1984 (7) TMI 190 - AT - Income Tax

Summary

Issues:
1. Extra shift allowance for plant and machinery
2. Grant of allowance, incentive, or ex-gratia payments
3. Disallowance of damages for delayed payment of Employees State Insurance premia
4. Reduction of interest charged under section 215 by recourse to rule 41 of the IT Rules

Analysis:

Issue 1: Extra shift allowance for plant and machinery
The Department objected to the direction of the CIT(A) to allow extra shift allowance for the plant and machinery based on the number of days the concern as a whole worked extra shift. The Department relied on a decision of the Madras High Court but conceded that the Board's circular supported the CIT(A)'s direction. The Tribunal noted that circulars issued by the CBDT are binding on all officers, even if not in line with the correct interpretation of the statute. Therefore, the Tribunal upheld the allowance of extra shift allowance for the entire concern as per the circular, rejecting the Department's objection.

Issue 2: Grant of allowance, incentive, or ex-gratia payments
The Department objected to the relief granted by the CIT(A) for allowance, incentive, or ex-gratia payments beyond the limit specified under the Payment of Bonus Act. The Tribunal found that the payments were in accordance with an agreement under the Industrial Disputes Act, which was binding on both parties. As the payments were a statutory obligation and for the benefit of the business, they were considered as expenditure for the business purpose and deductible under section 37 of the IT Act. The objection of the Department was rejected.

Issue 3: Disallowance of damages for delayed payment of Employees State Insurance premia
The Department disallowed damages paid for delayed payment of Employees State Insurance premia, claiming it was for an infraction of law. The Tribunal found that the damages were considerably reduced due to circumstances beyond the control of the assessee. It was established that the damages were not a fine or penalty for an infraction of law but a payment based on circumstances and explanations provided by the assessee. Therefore, the Tribunal upheld the CIT(A)'s decision to allow the deduction of damages.

Issue 4: Reduction of interest charged under section 215
The Department objected to the direction of the CIT(A) to reduce interest charged under section 215 by recourse to rule 41 of the IT Rules. The Tribunal held that the CIT(A) had jurisdiction to consider the appeal against the interest charge and direct reduction if certain circumstances were present, as per rule 40 of the IT Rules. Since the delay in assessment completion was not attributed to the assessee, the Tribunal upheld the CIT(A)'s direction to reduce the interest charged. The objection of the Department was rejected.

In conclusion, the appeals were dismissed by the Tribunal after thorough consideration and analysis of the issues raised by the Department in each assessment year.