1987 (11) TMI 135 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of Rs. 2,65,000 as a business expenditure.
2. Disallowance of Rs. 17,000 out of expenses.
3. Disallowance of Rs. 3,600 out of traveling expenses.
4. Disallowance of Rs. 5,000 out of truck expenses.
5. Charging of interest under sections 139(8) and 215.

Detailed Analysis:

1. Disallowance of Rs. 2,65,000 as a Business Expenditure:
The assessee, engaged in the transport service business, faced a loss of Rs. 3,20,120 at its Ludhiana Branch, primarily due to a claim of Rs. 2,99,795 by M/s. Modern Syntex India Ltd. The claim arose because the assessee used the approved motor transport receipts (bilties) of a sister concern, M/s. Yadav Transport Co., for transshipment of goods. The Ludhiana Branch Manager released the goods without receiving the bilties, leading to non-payment by the consignee. The assessee claimed that this liability arose in the relevant year due to its mercantile system of accounting. However, the ITO found no agreement between the assessee and M/s. Yadav Transport Co. for using their bilties and considered the claim non-genuine. The CIT(A) accepted the genuineness of the loss but disallowed the claim on the grounds that the liability did not mature in the relevant year.

The Tribunal, referencing Supreme Court decisions, concluded that the liability arose when the employee's default occurred, thus allowing the claim of Rs. 2,65,000 as a business expenditure for the relevant year.

2. Disallowance of Rs. 17,000 out of Expenses:
The Tribunal upheld the disallowance of Rs. 17,000 out of expenses. This disallowance was based on past disallowances, and no new evidence or arguments were presented to overturn the decision of the lower authorities.

3. Disallowance of Rs. 3,600 out of Traveling Expenses:
Similarly, the disallowance of Rs. 3,600 out of traveling expenses was maintained. The Tribunal found no reason to disturb the disallowance made by the lower authorities, as it was consistent with past disallowances.

4. Disallowance of Rs. 5,000 out of Truck Expenses:
The disallowance of Rs. 5,000 out of truck expenses was also upheld. This decision was based on the precedent of past disallowances, and the Tribunal saw no justification to alter the findings of the lower authorities.

5. Charging of Interest under Sections 139(8) and 215:
The issue of charging interest under sections 139(8) and 215 was deemed a consequential matter. The Tribunal did not provide a detailed analysis on this issue, indicating that it would follow the outcome of the primary issues discussed.

Conclusion:
The appeal of the assessee was allowed in part. The Tribunal allowed the claim of Rs. 2,65,000 as a business expenditure but upheld the disallowances of Rs. 17,000, Rs. 3,600, and Rs. 5,000. The issue of interest under sections 139(8) and 215 was treated as consequential.