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TMI Blog2006 (12) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... spects except in regard to claim of deduction towards driver's salary and depreciation in respect of car made by the petitioner under the head "Income from other sources". These amounts were added back, income determined and tax demanded through proceedings issued under section 143(1)(a) of the Act. The assessee challenged these orders in revision petitions filed before the Commissioner under section 264 of the Act on the ground that the deductions claimed are not items prima facie inadmissible for addition under clause (iii) of first proviso to section 143(1)(a) of the Act. However, the Commissioner vide exhibit P7 rejected the revision petitions on the ground that claim of salary paid to the driver is inadmissible by virtue of law settled by the decision of the Supreme Court in Vijaya Laxmi Sugar Mills Ltd. v. CIT [1991] 191 ITR 641 and so far as allowance of depreciation is considered, the claim is prima facie inadmissible because the petitioner returned no income from hire charges against which only allowance of depreciation is provided while computing the income under the head "Income from other sources" under section 57(ii) of the Act. It is against this common order that pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal errors in the returns, accounts or documents accompanying the same, the Assessing Officer in the course of processing of the returns is authorised under clause (iii) of the first proviso to section 143(1)(a) to grant prima facie admissible deductions and allowances or set off of carry forward loss claimed by the assessee. The question to be considered is whether disallowance of the two items of claims of deduction made by the assessee were prima facie inadmissible to justify disallowance by the officer in exercise of authority vested in him under clause (iii) of the first proviso to section 143(1)(a) of the Act. The Act is silent as to which are the items of allowances and deductions that could be disallowed as prima facie inadmissible. However, Circular No. 689, dated August 24, 1994, issued by the Central Board of Direct Taxes among other things states that claims which are patently inadmissible in law could be disallowed under clause (iii) of the first proviso to section 143(1)(a). The return is always accompanied by a statement of computation of income and tax liability which would certainly show the head of income under which income is computed claiming deductions and allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nery, plant, furniture, etc., under the head "Income from other sources". In other words, section 57(iii) does not visualise granting of any allowance like depreciation but provides for expenditure other than capital expenditure laid out or expended for the purpose of earning income of the nature falling under section 56. Therefore, the disallowance of depreciation on car claimed against income from other sources as prima facie inadmissible is perfectly justified and I uphold the impugned order on this issue. The next item disallowed as prima facie inadmissible is the driver's salary claimed by the petitioner against income from other sources. Even though the petitioner has declared two items of income under this head namely "dividend income" and "interest income", the petitioner still claimed driver's salary as a deduction. Counsel for the petitioner submitted that the petitioner has income in the nature of interest from a company at Coonoor and probably the petitioner was going there in his car to collect the income which obviously means expenditure. If that be so, then it is strange to note that the petitioner has not claimed any deduction towards fuel charges or for maintenan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry provision. Even though the Commissioner of Income-tax has relied on the decision of the Supreme Court in Vijaya Laxmi Sugar Mills Ltd. v. CIT [1991] 191 ITR 641and senior counsel for the Income-tax Department also contended that the issue whether salary paid to employees is an inadmissible deduction under section 57(iii) stands settled by the said decision of the Supreme Court, on going through the said judgment I do not find that the Supreme Court has held a general proposition that the salary paid to an employee cannot under any circumstance be allowed under section 57(iii) of the Act. All that the Supreme Court has held is that no employee is required for the official liquidator to earn salary on short-term deposits maintained in a bank because income is earned irrespective of whether the official liquidator maintains staff or pays salary to them. In fact, there can be cases where the interest earned on deposits in private firms, the volume and number of deposits, the places where deposits are maintained in relation to the location of the assessee, the pattern of collection may need the service of an employee. Of course, if any question of law is settled by the decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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