2001 (1) TMI 246 - AT - Income Tax

Summary

Issues involved:
1. Addition of credit balances written off to P&L account
2. Disallowance of commission
3. Deduction of depreciation
4. Expenses for increasing share capital
5. Disallowance of entertainment expenses
6. Disallowance of conference and seminar expenses
7. Disallowance of staff welfare expenses
8. Disallowance of miscellaneous expenses
9. Disallowance of gift expenses

Detailed Analysis:

1. Addition of credit balances written off to P&L account:
The first common issue in the judgment pertains to the addition of credit balances written off to the Profit and Loss (P&L) account. The Assessing Officer (AO) considered these amounts as income of the assessee based on previous orders. The Tribunal considered the judgments of the Supreme Court in two cases - T.V. Sundaram Iyengar & Sons and Sugauli Sugar Works. The Tribunal concluded that there was no conflict between the decisions. If the amount is received in trading transactions, it is assessable as trading receipts. However, if the benefit is obtained by the assessee due to remission or cessation of liability, it is assessable under section 41(1). The Tribunal set aside the orders of CIT(A) and directed the AO to ascertain the nature of unclaimed credit balances for fresh adjudication.

2. Disallowance of commission:
The second common issue involves the disallowance of commission claimed by the assessee. The AO disallowed the commission amount as a provision created by the assessee. The CIT(A) confirmed the disallowance. The Tribunal noted that the agreement details and workings were not before the AO. Therefore, the matter was set aside for fresh adjudication after considering the terms of the agreement.

3. Deduction of depreciation:
For the assessment year 1993-94, the issue was whether the deduction of depreciation could be imposed by the AO. The Tribunal ruled in favor of the assessee citing a decision of the Supreme Court in a relevant case.

4. Expenses for increasing share capital:
The issue for the assessment year 1993-94 was the disallowance of expenses for increasing the share capital. Both parties agreed that the issue was decided against the assessee based on a Supreme Court decision. The Tribunal followed the precedent and decided against the assessee.

5. Disallowance of entertainment expenses:
The issue for the assessment year 1994-95 was the disallowance of 80% of entertainment expenses. The Tribunal followed a previous decision and ruled against the assessee.

6. Disallowance of conference and seminar expenses:
For the assessment year 1994-95, the issue was the disallowance of conference and seminar expenses. The Tribunal followed a Special Bench decision and ruled in favor of the assessee.

7. Disallowance of staff welfare expenses:
The issue for the assessment year 1994-95 was the disallowance of staff welfare expenses on account of entertainment expenses. The Tribunal held that staff welfare expenses cannot be termed as entertainment expenses and ruled in favor of the assessee.

8. Disallowance of miscellaneous expenses and gift expenses:
The Tribunal dismissed the grounds related to the disallowance of miscellaneous expenses and gift expenses as they were not pressed by the parties.

In conclusion, the Tribunal partly allowed both appeals after detailed analysis and consideration of legal precedents and factual circumstances for each issue involved.