1998 (5) TMI 51 - AT - Income Tax

Remission, Trading Liability, Bad Debts Written Off, Business Expenditure, Allowability, Voluntary Contributions

Issues Involved:

1. Addition under Section 41(1) of the IT Act, 1961 for cessation of liability towards customs duty.
2. Disallowance of sales-tax demand.
3. Disallowance of bad debt.
4. Disallowance of contribution to Bhagwan Das Goenka Foundation for Excellence in Journalism.
5. Disallowance of building maintenance charges.
6. Deduction in respect of sales-tax collections.
7. Depreciation in respect of exchange rate difference.

Issue-wise Detailed Analysis:

1. Addition under Section 41(1) of the IT Act, 1961 for cessation of liability towards customs duty:

The primary issue was whether the liability to pay customs duty ceased during the accounting year relevant to the assessment year 1987-88. The assessee had provided for import duty on newsprint at Rs. 825 per metric ton, but the Supreme Court, in its judgment dated 6-12-1984, allowed the Government to recover only Rs. 550 per metric ton. The Government issued a notification on 19-12-1985, fixing the import duty at Rs. 550 per metric ton, and the CBEC issued a circular on 10-2-1986 confirming this rate for the period from 1-3-1981 to 18-12-1985. The Tribunal concluded that the liability of the assessee ceased during the accounting year relevant to the assessment year 1987-88, thus confirming the addition of Rs. 44,58,044 made by the Assessing Officer.

2. Disallowance of sales-tax demand:

The second ground regarding disallowance of Rs. 19,25,476 being sales-tax demand for the assessment year 1979-80 was not pressed by the assessee's counsel during the hearing. Consequently, this ground was dismissed as not pressed.

3. Disallowance of bad debt:

The assessee claimed a bad debt of Rs. 1,98,831 allegedly due from M/s. Kanmani & Co. The Assessing Officer disallowed the claim due to insufficient evidence and the fact that the matter was sub judice. The Tribunal upheld the disallowance, noting that the conditions specified in Section 36(2) were not satisfied, and the hope of recovery had not been extinguished.

4. Disallowance of contribution to Bhagwan Das Goenka Foundation for Excellence in Journalism:

The assessee claimed Rs. 10 lakhs as business expenditure, arguing that the contribution was towards the promotion of journalism, directly related to its business. The Assessing Officer and CIT(A) treated it as a donation, not wholly and exclusively for business purposes. The Tribunal upheld this view, citing a lack of direct nexus and commercial expediency between the contribution and the assessee's business.

5. Disallowance of building maintenance charges:

The assessee claimed Rs. 7,50,000 as building maintenance charges paid to Nariman Point Building Service and Trading P. Ltd. (NPBST). The Assessing Officer disallowed the claim, considering it excessive and partly unrelated to the relevant assessment year. The CIT(A) allowed partial relief but reduced the claim by Rs. 1,50,000 and adjusted for a concessional interest rate on an advance given to NPBST. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the adjustments made.

6. Deduction in respect of sales-tax collections:

The ground regarding deduction in respect of sales-tax collections at Rs. 2,61,089 was dismissed as it did not arise out of the order of the Assessing Officer.

7. Depreciation in respect of exchange rate difference:

The ground regarding depreciation of Rs. 2,64,495 in respect of exchange rate difference pertaining to plant and machinery was dismissed as it did not arise out of the order of the CIT(A).

Conclusion:

The Tribunal dismissed the appeal, confirming the additions and disallowances made by the Assessing Officer and CIT(A) on various grounds, including cessation of customs duty liability, disallowance of bad debt, contribution to a foundation, and building maintenance charges. The Tribunal also dismissed grounds that were not pressed or did not arise from the orders of the lower authorities.

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