1993 (7) TMI 138 - AT - Income Tax

Summary

Issues:
1. Disallowance of outstanding sales-tax liability under section 43B for the assessment year 1985-86.
2. Disallowance of bonus payment under the Payment of Bonus Act for the assessment year 1985-86.
3. Disallowance of various expenses for the assessment year 1986-87, including sales-tax liability, travelling expenses, stamp for loan agreement, inauguration ceremony expenses, transportation expenses, and interest charged by a bank.

Analysis:
1. For the assessment year 1985-86, the issue of disallowance of outstanding sales-tax liability under section 43B was addressed. The CIT had directed the addition of the sales-tax liability to the income of the assessee. However, the ITAT Jaipur held that the liability may not be disallowed if the sales-tax was paid within the time allowed under the Sales-tax law. The ITAT relied on the decision of the Andhra Pradesh High Court and directed that the outstanding sales-tax liability should not be disallowed as the payment was made within the permissible time, based on evidence provided by the assessee.

2. Another issue for the same assessment year was the disallowance of bonus payment under the Payment of Bonus Act. The assessee argued that the bonus payment was made within the time allowed under the Act. However, the ITAT found that the evidence of actual payment was lacking and decided to restore the matter to the Assessing Officer for further verification. The ITAT directed the Assessing Officer to allow the deduction if the assessee could prove the bonus payment was an ascertained liability within the specified time.

3. For the assessment year 1986-87, various expense disallowances were considered. The ITAT disagreed with the disallowance of sales-tax liability based on the Andhra Pradesh High Court decision. It also disagreed with the disallowance of certain expenses related to capital assets, citing a different High Court decision and Supreme Court precedent. However, the ITAT upheld the disallowance of entertainment expenses due to lack of specific records. Additionally, the disallowance of outstanding provident fund and certain vehicle expenses was upheld for lack of evidence supporting business use. Some grounds were dismissed as they were not pressed by the assessee.

In conclusion, the ITAT partially allowed both appeals, directing the Assessing Officer to make necessary adjustments based on the findings related to the various expense disallowances and outstanding liabilities.