1998 (3) TMI 193 - AT - Income Tax

Issues Involved:
1. Disallowance of extra shift allowance for computers.
2. Disallowance of investment allowance and depreciation on borewell.
3. Addition of insurance claim amount as revenue receipt.
4. Computation of relief under Section 80HH after adjusting losses from other units.

Detailed Analysis:

1. Disallowance of Extra Shift Allowance for Computers
The issue pertains to the disallowance of extra shift allowance amounting to Rs. 33,462 in respect of computers. The assessee argued that computers should be considered as plant and thus eligible for extra shift allowance. However, the Departmental Representative noted that the assessee did not provide details on the installation and usage of the computers for business purposes. The Tribunal agreed with the authorities below, as the assessee failed to submit material evidence to establish that the computers were part of the plant. Consequently, the disallowance of the extra shift allowance on computers was upheld.

2. Disallowance of Investment Allowance and Depreciation on Borewell
The second issue involved the disallowance of investment allowance and depreciation on the borewell. The assessee claimed that the borewell should be considered as a plant, thus eligible for investment allowance and depreciation at 15%. The Tribunal noted that the assessee did not produce evidence to show the necessity of the borewell for the manufacturing process. The Tribunal referenced the Supreme Court decision in CIT vs. N.C. Budharaja & Co., which disallowed investment allowance on borewells. Consequently, the Tribunal upheld the authorities' decision to allow depreciation at 10% and deny investment allowance on the borewell.

3. Addition of Insurance Claim Amount as Revenue Receipt
The third issue concerned the addition of Rs. 42,967 received from insurance claims for machinery damage as revenue receipt. The assessee argued that the amount should not be considered as revenue receipt, citing various judgments. However, the Departmental Representative contended that the amount was chargeable under Sections 28(iv) and 10(3) of the Act, emphasizing that the principle of res judicata does not apply to income-tax proceedings. The Tribunal agreed with the Departmental Representative, noting that the insurance payment was to reduce the assessee's expenditure on repairs, thus having a direct nexus with the business. The Tribunal concluded that the insurance claim was a receipt of casual and non-recurring nature within the meaning of Section 10(3), directing the AO accordingly.

4. Computation of Relief Under Section 80HH After Adjusting Losses from Other Units
The final issue involved the computation of relief under Section 80HH, specifically whether it should be done after adjusting losses from other units. The assessee relied on previous Tribunal decisions and various High Court rulings. The Departmental Representative, however, cited Supreme Court and High Court decisions supporting the deduction of net income after adjusting losses. The Tribunal analyzed the provisions of Sections 80HH, 80AB, and related sections, concluding that the deduction under Section 80HH should be computed on the net income, i.e., after adjusting losses from other units. The Tribunal referenced several High Court decisions and the latest Supreme Court ruling in CIT vs. Kotagiri Industrial Co-operative Tea Factory Ltd., ultimately agreeing with the AO and dismissing the assessee's ground.

Conclusion:
The appeal was dismissed, with the Tribunal upholding the disallowances and additions made by the authorities on all grounds.

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