1992 (9) TMI 130 - AT - Income Tax

Issues Involved:
1. Standard deduction on salary.
2. Addition on account of perquisite value of the car.
3. Deduction for repairs against income taxable under the head "property".
4. Taxability of interest income from cross-gifts under sections 60 and 64 of the IT Act.
5. Addition on account of household expenses.

Analysis:

1. Standard Deduction on Salary:
The first issue pertains to the claim for standard deduction. The appellant, a director in two family concerns, claimed a standard deduction of Rs. 5,000, which the ITO reduced to Rs. 1,000 due to alleged personal use of the company's cars. The CIT(A) upheld this view. The appellant's counsel argued that there was no personal use and cited previous Tribunal decisions allowing the full deduction for other directors under identical facts. The Tribunal noted no challenge from the Departmental Representative and decided to maintain consistency by allowing the standard deduction of Rs. 5,000 for both assessment years.

2. Addition on Account of Perquisite Value of the Car:
The second issue involves the addition for the perquisite value of the car used by the appellant. The ITO made an addition corresponding to the reduced standard deduction, which the CIT(A) upheld. The appellant's counsel again cited previous Tribunal decisions where such additions were not made. The Tribunal, aiming for consistency and noting no distinguishing features pointed out by the Departmental Representative, deleted the addition for both years.

3. Deduction for Repairs Against Income Taxable Under the Head "Property":
The third issue concerns the claim for a 1/6th deduction for repairs against property income. The appellant, a 1/5th owner of the Eros Cinema Building, leased it to M/s R.C. Sood & Co. Pvt. Ltd. The ITO disallowed the deduction, stating that the liability for repairs lay with the lessee, not the owners. The CIT(A) upheld this. The appellant's counsel referenced Tribunal orders allowing such deductions for other co-owners. The Tribunal, maintaining consistency with past decisions, directed the Assessing Officer to allow the deduction for both assessment years.

4. Taxability of Interest Income from Cross-Gifts Under Sections 60 and 64 of the IT Act:
The fourth issue involves the taxability of interest income from cross-gifts. The ITO added Rs. 12,000 under section 64, claiming the gifts were colorable devices to divert income. The CIT(A) upheld this, citing the Supreme Court's decision in McDowell & Co. Ltd. vs. CTO. The appellant's counsel argued that the gifts were genuine and not cross-gifts, referencing the Supreme Court decision in CIT vs. C.M. Kothari. The Tribunal upheld the tax authorities' view, noting the interconnected nature of the transactions and the funds' return to family-controlled entities. However, it excluded the gift to Miss Poonam Sahni (later Mrs. Poonam Sood) from this treatment, as it was a customary pre-marriage gift and not a cross-gift.

5. Addition on Account of Household Expenses:
The final issue is the addition for household expenses. The ITO, finding the declared expenses inadequate, estimated higher expenses based on the family's lifestyle and added Rs. 1,20,000 for each year. The CIT(A) confirmed this. The Tribunal agreed that an addition was warranted but found the ITO's estimates exaggerated. It reduced the additions to Rs. 40,000 for the assessment year 1983-84 and Rs. 60,000 for 1984-85. The Tribunal also rejected the argument that the expenses should be examined in individual cases or in the case of Shri R.C. Sood, noting that the appellant had appeared before the ITO and provided the necessary information.

Conclusion:
The appeals are partly allowed, with adjustments made to the standard deduction, perquisite value of the car, deduction for repairs, taxability of interest income from cross-gifts, and household expenses.

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