1997 (8) TMI 125 - AT - Income Tax

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Disallowance of depreciation on a building.
3. Disallowance of guest house expenses.
4. Non-consideration of disallowed amount out of traveling expenses while allowing deductions u/ss 80HH and 80-I.

Summary:

1. Condonation of Delay:
The appeal by the assessee was delayed by 35 days. The assessee argued that the delay was due to confusion and lack of clear directives, citing the Supreme Court's decision in Collector, Land Acquisition v. Mst.Katiji [1987] 167 ITR 471 for a liberal approach. The Departmental Representative opposed, stating the explanation was vague. The Tribunal, adopting a pragmatic view, condoned the delay and proceeded to hear the appeal on merits.

2. Disallowance of Depreciation on Building:
The main issue was the disallowance of depreciation on a building whose title had not been transferred to the assessee. The building was used for business, and full consideration had been paid. The Assessing Officer and CIT(A) disallowed the claim, as the legal title was not transferred. The assessee relied on the Supreme Court's decision in CIT v. Podar Cement (P.) Ltd. [1997] 92 Taxman 541, arguing that ownership for depreciation purposes should be interpreted in a substantial sense. The Departmental Representative argued that the Supreme Court's decision in Podar Cement (P.) Ltd. was context-specific to section 22 and not section 32. The Tribunal, referencing the Full Bench decision of the Kerala High Court in Parthas Trust v. CIT [1988] 169 ITR 334/38 Taxman 57, upheld the disallowance, stating that legal title was necessary for claiming depreciation u/s 32.

3. Disallowance of Guest House Expenses:
The assessee contested the disallowance of Rs. 15,000 out of guest house expenses. The Assessing Officer and CIT(A) disallowed the expenses u/s 37(4) and 37(5). The assessee argued that rent was deductible u/s 30, thus section 37(4) was not applicable. The Tribunal agreed, stating that section 37 is a residuary section and does not apply when specific provisions like section 30 are applicable. The disallowance was directed to be deleted.

4. Non-Consideration of Disallowed Traveling Expenses for Deductions u/ss 80HH and 80-I:
The assessee claimed that disallowed traveling expenses pertaining to the Urla Unit were not added back while computing deductions u/ss 80HH and 80-I. The CIT(A) rejected the claim, stating the net profit used for deductions was higher than the computed income. The Tribunal dismissed the assessee's ground due to lack of details and inability to substantiate the claim.

Conclusion:
The appeal was partly allowed, with the Tribunal condoning the delay, allowing the deduction for guest house expenses, but upholding the disallowance of depreciation on the building and rejecting the claim regarding traveling expenses for deductions u/ss 80HH and 80-I.