1991 (12) TMI 119 - AT - Income Tax

Issues Involved:
1. Disallowance of land and building tax.
2. Disallowance of staff welfare and business promotion expenses.
3. Disallowance of legal fees.
4. Disallowance of miscellaneous expenses.
5. Addition of interest receivable.
6. Disallowance of travelling expenses.
7. Valuation of closing stock.
8. Reduction of cost of shovel by subsidy received.
9. Disallowance of interest claimed by the assessee.
10. Claim of commission paid to M/s S. Zoraster & Co.
11. Expenditure on road repairs.
12. Claim under section 80HH.
13. Expenditure on construction of hospital ward.
14. Depreciation on Tipping wagons and Tipping Tubs.
15. Disallowance of expenses in respect of Chainpura unit.
16. Ex gratia payment to Shri R.K. Golcha.
17. Disallowance of staff welfare expenses.
18. Disallowance of reimbursement of medical expenses.
19. Disallowance of expenses on jeep and motor car.
20. Disallowance of farm expenses, penalties, and other expenses.

Detailed Analysis:

1. Disallowance of Land and Building Tax:
The assessee claimed Rs. 2,46,183 as land and building tax, but the Assessing Officer allowed only Rs. 57,906 for the period 1st April 1978 to 31st Dec 1978. The CIT(A) upheld the disallowance of the remaining amount, directing it to be allowed in the year of final payment. The Tribunal held that the assessee, following the mercantile system, was entitled to claim Rs. 1,89,776.50.

2. Disallowance of Staff Welfare and Business Promotion Expenses:
The ITO disallowed Rs. 25,000 out of Rs. 94,984 claimed as staff welfare expenses and Rs. 15,452 as business promotion expenses, treating them as entertainment expenses. The CIT(A) upheld the disallowance. The Tribunal reduced the disallowance to Rs. 10,000, considering the pattern of claims in previous years.

3. Disallowance of Legal Fees:
The ITO disallowed Rs. 9,390 out of legal fees claimed. The CIT(A) confirmed the disallowance. The Tribunal reduced the disallowance to Rs. 1,845, allowing the amounts paid to Shri S.K. Jain and ITAT fees as they were not covered under section 80VV.

4. Disallowance of Miscellaneous Expenses:
The ITO disallowed Rs. 7,979 out of miscellaneous expenses claimed for penalties and installation ceremony expenses. The CIT(A) upheld the disallowance. The Tribunal reduced the disallowance to Rs. 2,979, allowing the expenses for the installation ceremony.

5. Addition of Interest Receivable:
The ITO added Rs. 40,414 as interest receivable from M/s Deep Cinema. The CIT(A) confirmed the addition. The Tribunal upheld the addition, stating that the system of accounting was mercantile, and no change in the accounting method was approved by the ITO.

6. Disallowance of Travelling Expenses:
The ITO disallowed Rs. 9,600 out of general travelling expenses and Rs. 4,500 out of Directors' travelling expenses. The CIT(A) confirmed the disallowance. The Tribunal upheld the disallowance due to lack of detailed evidence.

7. Valuation of Closing Stock:
The ITO held that the closing stock of soapstone was undervalued by Rs. 2,195. The CIT(A) confirmed the addition. The Tribunal upheld the addition, directing that the closing stock of the preceding year should be taken as the opening stock for the assessment year in question.

8. Reduction of Cost of Shovel by Subsidy Received:
The ITO reduced the cost of shovel by Rs. 2,69,966 received as subsidy and allowed investment allowance on the balance amount. The CIT(A) did not adjudicate on this ground. The Tribunal held that the subsidy amount should not be reduced while computing the cost of the shovel for depreciation and investment allowance, following the Rajasthan High Court decision in CIT vs. Ambica Electrolytic Capacitors Pvt. Ltd.

9. Disallowance of Interest Claimed by the Assessee:
The ITO disallowed Rs. 3,57,120 claimed as interest. The CIT(A) directed the ITO to follow the overall method for disallowance. The Tribunal found no force in the Department's ground, as the Department had accepted the Tribunal's decision in earlier years.

10. Claim of Commission Paid to M/s S. Zoraster & Co.:
The ITO disallowed Rs. 5,38,804 paid as commission. The CIT(A) upheld the claim. The Tribunal found no reason to deviate from the Tribunal's earlier decisions allowing the commission.

11. Expenditure on Road Repairs:
The ITO disallowed Rs. 75,541 as capital expenditure. The CIT(A) allowed the claim. The Tribunal upheld the claim, stating the expenditure was on repairs of a "Kacha" road, following Tribunal's earlier decisions.

12. Claim under Section 80HH:
The ITO disallowed the claim. The CIT(A) allowed it, following the Tribunal's order for the asst. yr. 1975-76. The Tribunal upheld the claim, as the facts and contentions remained the same.

13. Expenditure on Construction of Hospital Ward:
The ITO disallowed the expenditure. The CIT(A) allowed the claim, considering it a staff welfare measure. The Tribunal upheld the claim, stating it was not a donation but an expenditure for staff welfare, supported by various High Court decisions.

14. Depreciation on Tipping Wagons and Tipping Tubs:
The ITO did not allow 100% depreciation. The CIT(A) upheld the claim. The Tribunal upheld the claim, stating specific entries for depreciation should be applied.

15. Disallowance of Expenses in Respect of Chainpura Unit:
The ITO disallowed Rs. 54,607 as the unit remained closed. The CIT(A) upheld the disallowance. The Tribunal allowed the claims, stating the expenses were necessary to keep the unit alive during a temporary lull.

16. Ex Gratia Payment to Shri R.K. Golcha:
The ITO disallowed Rs. 15,010. The CIT(A) upheld the disallowance. The Tribunal allowed the claim, stating the payments were made in lieu of bonus and were business expenses.

17. Disallowance of Staff Welfare Expenses:
The ITO disallowed Rs. 35,000 out of Rs. 1,60,541 claimed. The CIT(A) confirmed the disallowance. The Tribunal reduced the disallowance to Rs. 10,000, considering the pattern of claims in previous years.

18. Disallowance of Reimbursement of Medical Expenses:
The ITO disallowed Rs. 1,51,190 as personal expenses. The CIT(A) confirmed the disallowance. The Tribunal allowed the claim, stating the expenses were authorized and incurred for business expediency.

19. Disallowance of Expenses on Jeep and Motor Car:
The ITO disallowed Rs. 21,633. The CIT(A) reduced the disallowance by Rs. 3,000. The Tribunal sustained the disallowance to the extent of Rs. 7,000, considering past history.

20. Disallowance of Farm Expenses, Penalties, and Other Expenses:
The ITO disallowed Rs. 13,960. The CIT(A) did not deal with the ground. The Tribunal restored the matter to the CIT(A) for decision. The Tribunal upheld disallowance of Rs. 5,000 for other expenses, following past decisions.

Conclusion:
The assessee's appeals for asst. yrs. 1979-80 and 1984-85 are partly allowed. The Department's appeal for asst. yr. 1980-81 is partly allowed. The Department's appeals for asst. yrs. 1982-83 and 1983-84 are dismissed.

← Previous Next →