9911796707
TMI Blog2000 (12) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... pt of the earlier year cannot be included in the income of the assessee for the current year. He further contended, relying on the decision of the Supreme Court in CIT vs. P.J. Chemicals Ltd. (1994) 121 CTR (SC) 201 : (1994) 210 ITR 830 (SC) that the same also cannot be deducted from the cost of R D testing equipment for the purpose of calculating depreciation. 3. The learned Departmental Representative submitted that the assessee has shown this amount of subsidy in the P L a/c as miscellaneous income and, therefore, the same has been included in the total income as per s. 41(1)(a). He further submitted that although the subsidy received by the assessee is a capital receipt, the basis of such subsidy is not known. 4. We have considered the rival submissions and perused the material on record. It is observed that the AO has made the addition on this account considering that no depreciation is allowable on the amount of subsidy received which, in fact, should have been deducted by the assessee while claiming the depreciation at 100 per cent on the R D equipment It is also observed from the depreciation chart provided by the assessee on page No. 45 of his paper book that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itor's remark without going deep in the issue and also without giving opportunity to the assessee to offer any explanation. In such circumstances, we are of the opinion that the CIT(A) should have considered this apparent mistake instead of taking support from r. 46A. 7. Ground No. 4 relates to the disallowance of Rs. 4,500 out of telephone/telex expenses. 8. After considering the rival submissions and perusing the material on record, it is observed that this disallowance is made by the AO on account of personal use of telephone by the directors. On this issue this Tribunal has taken a consistent stand, following the decision of O.S. Motors vs. Asstt. CW (ITA No 623/Jp/94, dt. 31st Aug., 2000) that no disallowance on account of personal expenses can be made in the case of limited companies. We, therefore, direct the AO to delete this addition of Rs. 4,500 out of telephone expenses. 9. Ground No. 5 relates to the addition of Rs. 69,554 under s. 43B. The learned counsel for the assessee submitted that this liability on account of GST and RST amounting to Rs. 69,554 was paid before the due date of filing of return under s. 139(1) and, therefore, contended that no disallowance un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability paid by the assessee before the due date for furnishing the return of income under s. 139(1) cannot be disallowed under s. 43B. 11. Ground No. 6 relates to the addition of Rs. 79,674 being the amount of bonus paid in excess of bonus payable as per the Bonus Act. 12. The facts in this case are that the assessee paid bonus of Rs. 1,11,225 as per the provisions of Payment of Bonus Act and in addition also paid production bonus of Rs. 72,472 and incentive bonus of Rs. 23,098. The AO however considered that provisions of Bonus Act applied to all payments made on this account, by whatever name called. He accordingly worked out the maximum amount of bonus permissible under the Payment of Bonus Act @ 20 per cent on total salary and wages paid by the assessee and disallowed the excess amount of Rs. 79,674. The matter was carried before the learned CIT(A) who upheld the said additions made by the AO on the basis of observations made by the auditors in their report. He also observed that the explanation offered by the assessee before him as regards incentive and production bonus separately had not been offered before the AO during the assessment proceedings and as such the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed the excess payment of bonus specifically under s. 36(1)(ii) and contended that the reasonability of such expenditure as well as the business expediency in respect of the same have not been considered by the AO so as to ascertain the allowability of such expenditure under s. 37(1). 14. We have considered the rival submissions and also perused the relevant material on record including the decisions cited by the learned counsel for the assessee. It is observed that the AO in this case has disallowed the excess payment of bonus specifically under s. 36(1)(ii) without considering the other relevant aspects. He has particularly referred to the observations made by the auditors in the report wherein it has been specifically pointed out by the auditors that the additional amount of Rs. 72,472 and Rs. 23,098 were paid to employees on account of production bonus and incentive bonus, respectively. It is also observed that the assessee during the assessment proceedings before the AO claimed this production bonus and incentive bonus as allowable under s. 37(1). However, the AO has not examined this claim of the assessee from the angle of reasonability and business expediency. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating through the different assessment years has been found as a fact one way or the other, and parties have allowed that position to be sustained, it would not at all be appropriate to allow the position to be changed in a subsequent year. The decision of Hon'ble High Court in the case of Pukhraj Rikhabdas cited by the learned counsel for the assessee also supports this view. 15. As such considering all the facts of the case and the legal position emanating from the aforesaid judicial pronouncements, we hold that the payment of incentive and production bonus amounting to Rs. 79,674 cannot be regarded a bonus payable under the payment of Bonus Act to attract provisions of s. 36(1)(ii). The, order of the learned CIT(A) on this issue is, therefore, reversed and the AO is directed to allow this expenditure under s. 37(1). 16. Ground No. 7 relates to the disallowance of Rs. 2,000 out of general expenses. 17. After considering the rival submissions and perusing the material on record, it is observed that this issue has not been fully discussed by the AO in his order. He has also not given any basis or reasoning for such disallowance. The details of nature of such expenses have als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts onus in respect of establishing the identity and capacity of the creditor, maintaining of addition on this account is bad in law as well as on facts. 21. The learned Departmental Representative on the other hand, relied on the orders of the authorities below and submitted that the creditor did not have sufficient means to advance the deposit. He also submitted that the creditor at the relevant time was in the employment of the company drawing a meagre salary and contended that entry in respect of deposit in question is just an accommodation entry. He, therefore, urged that the order of the learned CIT(A) on this issue may be upheld. 22. We have heard both the parties and also considered the relevant material on record including the cited decisions. It is observed that the assessee-company filed the confirmation of Shri R.M. Daga before the AO in support of the deposit availed from him. It is also observed that the said creditor was also produced before the AO for examination and in the statement recorded on oath, he confirmed the fact of having advanced the money. He also explained the source of funds and also adduced the supporting evidence in the form of authority letter g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dentity as well as capacity of the depositor. Therefore, the deposits in the name of the depositor cannot be treated as unexplained deposit. The interest of such deposit treated as assessee's income by the AO will also have to be cancelled." Moreover in the case of CIT vs. Daulat Ram Rawatmull 1972 CTR (SC) 411 : (1973) 87 ITR 349 (SC) the Hon'ble Supreme Court has held that the simple fact that the explanation regarding the source of money furnished by the creditor/depositor had been found to be false, it would be a remote and farfetched conclusion to hold that the money belonged to the assessee and in such case there would be no direct nexus between the facts found and the conclusions drawn therefrom. 23. It is also pertinent to note here that the learned counsel for the assessee has also placed on record a copy of bank a/c of the depositor Shri R.M. Daga showing the refund of deposit amount by the assessee through account payee cheque in the next year and further application of these funds by the depositor for his own investment elsewhere. In our opinion these entries further substantiate the genuineness of the deposit. As such considering all the facts of the case and in vi ..... 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