2010 (3) TMI 299 - HC - Income Tax

Roll over charges/expenditure entertainment expenditure - unclaimed credit balances unilaterally written back (credited to Profit 6, 89, 881/ being roll over charges/expenditure paid to banks in respect of repayment of principal amount of foreign exchange loans taken for capital investments can not be allowed as deductible expenditure - The expenditure incurred by the assessee to the extent of 25% of the overall expenditure in question could legitimately be regarded as a fair estimate of what was incurred by the assessee for its employees at a place of work - The claims of the customers had become barred by limitation. In these circumstances the assessee having treated the money as its own money and having transferred it to the profit and loss account the Supreme Court held that the amount representing unclaimed credit balances would be treated as the assessee s income and was liable to be taxed. The decision in Sundaram Iyengar s case 2008 -TMI - 5532 - SUPREME Court consequently rested on these specific facts. On the other hand the subsequent decision in Sugauli Sugar Works 2008 -TMI - 5715 - SUPREME Court specifically deals with the issue in hand and would cover the case against the Revenue - unclaimed credit balances unilaterally written back is not taxable

Summary

Issues:
1. Appeal under Section 260A of the Income Tax Act, 1961 involving eight questions of law.
2. Common order by the Income Tax Appellate Tribunal for Assessment Years 1991-92 and 1992-93.

Analysis:
1. Question G:
- The Supreme Court judgment in a similar case was referred to, where the issue was covered against the assessee. The Court found in favor of the Revenue based on the factual position and allowed the appeal.

2. Question A:
- The Tribunal's decision was based on a previous judgment, and no substantial question of law was raised.

3. Questions B and E:
- The Tribunal upheld the decision of the CIT (A) regarding entertainment expenses, as it was considered reasonable and consistent. The legal provisions regarding entertainment expenditure were discussed, and the Tribunal's decision was found to be in line with the law.

4. Question C:
- The issue was found to be covered by a Supreme Court judgment, and no substantial question of law arose.

5. Question D:
- The issue was considered settled based on a previous judgment of the Court, and no substantial question of law was raised.

6. Question F:
- The Tribunal's decision was based on previous judgments and factual findings, which were considered final. No substantial question of law was identified.

7. Question H:
- The appeal was admitted on this question alone, and the legal principles from previous judgments were discussed to support the decision. The Court found that no substantial question of law arose based on the specific facts of the case.

8. Overall Decision:
- The appeal was allowed only on the specific question regarding roll over charges/expenditure paid to banks. The Court's decision was based on the interpretation of legal provisions, previous judgments, and factual findings. No costs were awarded in this case.

This detailed analysis of the judgment highlights the legal reasoning behind each decision on the various questions of law raised in the appeal under the Income Tax Act.