1994 (4) TMI 112 - AT - Income Tax

1996 (4) TMI 158 - AT

Issues Involved:
1. Computation of value of car perquisite.
2. Disallowance of discretionary expenses.
3. Disallowance of public relations expenses.
4. Addition of unclaimed cheques and sundry credit balances.
5. Deduction on account of processed stock valuation adjustment.
6. Addition of sales-tax amount.
7. Disallowance of purchase tax liability under Section 43B.
8. Addition of sales-tax on hire purchase transactions.
9. Disallowance of various funds' contributions under Section 43B.
10. Computation of disallowance under Section 37(3A) read with Section 37(3B).
11. Ad hoc addition to the trading account.
12. Assessability of excise duty provision written back under Section 41(1).
13. Assessability of cash compensatory support.
14. Disallowance under Section 37(2A).
15. Disallowance under Section 37(3) read with Rule 6-B.
16. Disallowance of investment allowance on motor cars.
17. Charging interest under Section 215.
18. Treatment of cash allowances for working out disallowance under Section 40A(5).
19. Disallowance of Shri Ram Jayanti Celebration expenses.
20. Treatment of commission payments under Section 37(3A).
21. Allowance of actual payment on account of sales-tax.

Detailed Analysis:

1. Computation of Value of Car Perquisite:
The Tribunal dismissed the assessee's claim for computing the value of car perquisite under Rule 3 of IT Rules, following its own decisions for previous assessment years.

2. Disallowance of Discretionary Expenses:
The Tribunal deleted the disallowance of Rs. 69,198, following its previous orders for similar issues in earlier assessment years, accepting the expenses as wholly and exclusively for business purposes.

3. Disallowance of Public Relations Expenses:
The Tribunal held that 30% of the total public relations expenses should be treated as related to employees, granting an additional relief of 10% to the assessee.

4. Addition of Unclaimed Cheques and Sundry Credit Balances:
The Tribunal dismissed the assessee's appeal, following its previous decisions against the assessee for earlier assessment years.

5. Deduction on Account of Processed Stock Valuation Adjustment:
The Tribunal rejected the assessee's claim for deduction of Rs. 7,62,664, following its decision for the assessment year 1981-82, where similar facts and circumstances were involved.

6. Addition of Sales-Tax Amount:
The Tribunal upheld the addition of Rs. 1,15,23,242, agreeing with the Revenue that the sales-tax constitutes trading receipts and should be accounted for on an accrual basis, rejecting the assessee's change in accounting method for sales-tax.

7. Disallowance of Purchase Tax Liability under Section 43B:
The Tribunal dismissed the assessee's appeal, following the jurisdictional High Court's decision in the case of Sanghi Motors vs. Union of India & Ors., holding that the liability had become due for payment.

8. Addition of Sales-Tax on Hire Purchase Transactions:
The Tribunal allowed the assessee's appeal, holding that sales-tax on hire purchase transactions is not payable until the final instalment is received, thus not attracting Section 43B.

9. Disallowance of Various Funds' Contributions under Section 43B:
The Tribunal allowed the assessee's appeal, holding that Explanation 2 to Section 43B is not applicable to sums referred to in clause (b), following the Andhra Pradesh High Court's judgment and the Tribunal's order in the case of Indian Aluminium Cables Ltd.

10. Computation of Disallowance under Section 37(3A) read with Section 37(3B):
- Sign Boards/Glow Signs, Leaflets/Hand Bills, Folders/Literature: The Tribunal allowed the assessee's claims, holding these items do not constitute advertisement.
- Posters, Town Development, Exhibition, Expenditure on Cooperative Basis, Art Work: The Tribunal upheld the Revenue's treatment as advertisement expenses.
- Delivery Van Expenses: The Tribunal held that only 1/3rd of the expenses should be considered for disallowance.
- Agent's Services: The Tribunal upheld the Revenue's treatment as advertisement expenses.
- Recruitment, Sale of Assets, Sale of Scrap, Statutory Notices: The Tribunal held these expenses do not fall under Section 37(3A).
- Commission for Procuring Orders: The Tribunal held that the commission paid is purely selling expenses, not involving advertisement, thus not attracting Section 37(3A).

11. Ad Hoc Addition to the Trading Account:
The Tribunal deleted the addition of Rs. 7 lakh, following its earlier orders for similar issues in previous assessment years.

12. Assessability of Excise Duty Provision Written Back under Section 41(1):
The Tribunal deleted the addition of Rs. 50.07 lakh, holding that the liability had not ceased to exist as the assessee's petition was still pending before the Supreme Court, and the write back was unilateral.

13. Assessability of Cash Compensatory Support:
This ground was not pressed by the assessee and was dismissed.

14. Disallowance under Section 37(2A):
The Tribunal allowed the assessee's appeal in part, holding that 30% of the expenditure is attributable to employees, following its order for the assessment year 1983-84.

15. Disallowance under Section 37(3) read with Rule 6-B:
The Tribunal allowed the assessee's claim, holding that presentation articles do not constitute entertainment and are allowable as business expenditure.

16. Disallowance of Investment Allowance on Motor Cars:
The Tribunal allowed the assessee's claim for investment allowance on motor cars, following its earlier orders for previous assessment years.

17. Charging Interest under Section 215:
The Tribunal allowed the assessee's appeal, following its earlier decision for the assessment year 1981-82.

18. Treatment of Cash Allowances for Working Out Disallowance under Section 40A(5):
The Tribunal dismissed the Revenue's appeal, following its order for the assessment year 1983-84, treating cash allowances as part of salary, not perquisites.

19. Disallowance of Shri Ram Jayanti Celebration Expenses:
The Tribunal dismissed the Revenue's appeal, following its order for the assessment year 1983-84, allowing the expenses.

20. Treatment of Commission Payments under Section 37(3A):
The Tribunal dismissed the Revenue's appeal, following its decision that commission payments for procuring export orders are excluded from the purview of Section 37(3A).

21. Allowance of Actual Payment on Account of Sales-Tax:
The Tribunal upheld the CIT(A)'s decision to allow the actual payment of sales-tax as a deduction, rejecting the Revenue's appeal.

Conclusion:
The Tribunal's judgment addressed multiple issues, providing detailed reasoning for each decision, often relying on previous orders and relevant case laws. The appeals were partly allowed in favor of the assessee and partly in favor of the Revenue, based on the merits of each issue.

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