1984 (8) TMI 139 - AT - Income Tax

Summary

Issues:
1. Addition of scrap shortage in manufacturing business for asst. yrs. 1978-79 & 1979-80.
2. Discrepancy in shortage percentage of soap-stone production for asst. yr. 1979-80.
3. Disallowance of 1/5th conveyance expenses including salary to driver and interest on car loan.

Detailed Analysis:
1. The judgment pertains to appeals by the assessee for the assessment years 1978-79 & 1979-80, involving common grounds of appeal related to the addition of scrap shortage in the manufacturing business. In the first year, the Income Tax Officer (ITO) made an addition of Rs. 5610 for a shortage of 1.74 tons of scrap, later reduced to Rs. 4,000 by the CIT(A). The Tribunal considered the meager nature of the shortage, mainly comprising dust, and deleted the addition for the year 1978-79. However, for the subsequent year 1979-80, a discrepancy in the shortage percentage of soap-stone production was noted. The Tribunal upheld the earlier year's order fixing the shortage at 5%, rejecting the contention of a 9.43% shortage due to the quality of the soap-stone, as it lacked substantial supporting information.

2. The second issue involved the discrepancy in the shortage percentage of soap-stone production for the assessment year 1979-80. The Tribunal rejected the assessee's argument for a higher shortage percentage of 9.43%, emphasizing the need for substantial information to support such claims. While acknowledging the uniqueness of each year's circumstances, the Tribunal upheld the 5% shortage percentage based on the earlier year's orders in the assessee's case. Consequently, an addition made on account of scrap shortage was deleted for the year 1979-80 as well.

3. The final issue concerned the disallowance of 1/5th of conveyance expenses, including salary to the driver and interest on a car loan. The Tribunal agreed with the assessee that expenses like the driver's salary and car loan interest did not directly relate to the usage of the car by the directors. Therefore, the Tribunal directed the ITO to delete the salary of the driver and interest paid on the car loan, allowing only 1/5th disallowance on the remaining expenses for personal use, applicable for both years. As a result, the assessee's appeals were partly allowed by the Tribunal.