1992 (8) TMI 144 - AT - Income Tax

Summary

Issues Involved:
1. Deduction of bad debts for the assessment year 1985-86.
2. Eligibility of investment allowance for computer purchase u/s 32A.
3. Computation of relief u/s 80HHC for the export profits.

Summary:

1. Deduction of Bad Debts:
The primary issue for the assessment year 1985-86 was the claim for deduction of bad debts amounting to Rs. 8,20,107. The assessee, a distributor for IPCL, had to write off this amount due to defaults by purchasers despite legal actions and internal instructions to limit credit. The Assessing Officer and CIT(Appeals) disallowed the deduction, arguing the debt was not bad as the suit was pending and the loss occurred in 1982. However, the Tribunal found that the decision to write off the debt was bona fide and based on the material available, allowing the deduction for the bad debt in computing the total income.

2. Investment Allowance for Computer Purchase:
The second issue was whether the expenditure on a computer was eligible for investment allowance u/s 32A. The Assessing Officer and CIT(Appeals) denied the allowance, categorizing the computer as an office appliance installed in office premises, thus not qualifying for the allowance. The Tribunal upheld this view, noting that the computer was used for data processing and installed in the office, making it ineligible for investment allowance under the specified provisions.

3. Computation of Relief u/s 80HHC:
The third issue concerned the computation of relief u/s 80HHC for the assessee's export profits. The Assessing Officer reduced the relief, arguing that the branch engaged in export could not be considered an independent business. The Tribunal, however, interpreted that the export profit was easily identifiable and thus fell within the scope of sub-section (3)(a) of section 80HHC, allowing the relief based on the identifiable export profits. The Tribunal directed the Assessing Officer to verify the computation of profits, considering any overhead expenditure incurred by the head office.

Conclusion:
The Tribunal allowed the deduction of bad debts, denied the investment allowance for the computer, and directed relief computation u/s 80HHC based on identifiable export profits, subject to verification of overhead expenses.