1984 (5) TMI 141 - AT - Income Tax

Issues Involved:
1. Construction of tenements
2. Foreign travel expenses
3. Claim under section 35B in respect of foreign travel expenses
4. Scrapping of barges
5. Claim of depreciation on barges gifted by the assessee

Detailed Analysis:

1. Construction of Tenements:
The assessee incurred an expenditure of Rs. 1,18,137 under the Miners Housing Scheme for providing housing to the staff. The Income Tax Officer (ITO) disallowed this claim, but the Commissioner (Appeals) allowed it, following the Tribunal's earlier decision in IT Appeal No. 378 (Pune) of 1978-79. As the matter is covered by the previous Tribunal decision in the assessee's own case, no interference with the Commissioner's order is warranted.

2. Foreign Travel Expenses:
Out of Rs. 2,57,636 claimed for directors' travel abroad, the ITO disallowed Rs. 1,93,698 due to lack of evidence linking the travel to the company's business. The Commissioner (Appeals) allowed the claim, noting the regularity of such expenses in previous years and the blanket permission from RBI for export activities. The department challenged this allowance.

The Tribunal held that the assessee must furnish full facts to justify the expenditure. Despite the RBI's blanket permission, the details of how the expenditure relates to the business must be provided. The matter was remitted back to the Commissioner (Appeals) for detailed verification, allowing both parties to present their cases.

3. Claim under Section 35B in Respect of Foreign Travel Expenses:
The assessee claimed relief under section 35B for foreign travel expenses of Rs. 1,93,698, which the ITO disallowed. The Commissioner (Appeals) allowed the claim, linking it to the business purpose.

The Tribunal stated that the allowance under section 35B depends on the primary decision regarding whether the travel expenses were for business. Since the matter of travel expenses was remitted back to the Commissioner (Appeals), the claim under section 35B should also be reconsidered in light of the nature of the expenditure, particularly against the export activities.

4. Scrapping of Barges:
The assessee claimed Rs. 47,042 as the scrap value of scrapped barges under section 32(1)(iii). The ITO disallowed the claim due to lack of evidence of condemnation and value write-off. The Commissioner allowed the claim based on a certificate from the Captain of the ports.

The Tribunal noted the absence of detailed evidence regarding the scrapping and its timing. The certificate did not specify the date or nature of the scrapping. The matter was remitted back to the Commissioner (Appeals) for verification of the condemnation date and scrap value, emphasizing that the entire value of a barge in running condition could not be considered nil.

5. Claim of Depreciation on Barges Gifted by the Assessee:
The assessee gifted 17 barges three days before the end of the accounting year and claimed depreciation of Rs. 1,09,114. The ITO disallowed the claim, stating that the assessee was not the owner on the last day of the year. The Commissioner (Appeals) allowed the claim, noting that ownership throughout the year is not a condition for depreciation.

The Tribunal was divided on this issue. The Vice President held that ownership throughout the year is necessary, while the Judicial Member disagreed, citing that section 32 does not specify ownership throughout the year. The Third Member sided with the Judicial Member, stating that section 32 does not require ownership throughout the year and that the assessee is entitled to depreciation if the asset is owned at any time during the year.

The Third Member emphasized that the absence of specific language requiring ownership throughout the year in section 32, combined with the allowance for partial-year usage in rule 5, supports the assessee's claim. The decision of the Patna High Court in CIT v. S.K. Sahana & Sons also supported the assessee's position. Consequently, the majority view upheld the Commissioner's decision to allow depreciation on the gifted barges.

Conclusion:
The appeal was partly allowed, with specific issues remitted back to the Commissioner (Appeals) for further verification, while the claim for depreciation on gifted barges was upheld in favor of the assessee based on the majority view.

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