1979 (4) TMI 87 - AT - Income Tax

Summary

Issues:
1. Depreciation allowance for a bottle washing machine.
2. Allowance of ex-gratia payment made to employees upon termination.
3. Allowance of fees paid to an advocate.

Detailed Analysis:

1. The first issue pertains to the depreciation allowance for a bottle washing machine. The Appellate Tribunal noted that the matter had been previously addressed in the assessee's case for earlier assessment years. Referring to the Tribunal's earlier order, the Tribunal upheld the decision of the AAC regarding the depreciation allowance at 15% for the bottle washing machine.

2. The second issue involves the allowance of an ex-gratia payment made by the assessee to its employees upon termination. The ITO disallowed the claim, stating that the payment was gratuitous and not incurred wholly and exclusively for the purpose of business. However, the AAC accepted the assessee's submission that the payments were made as a settlement due to the employees' disruptive behavior during a strike, which was causing losses to the company. The Tribunal agreed with the AAC, emphasizing that the expenditure was incurred in the interest of the business to remove disruptive elements, and therefore, upheld the AAC's decision.

3. The final issue concerns the allowance of fees paid to an advocate. The ITO disallowed the fees paid to the advocate, alleging that it was related to a case involving removal of goods without proper entries. However, the AAC accepted the assessee's claim that the fees were paid for the advocate's appearance before the excise authorities to determine the excisable value of the products. The Tribunal found that the AAC did not provide a specific finding on the purpose for which the advocate was engaged and the fees were paid. Consequently, the Tribunal remanded the matter back to the AAC for reevaluation, allowing the assessee to present evidence supporting the business purpose of the expenditure.

In conclusion, the Tribunal partially allowed the appeal, upholding the depreciation allowance for the bottle washing machine and the ex-gratia payment to employees while remanding the issue of advocate fees back to the AAC for further examination.