2001 (2) TMI 282 - AT - Income Tax

Summary

Issues:
1. Partial sustenance of disallowances out of certain items of expenses.

Analysis:
The first issue in this appeal pertains to the partial sustenance of disallowances related to various expenses claimed by the assessee. The Assessing Officer (AO) disallowed amounts from expenses such as travelling expenses, telephone charges, and car running expenses. The Commissioner of Income Tax (Appeals) [CIT(A)] partially upheld these disallowances, reducing the amounts in consideration. The Appellate Tribunal upheld the CIT(A)'s orders after examining the facts of each case.

Moving on to the next issue, the disallowance of a claimed payment of royalty at Rs. 60,000 is discussed. The AO contended that the payment was gratuitous and not for business purposes, as the patent right and trade mark were deemed to have been transferred to the new firm. The CIT(A) agreed with the AO, upholding the disallowance. However, during the appeal hearing, the counsel for the assessee highlighted the partnership deed clauses, indicating that the patent right and trade mark were not transferred. Citing legal precedents, including judgments from the Calcutta High Court and the Supreme Court, the Appellate Tribunal concluded that the payment of royalty was a deductible business expense. Consequently, the disallowance of Rs. 60,000 was deleted.

Although not raised by the Department, the Appellate Tribunal directed that the amount of Rs. 60,000 received by the partner should be included in his income for equity. The appeal filed by the assessee was partially allowed based on the above analysis and conclusions.

In summary, the judgment addresses issues concerning the partial sustenance of disallowances on various expenses and the disallowance of royalty payment. Through detailed examination of the partnership deed and legal precedents, the Appellate Tribunal ruled in favor of the assessee, allowing the claimed expenses and deleting the disallowance of royalty payment.