2015 (2) TMI 848 - HC - Income Tax

Expenditure on account of municipal tax, repairs and insurance - disallowance of the said expenditure in respect of guest house under section 37(4)- Held that - Decided against assessee as relying on Britannia Industries Ltd. v. CIT reported in 2005 (10) TMI 30 - SUPREME Court . Disallowance of deduction under section 33AB - Interest income from deposits with Nabard whether connected with the business of growing and manufacture of tea - Held that - Whether such deposit was made in connection with the business of growing and manufacture of tea, as contended by the learned counsel, should have appeared from the order of the Assessing Officer or the order of the Commissioner of Income-tax or the order of the learned Tribunal. It appears that at all the three stages this position was not clarified by any of the authorities. Whether the income of ₹ 1,07,29,555 actually arose from deposits integrally connected with the business of growing and manufacture of tea is a pure question of fact. Unless a finding is recorded with regard thereto, it is not possible to answer the question whether that income can be taken into account for the purpose of allowing deduction under section 33AB of the Income-tax Act. Therefore, it appears to us that the adequate attention was not given to the matter when the same was dealt with at different stages. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Disallowance of expenditure on municipal tax, repairs, and insurance for guest house under section 37(4) of the Income-tax Act.
2. Disallowance of deduction under section 33AB of the Income-tax Act regarding interest income.
3. Treatment of sale proceeds of wind fallen shade trees as income from other sources instead of capital gains.
4. Admissibility of additional grounds related to allowance of depreciation and computation of written down value under section 43(6) of the Income-tax Act.
5. Interpretation of section 43(6) of the Income-tax Act for computing opening and closing written down value of assets.

Analysis:

1. The first issue pertains to the disallowance of expenditure on municipal tax, repairs, and insurance for a guest house under section 37(4) of the Income-tax Act. The appellant contended that such expenditure should be allowable directly under sections 30 and 31 of the Act. The Tribunal's decision upholding the disallowance was challenged as perverse. The senior advocate highlighted a judgment by the Supreme Court to support the appellant's position.

2. The second issue revolves around the disallowance of deduction under section 33AB of the Income-tax Act concerning interest income. The appellant argued that the interest income arose from deposits connected with the business activities of growing and manufacturing tea, making it eligible for deduction under section 33AB. However, it was noted that the authorities had not clarified whether the income actually arose from business-related deposits, indicating a factual question that needed resolution. The Court decided to remand the matter to the Tribunal for a rehearing on all issues except those covered by the Supreme Court's judgment.

3. The third issue involved the treatment of sale proceeds of wind fallen shade trees as income from other sources rather than capital gains. The lower authorities had treated the amount as income from other sources, rejecting the appellant's claim for exemption under section 54E of the Income-tax Act. The Tribunal's decision upholding this treatment was challenged as perverse.

4. Moving on to the fourth issue, it concerned the admissibility of additional grounds raised by the appellant related to the allowance of depreciation and computation of written down value under section 43(6) of the Income-tax Act. The appellant argued that the Tribunal had not addressed these additional grounds, which raised pure questions of law, warranting consideration in the appeal.

5. The final issue centered on the interpretation of section 43(6) of the Income-tax Act for computing the opening and closing written down value of assets. The Tribunal's decision not to direct the Assessing Officer to compute the written down value in a specific manner was challenged as perverse. The appellant sought a direction for the proper interpretation of section 43(6) in computing the depreciation for assets.