2003 (3) TMI 291 - AT - Income Tax

Summary

Issues Involved:
1. Standard deduction out of director's remuneration.
2. Deletion of addition on account of interest on deposits of family members.
3. Reduction of addition on account of low household withdrawals.
4. Inclusion of interest income of wife and minor children.
5. Allowance of depreciation on car-taxi.
6. Allowance of credit for declared jewellery.
7. Reduction of addition on account of perquisites (free use of house and car).

Detailed Analysis:

1. Standard Deduction Out of Director's Remuneration:
The primary issue was whether the assessee, who was a director of "Shyam Oil Cake Limited," was entitled to a standard deduction under Section 16(i) of the Income Tax Act out of his salary. The Revenue argued that the director's fees should be taxed under Section 56 (income from other sources) and not as salary. The Tribunal found that the assessee was rendering full-time services to the company, which established an employer-employee relationship. The Tribunal upheld the CIT(A)'s order allowing the standard deduction, citing previous decisions and the fact that the assessee's similar claim for the assessment year 1990-91 was accepted without further appeal by the Department.

2. Deletion of Addition on Account of Interest on Deposits of Family Members:
The Revenue contended that the estimated interest income of the assessee's HUF and wife should be included in the assessee's income. The Tribunal noted that the HUF and wife were existing income-tax assessees, and the addition was made merely on an estimate without specific findings. The Tribunal upheld the CIT(A)'s order deleting the addition, finding it justified.

3. Reduction of Addition on Account of Low Household Withdrawals:
For the assessment year 1990-91, the Revenue disputed the reduction of an addition made by the AO on account of low household withdrawals. The AO estimated household expenses at Rs. 4,000 per month, while the CIT(A) reduced it to Rs. 2,000 per month. The Tribunal found the CIT(A)'s estimation reasonable, considering the assessee's small family and rent-free accommodation, and upheld the reduction.

4. Inclusion of Interest Income of Wife and Minor Children:
The Revenue argued that the interest income of the assessee's wife and two minor children should be included in the assessee's income. The Tribunal noted that the AO had accepted the deposits/credits of the wife and children as satisfactorily explained in previous assessments. The Tribunal upheld the CIT(A)'s order deleting the addition, citing that the interest income was rightly assessed in the hands of the wife and children, not the assessee.

5. Allowance of Depreciation on Car-Taxi:
The Revenue contended that the depreciation on the car used as a taxi should be disallowed as the assessee did not obtain a permit from the RTO. The Tribunal found that the car was used to earn hire income, which was accepted by the AO, and that obtaining a permit was not necessary for allowing depreciation. The Tribunal upheld the CIT(A)'s order allowing depreciation.

6. Allowance of Credit for Declared Jewellery:
The Revenue disputed the CIT(A)'s direction to allow credit for jewellery declared by the assessee in a previous return under the amnesty scheme. The Tribunal found that the assessee had explained the source of the jewellery and upheld the CIT(A)'s direction to allow credit after examining the declaration.

7. Reduction of Addition on Account of Perquisites (Free Use of House and Car):
For the assessment years 1993-94 and 1994-95, the Revenue disputed the reduction of an addition made for perquisites (free use of house and car). The AO had estimated the value of perquisites, while the CIT(A) allowed a reduction. The Tribunal found the CIT(A)'s reduction justified, considering the salary received by the assessee and the estimated nature of the addition.

Conclusion:
The Tribunal consistently upheld the CIT(A)'s orders across various assessment years, finding no infirmity in the CIT(A)'s decisions on the issues of standard deduction, deletion of additions, allowance of depreciation, and credit for declared jewellery. The appeals by the Revenue were dismissed for all the assessment years involved.