1982 (9) TMI 179 - AT - Income Tax

Summary

Issues:
Eligibility of the assessee for allowance under s. 35C of the IT Act.

Detailed Analysis:
The assessee, a private limited company engaged in seed manufacturing, processing, and selling, claimed allowance under s. 35C for certain expenses. The ITO and CIT (A) allowed part of the expenses. The AAC set aside the assessment for 1973-74, directing the ITO to review s. 35C conditions. Fresh assessments were made for 1973-74, 1974-75, and 1975-76, where some expenses were deemed ineligible under s. 35C. The CIT (A) later allowed the crop production, inspection fees, and demonstration expenses. The Tribunal confirmed crop production expenses but set aside processing expenses and inspection fees for further review by the CIT (A). The ITO, upon fresh assessments, rejected claims for processing and crop production expenses. The Revenue appealed against the allowance under s. 35C for processing expenses, inspection fees, and godown expenses. The Revenue argued that the assessee was a mere dealer in seeds, not eligible for s. 35C. The assessee contended that it was too late for the Revenue to challenge eligibility, as previous assessments had allowed s. 35C claims. The Tribunal focused on the eligibility of processing expenses, inspection fees, and godown expenses under s. 35C. The Tribunal found that these expenses did not align with the categories specified in s. 35C, reversing the CIT (A)'s decision on processing expenses but upholding the allowance for godown expenses. The Revenue's appeals were allowed.

The Tribunal noted that the dispute for the first three years centered on the eligibility of relief under s. 35C for specific expenses. The ITO, CIT (A), and Tribunal had previously deemed the assessee eligible for s. 35C relief for various expenses. The Tribunal concluded that it was too late for the Revenue to question the overall eligibility of s. 35C for the assessee. The focus was on the admissibility of relief for processing expenses and inspection fees under s. 35C. The Tribunal analyzed the nature of the processing expenses and found that they did not fall under the categories specified in s. 35C. Therefore, the CIT (A) erred in allowing relief for processing expenses, inspection fees, and godown expenses. The Tribunal upheld the allowance for godown expenses for one year but reversed the CIT (A)'s decision on other expenses. The Revenue's appeals were allowed, and the orders of the CIT (A) were reversed.