1993 (6) TMI 132 - AT - Income Tax

Summary

Issues:
1. Disallowance out of travelling allowance (Rule 6D)
2. Disallowance of medical expenses reimbursed to employees/directors under sec. 40(c) and 40A(5)
3. Disallowance under sec. 37(3A) of the Income-tax Act
4. Terminal allowance under sec. 32(1)(iii)

Issue 1: Disallowance out of travelling allowance (Rule 6D)
The appellant contested an excess disallowance of Rs. 15,008 under 'Travelling expenses' due to not following a specific case law. The tribunal found the objection valid and directed the Assessing Officer to recalculate the disallowance under Rule 6D based on the mentioned case law.

Issue 2: Disallowance of medical expenses reimbursed to employees/directors under sec. 40(c) and 40A(5)
The appellant argued that medical expenses reimbursed should not be part of employees' salaries for disallowance calculation. However, citing a precedent case, the tribunal rejected the appellant's contention and upheld the disallowance under the relevant sections.

Issue 3: Disallowance under sec. 37(3A) of the Income-tax Act
The Assessing Officer computed disallowances under sec. 37(3A) for various expenses. The appellant argued that certain hotel expenses should not be disallowed as they included payments for foreign technicians. Despite the appellant's arguments, the tribunal upheld the disallowance, stating that the Act imposes restrictions without distinguishing between residents and non-residents.

Issue 4: Terminal allowance under sec. 32(1)(iii)
The appellant claimed terminal allowance for scrapped assets, disputing the estimated scrap value used by the Assessing Officer. The tribunal rejected the contention that the assets had no scrap value and found the estimation reasonable. Additionally, the tribunal directed the Assessing Officer to treat the estimated scrap value as the opening stock for future adjustments, aligning with accounting practices and tax provisions.

In conclusion, the tribunal partially allowed the appellant's appeal, addressing each issue raised and providing detailed reasoning for its decisions based on legal precedents and tax regulations.