1997 (2) TMI 173 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of medical reimbursement expenses, insurance premiums, and telephone expenses.
2. Addition of telephone expenses, servant's wages, salary, and bonus.
3. Addition of incentive awards payment.
4. Disallowance of excise duty under Section 43B.
5. Disallowance of traveling expenses under Rule 6D.
6. Disallowance of tips, challans, gift cheques, and tent house hire charges.
7. Disallowance of car expenses for alleged personal use.
8. Disallowance of repair and maintenance expenses related to earlier years.
9. Disallowance of building repair and maintenance expenses as capital expenditure.
10. Disallowance of traveling expenses for Mr. and Mrs. Ingham.
11. Disallowance of payments to clubs.
12. Deletion of additions related to HRA, wages, residential telephone, medical expenses, and insurance premiums under Section 40A(5).
13. Deletion of addition under Section 36(1)(ii).
14. Deletion of traveling expenses for Mr. Ingham.
15. Deletion of addition under Section 40A(12).
16. Deletion of disallowance out of guest-house expenditure.
17. Disallowance of royalty payable due to non-renewal of the contract.
18. Disallowance of lunch expenses for executives as entertainment expenses.
19. Disallowance of repair expenses due to lesser liability provided.
20. Non-allowance of full depreciation on small items.
21. Disallowance of repair and maintenance expenses for water-proofing.
22. Disallowance of lunch expenses for executives as entertainment expenses.

Issue-wise Detailed Analysis:

1. Disallowance of medical reimbursement expenses, insurance premiums, and telephone expenses:
The Tribunal held that these expenses were wholly and exclusively incurred for business purposes and are fully allowable, following its own decision for the assessment year 1986-87. The additions were deleted.

2. Addition of telephone expenses, servant's wages, salary, and bonus:
The Tribunal directed the deletion of these additions, following its decision for the assessment year 1986-87.

3. Addition of incentive awards payment:
The Tribunal found that the incentive awards were incurred wholly and exclusively for business purposes and deleted the addition, following its decision for the assessment year 1986-87.

4. Disallowance of excise duty under Section 43B:
This ground was not pressed by the assessee's representative and was treated as dismissed.

5. Disallowance of traveling expenses under Rule 6D:
The Tribunal directed the AO to follow the decision for the assessment year 1986-87 and allow necessary relief.

6. Disallowance of tips, challans, gift cheques, and tent house hire charges:
The Tribunal deleted the additions for tips, challans, and gift cheques, following its decision for the assessment year 1986-87. For the tent house hire charges, the Tribunal found the expenditure allowable and deleted the addition.

7. Disallowance of car expenses for alleged personal use:
The Tribunal deleted the addition, following its decision for the assessment year 1986-87, finding no personal element involved.

8. Disallowance of repair and maintenance expenses related to earlier years:
The Tribunal found the liability crystallized and paid within the period under appeal, making the expenditure allowable. The addition was deleted.

9. Disallowance of building repair and maintenance expenses as capital expenditure:
The Tribunal found the repairs necessary for the smooth running of the property and held the expenditure as revenue in nature. The addition was deleted.

10. Disallowance of traveling expenses for Mr. and Mrs. Ingham:
The Tribunal sustained the disallowance for Mrs. Ingham's expenses, finding them not for business purposes, and deleted the balance.

11. Disallowance of payments to clubs:
The Tribunal deleted the addition, following its decisions for the assessment years 1982-83 and 1986-87.

12. Deletion of additions related to HRA, wages, residential telephone, medical expenses, and insurance premiums under Section 40A(5):
The Tribunal upheld the CIT(A)'s decision to delete these additions, finding it reasonable and justified.

13. Deletion of addition under Section 36(1)(ii):
The Tribunal upheld the CIT(A)'s decision to delete the addition, finding it reasonable and justified.

14. Deletion of traveling expenses for Mr. Ingham:
The Tribunal upheld the CIT(A)'s decision to delete the addition, finding the expenses related to business activities.

15. Deletion of addition under Section 40A(12):
The Tribunal upheld the CIT(A)'s decision to allow relief of Rs. 15,000, finding it reasonable and justified.

16. Deletion of disallowance out of guest-house expenditure:
The Tribunal upheld the CIT(A)'s decision to restrict the disallowance to Rs. 45,260 and found the further disallowance of Rs. 59,740 unjustified.

17. Disallowance of royalty payable due to non-renewal of the contract:
The Tribunal directed the AO to allow the claim, considering the peculiar circumstances and the approval received from the Government of India.

18. Disallowance of lunch expenses for executives as entertainment expenses:
The Tribunal found the expenditure on lunch and coffee for executives as staff welfare and deleted the addition.

19. Disallowance of repair expenses due to lesser liability provided:
The Tribunal directed the AO to examine the total expenditure and allow the claim if it had not been previously considered.

20. Non-allowance of full depreciation on small items:
The Tribunal directed the AO to allow full depreciation on items costing less than Rs. 5,000.

21. Disallowance of repair and maintenance expenses for water-proofing:
The Tribunal found the expenditure as revenue in nature and deleted the addition, following its decision for the earlier assessment year.

22. Disallowance of lunch expenses for executives as entertainment expenses:
The Tribunal deleted the disallowance, finding the expenditure as staff welfare in nature.

Conclusion:
- ITA No. 3898/Del/1990 was partly allowed.
- ITA No. 3865/Del/1990 was dismissed.
- ITA No. 4502/Del/1991 was allowed.
- ITA No. 1367/Del/1992 was allowed.