1984 (5) TMI 101 - AT - Income Tax

Summary

Issues:
1. Whether the Hotel Building should be treated as Plant for depreciation.
2. Disallowance of specific expenses including bad debts.

Analysis:
1. The first issue revolves around the treatment of the Hotel Building as a Plant for depreciation. The assessee contended that the authorities erred in not treating the Hotel Building as Plant and disallowing depreciation at the appropriate rate. The ITAT considered the Supreme Court judgment in CIT vs. Taj Mahal Hotel and a Madras Bench Tribunal decision in Hotel Shreelekha Pvt. Ltd. vs. Third ITO. The ITAT found that the Madras High Court judgment cited by the Departmental Representative did not distinguish the Supreme Court judgment. Relying on the Madras Bench Tribunal decision, the ITAT held that the hotel building should be treated as a plant for depreciation purposes, directing the ITO to allow depreciation accordingly.

2. The second issue pertains to the disallowance of specific expenses, including bad debts. The AAC disallowed bad debts amounting to Rs. 763, stating that the assessee made no effort to reclaim them. The assessee argued that these bad debts, especially those owed by reputed concerns like Sita World Travels, should have been fully allowed as they were of a petty nature. The ITAT agreed with the assessee, ordering the ITO to allow the bad debts of Rs. 763 in full. Additionally, the disallowance of 1/4th of car expenses and 1/4th of car depreciation, which were not pressed before the AAC, were deemed infructuous. Consequently, the ITAT partially allowed the assessee's appeal, specifically addressing the issues related to the treatment of the Hotel Building as a Plant and the disallowance of bad debts.