1987 (6) TMI 93 - AT - Income Tax

Summary

Issues:
1. Legality of the fresh assessment
2. System of accounting regularly employed by the assessee
3. Allowance of advances written off pertaining to New York party
4. Weighted deduction u/s. 35B of the Income-tax Act, 1961
5. Deduction u/s. 37(1) of the Income-tax Act, 1961 on foreign income-tax deducted

Analysis:

1. The appeal was against the order of the CIT (A) related to the assessment year 1977-78. The ground regarding the legality of the fresh assessment was withdrawn with permission and dismissed. The dispute arose due to inconsistency in the system of accounting followed by the assessee. The assessee claimed a hybrid system of accounting, but the authorities found a mercantile system being followed in previous years. The claim was dismissed as it lacked factual support.

2. The next issue concerned the allowance of advances written off pertaining to a New York party. The claim for Rs. 40,072 was disallowed by the CIT (A) as the details provided did not support the claim. The expenses were related to various items, but the lack of specific details and evidence led to the dismissal of the claim.

3. The weighted deduction u/s. 35B was another point of contention. The ITO disallowed the claim for legal fees and foreign tour expenses. The CIT (A) allowed a portion of the foreign tour expenses related to Export Development. The claim for weighted deduction under various heads lacked specifics and evidence, leading to its dismissal.

4. The final substantive ground was the deduction u/s. 37(1) of the Income-tax Act on foreign income-tax deducted. The CIT (A) allowed the deduction for tax deducted from Japan under the double taxation avoidance agreement and provided unilateral relief for dividend income from the UK. The claim for deduction u/s. 37(1) was dismissed as it did not meet the requirements for such a deduction.

5. Overall, the appeal was dismissed, with each ground analyzed and dismissed based on the lack of factual support, evidence, or compliance with legal provisions. The judgments were made after careful consideration of the facts and submissions presented by the parties involved.