1989 (11) TMI 96 - AT - Income Tax

Summary

Issues:
1. Disallowance of interest on deposit.
2. Disallowance of expenses in the nature of entertainment.
3. Disallowance of miscellaneous expenses.
4. Weighted deduction under sec. 35B.

Analysis:

1. Disallowance of interest on deposit:
The assessee, a private limited company, had exported rice to Russia and was aggrieved by the disallowance of Rs.7,534 representing interest on a deposit of Rs. 2 lakhs. The disallowed amount was based on an observation in the assessment order without providing detailed basis. The appellate tribunal found that the basis for the addition was not established and that the addition should be deleted as there was no justification for it.

2. Disallowance of expenses in the nature of entertainment:
The disallowance of Rs. 55,912 under sec. 37(2A) as entertainment expenses was challenged. The tribunal reviewed the details of the expenses and found that certain expenses did not qualify as entertainment expenses. After considering the arguments, the tribunal decided to delete the disallowance of Rs. 11,688 as it did not fall under the category of entertainment expenses.

3. Disallowance of miscellaneous expenses:
The disallowance of Rs. 1,700 out of miscellaneous expenses was contested. The tribunal examined the details of the expenses and found that one item related to sec. 37(2A) and was upheld, while the other item was not a disallowable expenditure. Consequently, the disallowance was reduced to Rs. 1,217, providing relief to the assessee.

4. Weighted deduction under sec. 35B:
The claim for weighted deduction under sec. 35B on export inspection fee was disputed. The tribunal analyzed the relevant provisions and held that the assessee, despite not maintaining its own facility, was entitled to the deduction as the inspection was compulsory for export. Citing precedents and statutory notifications, the tribunal allowed the weighted deduction on the inspection fee, contrary to the decisions of the income-tax authorities.

In conclusion, the tribunal partly allowed the appeal, deleting certain disallowances and allowing the weighted deduction under sec. 35B for the export inspection fee.