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TMI Blog1980 (10) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... iation from 50 per cent to 33 1/3 per cent, the AAC directed a further disallowance of 33 1/3rd of the expenditure on the maintenance of the car. 3. It is urged on behalf of the assessee that the AAC has in effect enhanced the income of the assessee without a notice in this respect having been given to the assessee. It is pointed out on behalf of the Department that there is no enhancement involved because, the AAC had deleted an addition of Rs. 12,760 in the case of lorry transport, which amount was far in excess of the 1/3rd of the car expenses. It was, therefore, urged that no notice for enhancement was necessary. From the narration given by the AAC, in his order does not appear to have been even an informal mention of this proposed disallowance of the car expenditure mooted by the AAC in the order. It would also appear from the same narration that for the earlier assessment year as well, the Department had accepted the position that no disallowance of the expenditure of the car is to be made. Taking this into consideration, we feel that even though a formal enhancement notice was not necessary on the part of the AAC in this regard, it was certainly necessary for the AAC to ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee did not have any special trips allotted to it and, therefore, the collections shown by him cannot be considered to be unreasonably low. These contentions were not accepted by the AAC, who felt that the very fact that the additional routes were allotted to Cheran Transport would mean that there was sufficient traffic in those routes and the Government must have felt that the Cheran Transport buses and the assessee's buses should run at the same time to clear the heavy traffic. He also felt that it was not possible to correlate the collection shown by the assessee in the collection memos with the mileage run. It was stated by him that the jottings in the collections memos should be corroborated by the carbon copies of the tickets issued, which primary material was not produced. In the absence of such primary material he felt that the account cannot be considered to be free from defect. He also felt that the diesel consumption was sufficiently excessive to warrant a better collection shown by the assessee. He, therefore, sustained the action of the ITO in ignoring the loss of Rs. 18,310. 6. It is urged before us that the AAC had not appreciated the facts of the case properly. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO and the AAC have been able to show that the books of accounts maintained by the assessee cannot be considered to be complete and verifiable. The collections shown by him amounted to Rs. 3,63,957. If the loss due to trips lost was taken into account, the collections would have been Rs. 4,35,142 as against the optimum collections of Rs. 8,96,969. In the earlier year the percentage of collections in respect of the same routes though not in the hands of the assessee in the present case was 50 per cent of the optimum collections. Collections shown by the assessee are definitely lower than the collections in earlier previous year. The only question is whether the assessee ha been able to show whether there were circumstances which justified such poor collections. We are satisfied that the assessee has been able to show that the circumstances under which he was running these six routes sufficiently justified the poor collections shown by him. This is the first year in which the assessee has been carrying on this business. The assessee started off with a teething trouble mainly the allotment of these routes to the Cheran Transport. It is only as a temporary measure by way of an interi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Motor Services Pvt. Ltd., that was only a clause providing for the settlement of the disputes between the parties to the award, that in actuality there was no liability to gratuity on the part of M/s. Gobald Motor Service Pvt. Ltd., at the time the buses were allotted to the assessee and, therefore, the payment of gratuity was only a liability on the part of the assessee himself. It is urged on behalf of the Department that though there was no liability existing at the time of the take over by the assessee of these route buses, there was an anticipation that there would be a liability in respect of the gratuity at that point of time and, therefore, it had the effect of reducing the value of the assets that were allotted to the assessee under the arbitration. It is urged that in this regard also the thing was capital in nature and, therefore, should not be allowed in the hands of the assessee. 10. We have carefully considered these arguments. The material part of the arbitration award in respect of this liability on the part of the assessee to pay gratuity is cl.17(a) which has been extracted by the AAC. in his order. It is stated in this clause as follows: "Gratuity in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the part of the business of M/s. Gobald Motor Services Pvt. Ltd. in Oct., 1976. We, therefore, agree with the AAC that this liability of Rs. 6,364 discharged by the assessee immediately after the take over of the portion of the business is the liability only of M/s Gobald Motor Services Pvt. Ltd. that had been discharged by the assessee in terms of the arbitration award. There is much force in the argument advanced by the ld. Deptl. Rep. That this is a capital expenditure. The assessee has taken over part of the business of M/s. Gobald Motor Services Pvt. Ltd., which in effect and in terms of the arbitration award means that the assessee had taken over the assets and the liabilities in part from Gobald Motors. What has passed to the assessee is not merely the routes and the route buses but the part of the business, which part must be considered in its entirety. If the part is considered in its entirety, the liability to pay this gratuity in question is merged with that part of the business taken over by the assessee, i.e., to say, the part of the business of M/s. Gobald Motor Services Pvt. Ltd., has been taken as an integrated whole by the assessee, the assets together with the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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