1994 (3) TMI 158 - AT - Income Tax

Summary

Issues:
1. Taxability of cash incentive
2. Disallowance under section 40A(3)
3. Claim for investment allowance on a computer

Detailed Analysis:

1. Taxability of Cash Incentive:
The appeal raised various issues, with the counsel stating not to press ground No. 1 related to the taxability of the cash incentive received. The tribunal accordingly rejected this ground, indicating a decision on this issue was not pursued further.

2. Disallowance under Section 40A(3):
The second ground in the appeal concerned a disallowance made under section 40A(3) by the Assessing Officer, which was confirmed by the CIT(A). The disallowance was based on cash payments exceeding Rs. 2,500 without a satisfactory explanation. The appellant argued that the payments fell under exceptional circumstances as per rule 6DD(j) and provided detailed explanations for each payment made in cash. The tribunal examined the facts, noting that the payments were genuine, the payees lacked bank accounts, and the circumstances qualified under rule 6DD(j). The tribunal found no need for disallowance under section 40A(3) and deleted the addition made by the Assessing Officer and confirmed by the CIT(A).

3. Claim for Investment Allowance on a Computer:
The final ground involved the disallowance of the claim for investment allowance on a computer. The Assessing Officer rejected the deduction, considering the computer as an "office appliance." The CIT(A) upheld this decision, emphasizing that the computer did not aid in manufacturing as it processed data. The appellant argued that the computer was in the factory premises, not the office, and played a crucial role in the manufacturing process. The tribunal found discrepancies in the location of the computer installation and the role it played, leading to a decision to remand the matter back to the Assessing Officer for a re-examination. The tribunal directed a reevaluation of the installation location and the computer's role in the manufacturing process before deciding on the investment allowance claim.

In conclusion, the tribunal partly allowed the appeal, rejecting the taxability of the cash incentive, deleting the disallowance under section 40A(3), and remanding the investment allowance claim on the computer for further assessment by the Assessing Officer based on the installation location and its role in manufacturing.