1984 (2) TMI 159 - AT - Income Tax

Summary

Issues:
1. Disallowance of sundry expenses, telephone expenses, vehicle maintenance expenses, labour charges, and depreciation.
2. Disallowance of training expenses for a partner.
3. Disallowance of travelling expenses and miscellaneous expenses.

Analysis:
1. The ITO disallowed various expenses like sundry expenses, telephone expenses, vehicle maintenance expenses, and labour charges. The AAC upheld most of these disallowances. The ITAT upheld the disallowance of sundry expenses and telephone expenses due to lack of detailed explanations and high amounts. However, the disallowance of vehicle maintenance expenses and depreciation on the motor car at Silchar was deleted as partners did not use the car at that location.

2. The disallowance of Rs. 47,568 as training expenses for a partner was contested. The ITO and AAC considered it capital expenditure, but the ITAT disagreed. Citing relevant case laws, the ITAT held that training expenses for achieving efficient production are revenue expenditure. Therefore, the ITAT directed the ITO to recompute the income accordingly.

3. The disallowance of travelling expenses and miscellaneous expenses was also challenged. The ITAT noted discrepancies in the disallowance amounts and lack of objections raised before the AAC. As a result, the ITAT rejected the appeal on these grounds.

In conclusion, the ITAT partially allowed the appeal by overturning some disallowances, emphasizing the distinction between revenue and capital expenditures, and directing the ITO to adjust the income calculation accordingly.