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TMI Blog1982 (9) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... sum total of the claims under items 1, 2 and 5 to 8 amounted to Rs. 2,82,873 termed as miscellaneous expenses. The ITO disallowed Rs. 50,000 out of this claim keeping in view that the assessee had surrendered Rs. 10,000, that the entertainment expenses were Rs. 10,000 and that there were other expenses of an unverifiable and inadmissible nature. The amount of travelling expenses claimed at Rs. 69,531 were also included in the aforesaid amount of Rs. 2,82,873 but even then ITO separately disallowed Rs. 20,000 out of this claim. Similarly out of the advertisement claim of Rs. 6,363, the ITO disallowed Rs. 2,000. Kamla Retreat expenses were similarly included in the above amount but were disallowed by the ITO in to. Out of staff welfare expenses claimed at Rs. 23,403, the ITO disallowed Rs. 4,000. When the matter came up in appeal before the CIT(A), he reduced the disallowance of Rs. 50,000 to Rs. 25,000. This disallowance of Rs. 25,000 was inclusive of Rs. 10,000 on account of entertainment expenses. So far as advertisement expenses are concerned, the disallowance of Rs. 2,000 was reduced to Rs. 500. The disallowance of Rs. 4,000 on account of staff welfare expenses was, however, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lling expenses, advertisement expenses, Kamla Retreat expenses and staff welfare expenses without any duplication of the expenses claimed or disallowed. 4. The next item of dispute relates to the disallowance of Rs. 58,000 out of payments made by the assessee and claim by way of good work. The ITO noticed from the profit and loss account the debit of expenses incurred by way of good work and ex gratia payment to Shri J.B. Krishnan, G. Sheshadri, Shri M.L. Srivastava, and others amounting to Rs. 58,000. The break up of the same is as follows: Rs. 1. Payment made to workers for good work 32,914 2. Paid to Shri G.S. Singhan S/o Late Shri G. Sheshadri, former Works Manager 15,000 3. Smt. Jagdisha, widow of Shri M.L. Srivastava, former Statistics Incharge. 8,550 4. Other small payments 1,933 58, 397 Rounded to 58,000 According to the ITO there was no justification for payment of these sums as no evidence was produced to show that they were in keeping with service conditions. He, therefore, held the entire amount of Rs. 58,000 as ex gratia payment and disallowed the same. In ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. Deptl. Representative. Placed reliance on the orders of the IT Authorities as also on the decision of the Supreme Court in Gordon Woodroofs Leather Manufacturing vs. CIT (1962) 44 ITR 551 (SC). We have considered the rival submissions. So far as the payment of Rs. 32,914 to 147 workers for good work/over time is concerned, we take the view that this payment was a business expenditure on the part of the assessee and accordingly allowable. The fact that no receipts were taken from the workers, would not be material as the details of the payments were furnished by the assessee including complete particulars of dates, payments and imprest slip particulars. On facts we hold these payments could not be doubted. We, therefore, hold that the disallowance to the extent of Rs. 32,914 is not sustainable. 4. However, so far as the other payment of Rs. 25,483 is concerned, in reply to a query from the Bench, Shri Agarwal stated that there was no agreement, resolution, rule or scheme under which these payments were made to the legal representatives etc. of the deceased employees. The payment was, therefore, in the nature of ex gratia payment. In the case of Gordon Woodroffe Leater Manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, estimated the purchase of sugarcane at 10,000 quintals and applying a rate of 9% and deducting the yield shown by the assessee, arrived at the quantity of 655 quintals, as suppressed productions. He, therefore, made an addition of Rs. 1,08,250 by taking the rate of sugarcane at Rs. 150 per quintal. He also added Rs. 8,000 for suppression of the production of molasses which is a bye product. The CIT (A) observed that the assessee had not purchased any sugarcane in December, 1970 though the plant was operated in the weeks starting from 26th December 1970 and 5th January 1971 and it also paid wages amounting to Rs. 4,391 in December, 1970. He noticed that the sugarcane was purchased on 14th January 1971 for the first time whereas the plant had already operated for about 15 days in December, 1970 and January 1971. He found the same thing for February, 1971. He, therefore, took the view that the purchase of sugarcane, the payment of wages, the production of sugarcane and molasses were not verifiable and that even if it was accepted that it was a demonstration plant, there was no reason why the assessee would not run the plant fully during the sugarcane season specially when it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt being different from a normal plant, it would be futile to expect the same pattern of crushing and supply of sugarcane and production of sugar and molasses. It is not clear as to how the yield of 6% was accepted by the CIT (A) as the normal yield, in the absence of a comparable case. The assessee had submitted the account of Khandsari plant together with details of the excise duty paid giving the challan number and the date of deposit and the amount paid. The excise duty of Khandsari plant, known as compounded duty was paid in advance for a week during which the centrifugal was to be operated and for a week preceding it. In the reply the assessee had given the excise procedure in such matters, namely, that after the operation was over for a week, the excise department used to seal the plant. There is no material on the record before us to dispute this position. This shows that the duty was paid as and when the plant was to be operated and that it had no relation to the quantum of production. The assessee had also said in its own foundry department that only a part of it was used to extract cheap type of sugar. Shri H.P. Agarwal also pointed out that ultimately the plan of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out. He also referred to the assessee's replies dt.14th September 1976 and 3rd March 1978. He pointed out that in 1970-71 M/s Graphite India Ltd. Who were the indigeneous manufacturers of electrodes, could not cope up with the market requirements and, therefore, the electrodes had to be obtained at exhorbitant prices from the market. He pointed out that the correspondence which the assessee had with M/s Graphite India Ltd. And others was produced before the ITO. He also pointed out that for want of electrodes the assessee's electric are furnace had to be closed down for quite a number of days. Summing up his arguments Sri Agarwal stated that there was no justification for making any addition and that it is under some confusion that the assessee's counsel may have stated before the CIT (A) what it was not able to give was the name and addresses of the parties from whom the electrodes were purchased. On the other hand, Shri R.K. Upadhyay, the ld. Deptl. Rep. Places strong reliance on the orders of the income-tax authorities and on the counter affidavit of the ITO. He also stated that the cash memos, etc. Were not before the IT Authorities. 8. We have considered rival submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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