1989 (11) TMI 94 - AT - Income Tax

1994 (9) TMI 131 - AT

Issues Involved:
1. Expense under Section 37(3A) of the IT Act.
2. Deduction of interest paid under Section 216 of the IT Act.
3. Treatment of unclaimed amounts written back under Section 41(1) of the IT Act.
4. Deduction of provision of customs duty payable.
5. Deduction of fuel surcharge.
6. Treatment of provision of sales tax on freight.
7. Deduction of increase in cess under the Orissa Cess Act.
8. Claim of compensation by the Forestry Department.
9. Various cost and levy issues not pressed by the assessee.
10. Damages charged by the Orissa Electricity Board.
11. Disallowance of interest on borrowings diverted to subsidiaries and employees.
12. Evaluation of perquisites under Section 40A(5) of the IT Act.
13. Claim of investment allowance and additional depreciation.
14. Claim of terminal depreciation for destroyed assets.
15. Levy of interest under Section 216.
16. Deduction allowed of write-back of excess provisions.
17. Additional sales tax liability, voluntary retirement scheme payments, and commission payments.
18. Allowing of investment allowance on internal telephone system.
19. Direction for checking depreciation calculations.

Detailed Analysis:

1. Expense under Section 37(3A) of the IT Act:
The Tribunal considered the expenses related to sales promotion, entertainment, presentation articles, and seminars. It allowed a deduction of Rs. 13,722 for presentation articles and 20% of certain other expenses as pertaining to staff. The ITO was directed to rework the disallowance under Section 37(3A) based on these considerations.

2. Deduction of interest paid under Section 216 of the IT Act:
The Tribunal upheld the decision of the authorities below, not allowing the deduction of interest paid to the government on delayed payment of taxes, following the Delhi High Court ruling in DALMIA DADRI CEMENT LTD. vs. CIT.

3. Treatment of unclaimed amounts written back under Section 41(1) of the IT Act:
The Tribunal held that the suo-motu writing back of certain expenses provided in earlier years does not indicate cessation of liability. It followed its earlier decision and upheld the treatment given by the authority below.

4. Deduction of provision of customs duty payable:
The Tribunal rejected the claim of the assessee for the provision of customs duty payable, stating that the claim was imaginary and not based on any demand raised by the Customs.

5. Deduction of fuel surcharge:
The Tribunal allowed the deduction of Rs. 1,54,050 for fuel surcharge, stating that the liability was positively claimable in the assessment year under consideration, despite the final quantification being done later.

6. Treatment of provision of sales tax on freight:
The Tribunal held that the settlement reached with the sales tax authorities during the financial year relevant to the assessment year under appeal should be treated as deemed income under Section 41(1) for the assessment year under appeal.

7. Deduction of increase in cess under the Orissa Cess Act:
The Tribunal allowed the deduction of Rs. 2,49,653 for the increase in cess, limiting the allowance to the period 1st April 1980 to 31st Dec 1980, and excluding Rs. 18,566 for the period 1st Jan 1980 to 31st March 1980.

8. Claim of compensation by the Forestry Department:
The Tribunal decided against the assessee, as the claim preferred by the Forestry Department had not been accepted by the company.

9. Various cost and levy issues not pressed by the assessee:
The Tribunal decided against the assessee on grounds related to the cost of rejected refractories, levy made by the Cement Regulation, demand under the Cement Regulation, disallowance of guest house expenses, and depreciation on assets of Mubarikpur Works, as these were not pressed during the arguments.

10. Damages charged by the Orissa Electricity Board:
The Tribunal allowed the deduction of Rs. 16,081 for damages charged by the Orissa Electricity Board, as the sale and damage occurred in the same year, and the quantification had been made.

11. Disallowance of interest on borrowings diverted to subsidiaries and employees:
The Tribunal remanded the matter to the ITO to verify the facts and apply the same analogy as determined in the assessment year 1979-80, based on the Tribunal's decision.

12. Evaluation of perquisites under Section 40A(5) of the IT Act:
The Tribunal remanded the issue to the ITO to calculate the perquisite value as per the method of calculation provided in Rule 3 of the IT Rules, 1962.

13. Claim of investment allowance and additional depreciation:
The Tribunal upheld the CIT(A)'s order, denying the claim of investment allowance and additional depreciation, as the assets were used for residential purposes only.

14. Claim of terminal depreciation for destroyed assets:
The Tribunal upheld the rejection of terminal allowance for destroyed assets of a discontinued business but allowed the alternative claim of deduction as a capital loss.

15. Levy of interest under Section 216:
The Tribunal directed the ITO to recalculate the interest after giving effect to this order.

16. Deduction allowed of write-back of excess provisions:
The Tribunal reversed the order of the CIT(A) and restored that of the ITO, treating the write-back of excess provisions as deemed income under Section 41(1).

17. Additional sales tax liability, voluntary retirement scheme payments, and commission payments:
The Tribunal upheld the CIT(A)'s order, allowing these deductions, as the facts and circumstances were the same as in the past.

18. Allowing of investment allowance on internal telephone system:
The Tribunal upheld the CIT(A)'s order, allowing the investment allowance on the internal telephone system, as it was installed in the factory and considered a plant for efficient working.

19. Direction for checking depreciation calculations:
The Tribunal rejected the revenue's objection, as the direction was limited to checking calculations for removing mistakes.

Conclusion:
Both the appeals were allowed in part, with specific directions and remands on various issues for further verification and re-evaluation by the ITO based on the Tribunal's detailed considerations and previous decisions.

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