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TMI Blog1993 (6) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... ad ' Travelling expenses '. 3. On hearing the rival submissions, we consider that the assessee's objection is valid. We, therefore, direct the Assessing Officer to recompute the sum to be disallowed under Rule 6D by following the aforesaid case. 4. Issue No. 2 ---Disallowance of medical expenses reimbursed to employees/ directors under sec. 40(c) and 40A(5) Here the assessee's contention is that the medical expenses reimbursed by the assessee to its employees/directors ought not to have been taken as part of salary of the employees/directors for the purpose of computing the disallowance under the said sections. 5. We find that this matter stands covered against the assessee by the I.T.A.T. Special Bench order in the case of Glaxo Labora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and unambiguous provisions of the said section, we decline to interfere in the matter and dismiss the related grounds. 9. Issue No. 4 ---Terminal allowance under sec. 32(1)(iii) During the relevant previous year the assessee had scrapped certain assets and the written down value of which aggregated Rs. 11,15,630, and claimed terminal allowance in respect thereof. Finding that the assessee had not furnished the scrap value of the assets in question, the Assessing Officer estimated the scrap value at 25 per cent of the Written Down Value and granted the assessee terminal allowance in respect of the balance of sum of Rs. 8,36,723. The CIT(A) declined to interfere in the matter. 10. Before us it was sought to be argued that the scrapped ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 1986-87. 14. As we see it, the point made as and by way of additional grounds is well taken. Accounting policy in matters relating to assets that are disposed of or discarded is well settled. Particularly in cases in which some of the assets are disposed of or discarded, the accounting practice is to open an account called " Machinery Disposal Account ". If the books of account show the Written Down Value of the assets, the book value of the discarded assets is debited to the Machinery Disposal Account by credit to the asset account. If the books of account show the cost of the assets, there being separate provision for depreciation account, the Machinery Disposal Account is debited with the cost of the discarded assets (by credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Account (it can also be called ' Scrap Account ') and the resulting profit or loss transferred to the P & L Account. We may illustrate the entries that need to be passed in the context of the terminal allowance available to the assessee under sec. 32(1)(iii) of the Act. Let us say that an asset whose WDV is Rs. 70 is discarded during the year of account ending on, say, 31-3-1979, being the previous year relevant to the assessment year 1979-80. Let us also assume that the discarded machinery has an estimated scrap value of Rs. 40. Let us further assume that the scrap was not sold during the previous year ending on 31-3-1979. In such a situation in the context of terminal allowance admissible to the assessee, the following will be the sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (a) To Balance b/d 40 By Cash 40 ---------------------------------------------------------------------------------------------------------------------------------------------------- 40 40 ---------------------------------------------------------------------------------------------------------------------------------------------------- Situation (b) To Balance b/d 40 By Cash 80 To P & L A/c 40 ---------------------------------------------------------------------------------------------------------------------------------------------------- 80 80 ---------------------------------------------------------------------------------------------------------------------------------------------------- Situation (c) To Balance b/d 40 By ..... X X X X Extracts X X X X X X X X Extracts X X X X
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