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TMI Blog1991 (7) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... fit on additional licences amounting to Rs. 2,22,946 and Rs. 1,25,409 respectively are revenue receipts liable to tax. 5. After hearing the parties, we are of the opinion that in view of retrospective amendment by insertion of s. 2(25) (sic) and decision of the Special Bench of the Tribunal in the case of M/s Gedore Tools (India) Pvt. Ltd., vs. IAC (1988) 70 CTR (Trib) (Del) (SB) 69 : (1988) 25 ITD 193 (Del) (SB), this ground has to be decided against the assessee. 6. The next grievance in the assessee's appeal relates to the disallowance of Rs. 75,938 under s. 37(3A) to 37(3D) of the Act. The disallowance had been made by the Assessing Officer by applying provisions of s. 37(3A) to (3D) to the following expenditure: . . Rs. (1) Car expenses 1,08,382 (2) Car depreciation 34,971 (3) Taxi hire 8,000 (4) Advertisement 43,535 (5) Free samples 2,73,066 (6) Fair & exhibition 11,740 7. The submission of the learned counsel for the assessee Shri Ajay Vohra is that the car expenses include Rs. 37,741 for repairs. Expenses to repair of motor car are allowable under s. 32 (sic). Therefore, it cannot be disallowed under s. 37(3A). Reliance was placed on the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ival submissions, we find substance in the ground of the assessee and hold that this amount cannot be disallowed. 12. The next item of expenditure is on fair and exhibition, amounting to Rs. 11,740. The details of this expenditure are given at page 13 of the Paper Book. Out of total expenditure on fairs & exhibitions, Rs. 11,740 were disallowed. The case of the assessee is that provisions of s. 37(3A) are not applicable for disallowance. As against this, the learned Departmental Representative supported the action of the CIT(A). 13. We have considered the rival submissions. We find that s. 37(3C)(i) excludes from the purview of disallowance under s. 37(3A) expenditure on advertisement, publicity and sales promotion outsideIndia. Therefore, we hold that the amount of Rs. 11,740 cannot be disallowed. 14. The next ground in the assessee's appeal is that the CIT(A) has erred in sustaining an addition of Rs. 800 on account of perquisite value of telephone installed at the residence of the Director. At the outset the learned counsel for the assessee pointed out that in asst. yr. 1983-84 in the assessee's own case this disallowance was deleted vide order of the Tribunal in ITA Nos. 145 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve gone through the details of expenditure incurred on repairs. We find that this expenditure was incurred on purchasing of wood for repair of windows, doors, & roofing beeding, bending etc. cost of Iron & Steel cost of repair of flooring (stone & marble chips) and cost of doors and windows, tower bolts, handles etc. Considering the fact that this expenditure was incurred on a rented premises, it is held to be an expenditure of revenue nature. We Therefore, set aside the order of the CIT(A) and direct the ITO to delete to the same. 22. The next grievance of the assessee is that the CIT(A) erred in confirming the disallowance to the extent of Rs. 19,120 out of general expenses The assessee incurred an expenditure on entertainment of foreign buyers. The IAC (Asst) as well as the CIT(A) made disallowance under s. 37(2A) of the IT Act considering the same purely on entertainment. 23. The learned counsel for the assessee submitted that in asst. yr. 1983-84 the Tribunal has estimated 40 per cent of the expenditure to be allocable by employees' participation and excluded the same from the purview of disallowance under s. 37(2A) Therefore, similar estimation should be made this year also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The next grievance in the assessee's appeal is that the CIT(A) erred in confirming the disallowance of Rs. 1,62,840 out of export market development expenses During the assessment year under consideration the assessee had spent Rs. 1,84,780 for export market development fees. The Assessing officer made disallowance on the ground that the expenditure is in the nature of entertainment expenditure. The case of the assessee was that this expenditure has been incurred in connection with the travelling of foreign buyers. who come in connection with business of the assessee. However, the CIT(A) treated Rs. 21,940 for export market development and rest was disallowed. 32. The learned counsel for the assessee pointing out the details and history of the expenditure given at pages 15 and 16 of paper Book submitted that this expenditure cannot be disallowed in view of the decision of the special bench in the case of J. Hemchand & Co. vs. Second ITO (1982) 1 SOT 150 (Bom) and in the case of ITO's. Happy Sound Industries (1982) 1 SOT 172 (Del). It was pointed out that the Tribunal has held that the expenditure incurred by the assessee on receiving and treating its foreign buyers could well be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n estimate basis. This ground is, therefore, partly allowed. 37. The next grievance in the assessee's appeal is that the CIT(A) erred in confirming the disallowance in respect of guest house at Mussoorie. At Mussoorie the assessee company has building which is used as a guest house The case of the assessee is that the guest house expenditure is allowable under s. 32. It cannot be disallowed under s. 37(4) as held by the Bombay High Court in the case of CIT vs. Chase Bright Steel Ltd. (1989) 75 CTR (Bom) 60 (1989) 177 ITR 124 (Bom) and various decisions of the Tribunal given as under; (i) Eicher Good earth Ltd. vs. IAC (A) Delhi Bench 'E'' (ii) Purolator India Ltd. vs. IAC (A) Delhi Bench. (iii) American Bureau of Shipping vs. ITO (1986) 19 ITD 793 (Bom). It was submitted that the depreciation is allowable on building. As against this, the learned Departmental Representative supported the action of the revenue authorities. 38. We have considered the rival submission In view of the Tribunal's decisions cited above and the decision of the Bombay High Court in the case of Chase Bright Steel Ltd. we are of the opinion that depreciation on guest house maintained by the assessee at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 months in the previous year relevant to the asst. yr. 1983-84 the submission of the learned counsel for the assessee seems to be justified with regard to Mathura Unit. Therefore, we, direct that while working out deduction admissible under s. 80HH the assessees allocation of fixed overhead expenditure incurred by the Head office atMathuraunit should be worked out. We would, therefore, direct IAC (Asst) to compute deduction by taking 10 per cent of the over-head expenses claimed This ground is allowed. 42. The next grievance in the assessee's appeal relates to deduction under s. 80-1 in respect of Jamna Kinara Unit The assessee claimed deduction under s.80-1 in respect of Jamna Kinara Unit on the same basis as given for Mathura Unit However the IAC (Asst) and CIT(A) had disallowed deduction under s.80-1 on the ground that after allocating both fixed and variable overheads expenses incurred by the head office in the proposition of sales, there is no profit available for claiming deduction under s. 80-1 43. The learned counsel for the assessee pointed out that in the asst. yr. 1982-83 the Tribunal approved the assessee's basis of allocating 10 per cent of fixed overhead expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of Gedore Tools (India) Pvt. Ltd. came in the year 1990, by Finance Act, 1990 whereby the CCS and Import Entitlement are held to be taxable. In view of these facts, it cannot be said that the assessee acted Mala fidely by not considering the CCS and duty draw back as taxable receipt. In view of these facts and the coupled with the decision of Gujarat High Court in the case of Nagri Mills Ltd we are of the opinion that interest under s.216 cannot be charged unless it is proved that the estimate was deliberately understated which is absent in the assessee's case. Therefore interest under s. 216 cannot be charged The IAC (Asst) is directed to delete the same. 47. The next grievance in the assessee's appeal is that the CIT(A) erred in upholding the levy of interest under s. 215. This ground is consequential and does not call for discussion. 48. There is another additional ground raised by a letter before the Tribunal that the CIT(A) erred in confirming the order of the Assessing Officer in allowing deduction under s. 80-I on the balance profits and the new industrial undertaking after reducing deductions allowed under ss. 80HH and 80HHC. For the admission of this ground the le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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