9911796707
TMI Blog1998 (11) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... her scrap. The AO following similar additions made in preceding years, made an addition of Rs. 40,000 on account of alleged suppressed sale of leather scrap. He observed that on similar facts an addition of Rs. 30,000 was made in the preceding year. The learned CIT(A) confirmed the said addition. 5. The learned counsel for the assessee submitted that this point is covered in favour of the assessee by decision of the Tribunal for asst. yrs. 1986-87 to 1988-89. He stated that similar additions were made in asst. yrs. 1984-85 as well as in 1985-86. The Tribunal restored the matter back to the AO in asst. yrs. 1984-85 and 1985-86. The AO passed fresh orders for these years. Addition was made in the fresh order for asst. yr. 1985-86 which was again deleted by the CIT(A) vide order dt. 10th Jan., 1995. The facts pertaining to the year under consideration are similar. The assessee contended that no saleable leather scrap was obtained during the process of production. Whatever scrap was generated, it was either burnt as fuel or thrown away and nothing was sold in the market. This fact has been accepted by the Tribunal in the preceding year also. 5.1. The learned Departmental Represen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same. 7. In ground No. 3, the assessee has challenged the confirmation of disallowance of Rs. 19,677 out of export promotion expenses by involing the provisions of s. 37(2A) of the Act. A ground relating to this very point has also been raised by the Revenue in its cross-appeal in Ground No. 2. The Revenue has challenged the relief of Rs. 39,729 allowed by the CIT(A) out of disallowance of Rs. 59,406 made by the AO under s. 37(2A) of the Act. 8. The assessee debited a total sum of Rs. 73,216 in P L a/c on account of export promotion expenses. The AO was of the view that the aforesaid expenditure represented entertainment expenditure which will have to be dealt with as per provisions of s. 37(2A). He further observed at p. 5 of the assessment order that out of Rs. 73,216, as sum of Rs. 310 has been disallowed under r. 6BB thus the balance entertainment expenditure governed by s. 32(2A) comes to Rs. 72,906. The deduction allowable as per s. 37(2A) comes to Rs. 13,500. The AO accordingly disallowed the balance amount of Rs. 59,406. 8.1. The CIT(A) gave the details of expenditure of Rs. 73,216 in para 17 of the order passed by him. The said expenditure included Rs. 310 relatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relief out of entertainment expenditure attributable to employees participation only to the extent of 25 per cent as against 50 per cent allowed by the CIT(A). The ground No. 2 raised by the Revenue is thus partly allowed and ground No. 3 raised by the assessee stands rejected. 10. In ground No. 4, the assessee has challenged the finding given by the CTI(A) confirming the denial of deduction under s. 80HHC in respect of interest income of Rs. 39,608 and rental income of Rs. 600. The learned counsel for the assessee did not press its claim for grant of deduction in relation to rental income of Rs. 600. The learned counsel, however, submitted that interest income of Rs. 39,608 has been assessed by the AO as income from business. The assessee is wholly engaged in the export business. Such interest income therefore forms part of export business and qualifies for deduction under s. 80HHC. He further drew our attention towards the decision of the Tribunal in assessee's own case for asst. yrs. 1987-88, 1988-89 in ITA Nos. 1345 and 1346 and 2957 and 2958/Del/1990. The Tribunal, in the aforesaid decision, vide para 16 at p. 13 has held that the entire income has been computed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rant of deduction under s. 80HHC in relation to interest income of Rs. 39,608. The AO is directed to verify and examine the true nature of interest income and find out whether it has any direct nexus or connection with the export trade of the assessee. The AO will decide this point afresh in accordance with the provisions of law after giving a reasonable opportunity of hearing to the assessee. 12. Now, we will deal with the remaining grounds of Revenue's appeal. In ground No. 1, the Revenue has challenged the deletion of addition of Rs. 6,21,021 by the CIT(A), the said addition was made by the AO on account of alleged suppressed sale of shoe-uppers. The AO has observed that the shoe-uppers of the value of Rs. 10,66,754 are shown to have been sold by the assessee for sum of Rs. 4,45,733. It was stated on behalf of the assessee before the AO that Export Inspection Authorities of foreign buyers found that 7,875 pairs of uppers as defective. The rejected shoe-uppers which were meant for being exported are not locally saleable items looking to their specification, price and size. Therefore, such rejected shoe-uppers were sold to petty karigars at very low prices. The assessee also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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