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TMI Blog1996 (9) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Appellate Tribunal (for short, "the Tribunal") for the assessment year 1982-83 (ITC No. 33 of 1995): (i) Questions of law arising out of R. A. No. 954 of 1993/ITA No. 986 of 1987,--- " 1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in allowing weighted deduction on 50 per cent. of expenditure on travelling to foreign countries by the directors and officers of the company ? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the company may not constitute agency or office outside India to avail of deduction under section 35B on commission when provisions of this section are mandatory to have branch office or an agency outside India ? 3. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in allowing weighted deduction under section 35B on advertisement and marketing expenditure ? 4. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in permitting the change in the method of accounting with regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defeat the Revenue when the issue of determining items of direct cost is highly debatable ? 5. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the method of accounting with regard to valuation of closing stock is followed from year to year regularly and consistently?" (ii) Questions of law arising from R. A. No. 957 of 1993/ITA No. 1089 of 1987,--- " 1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that expenditure on the purchase of air-conditioner, cooler, calculator and fans is entitled for deduction under section 35(1)(iv) ? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in allowing extra shift allowance on new plant and machinery on the working of the concern as a whole even for the period when the new machinery was not available with the assessee ? " Questions of law arising from the order of the Tribunal for the assessment year 1985-86 (ITC No. 32 of 1995) : (i) Questions of law arising out of R. A. No. 958 of 1993/ITA No. 988 of 1987,--- " 1. Whether, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight in law in allowing bad debts of Rs. 1,71,73,148 ? 5. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the medical expenses by way of payment of group insurance, reimbursement of medical expenses, electricity, water, gas charges and salaries to servants shall not be treated as perquisites for computing disallowance under section 40(c) and section 40A(5) ? 6. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in allowing extra shift allowance on new plant and machinery on the working of the concern as a whole even for the period when the new machinery was not available with the assessee ? " Questions on the valuation of closing stock.---The questions raised on the method of valuation of the closing stock in all the three assessment years (1982-83, 1983-84 and 1985-86) arise from the change in the method of accounting adopted by the assessee in the assessment year 1982-83 and then followed in the subsequent assessment years. The assessee's plea was that valuation of the closing stock could be done either at cost or at the market value. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the foreign agents and also on foreign travelling. The relevant sub-clauses in section 35B(1)(b) of the Act are as under : " 35B. Export markets development allowance.---(1) . . . (b) The expenditure referred to in clause (a) is that incurred wholly and exclusively on--- (i) advertisement or publicity outside India in respect of the goods, services or facilities which the assessee deals in or provides in the course of his business ;.... (iv) maintenance outside India of a branch, office or agency for the promotion of the sale outside India of such goods, services or facilities ;... (vii) travelling outside India for the promotion of the sale outside India of such goods, services or facilities, including travelling outward from, and return to, India ; " It is evident that the directors and the employees had undertaken foreign tours for the purposes of the company's business so as to promote the sales. The Assessing Officer had taken the view that, since the assessee-company was an associate of the company, Beecham Products Overseas Ltd., and was controlled by the parent company, there was no need for the officers and the directors to go to foreign countries. The Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a particular plant or machinery had worked. It was stated that, normally, depreciation is allowed on the plant and machinery even if such plant was acquired on the last day of the accounting period. Normally, depreciation did not depend on the number of days. The Tribunal agreed with the assessee's plea and allowed extra shift allowance on concern basis. The following question of law arises in each of the three assessment years : " Whether, on the facts and in the circumstances of the case, extra shift allowance on new plant and machinery is to be allowed on the basis of the working of the undertaking as a whole or on the basis of the number of days the machinery had worked extra shifts during the year ? " Questions on inclusion of excise duty in the value of closing stock.---Question No. 6 in the assessment year 1982-83 and question No. 4 in the assessment year 1985-86 relate to the inclusion of excise duty in the value of the closing stock. From a perusal of the Tribunal's order, it is noticed that the assessee had not debited a sum of Rs. 94,35,617, to the profit and loss account though this amount had been paid by way of excise duty on the goods produced but not sold. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above facts, it is apparent that the assessee had actually not received any refund of excise duty and, therefore, no income can be said to have accrued. In Morvi Industries Ltd. v. CIT [1971] 82 ITR 835, the Supreme Court had held that if income by way of commission has accrued, that could be treated to be income though the payment had been deferred. Income accrues when it becomes due and the postponement of the date of payment did not affect the accrual of income. In the present case, the income actually had not accrued at all, because the Department had chosen to file SLP before the Supreme Court and, therefore, the matter had not been finally settled and the refund was under a cloud. In Union of India v. J. K. Synthetics Ltd. [1993] 199 ITR 14, it has been held by the Supreme Court that liability to tax under section 41 would depend on the outcome of the appeal. The assessee's writ petition in that case challenging its liability to pay the excise duty had been accepted by a single judge of the High Court but the matter was pending in appeal before a Division Bench. Therefore, section 41 of the Act could not be invoked. In view of the aforesaid decision of the Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd of directors in the next year, the following question of law is found to arise in the matter : " Whether, on the facts and in the circumstances of the case, deduction on account of bad debt of Rs. 1,71,73,148 was rightly allowed in the assessment year 1985-86. " Question on perquisites under section 40(c) and section 40A(5) of the Act.---The Assessing Officer noticed, that certain expenditures on group medical insurance, medical reimbursement of medical expenses, electricity, water and gas charges had been incurred in connection with the amenities and benefits provided to the directors of the assessee-company. These expenditures were, therefore, treated within the ambit of perquisites while working out the disallowance under section 40(c) of the Act. The Tribunal, however, took the view that these expenses are not to be treated as perquisites while computing disallowance under section 40(c) and section 40A(5) of the Act. The question has been finally settled by the Supreme Court in CIT v. Mafatlal Gangabhai and Co. (P.) Ltd. [1996] 219 ITR 644. It was held that cash payments by an assessee to its employees do not fall within the ambit of section 40(a)(v) or section 40A(5)( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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