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TMI Blog1989 (10) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... arned CIT(A) erred in allowing the expenditure of Rs. 2,02,773 even when it was of capital nature. (6) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred n deleting the addition of Rs. 4.25,00 on account of assessee's claim regarding loose tools. (7) On the facts and in the circumstances of the case and in law, the leaned CIT(A) erred in deleting the interest of Rs. 37,470 correctly levied under s. 216 of the IT Act." 2. Ground No. 1 has to be decided in favour of the assessee as the Benches of the Tribunal are uniformly taking the decision that the provisions of s. 40(c) are applicable to the employee directors and not the provisions of the s. 40A(5) of the Act. In the assessee's own case, the Tribunal in ITA No. 3864/Bom/83 and ITA No. 6526/Bom/84 decided on 21st Oct., 1985 for the asst. yr. 1979-80 has taken a similar view. This ground is accordingly, rejected. 3. Ground No. 2 has to be decided in favour of the assessee in view of the decision of the Tribunal reported in MAHINDRA MAHINDRA LTD. vs. ITO (1984) 8 ITD 427 (Bom) and further the decisions of the Tribunal in the assessee's own case in ITA Nos. 4875 and 4876/Bom/83 for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and spreading manure in the park and gardens of the companies township. The company manages the entire township of Jamshedpur in the course of its normal business. In any case, in view of the Circular of the Board which is to be effect that tractors cannot be described as road transport vehicles and hence entitled to development rebate, the counsel for the assessee is right that tractors cannot been described as road transport vehicles. The decision of the Gujarat High Court cited by the learned Departmental Representative was on the question whether dumpers were road transport vehicles or not. It is evident on a reading of the decision of that dumpers were held to be road transport vehicles as the assessee's counsel there conceded this position. In any case dumpers and tractors, as stated above, are different in character and nature. We are, therefore, of the view that the assessee is entitled for the allowance under s. 32A in respect of the tractors and trailers used by it in the course of its business. This ground is, accordingly, rejected. 7. The next ground of appeal is in relation to the grant of investment allowance on the cost of the railway siding in the Bombay Stock ya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee incurred by the said expenditure on travelling, car hire charges and hotel bills, etc., on its officers, who participated in the modernisation programmes. The same was disallowed by the ITO following his reasoning given in the assessment order for the asst. yr. 1980-81. On appeal, the CIT(A), following his order for the asst. yr. 1980-81 allowed the said expenditure on the ground that same was revenue in nature and did not result in the acquisition of any asset or advantage of an enduring nature. 10. We have heard the parties, Similar expenditure had been allowed by the Tribunal as a revenue expenditure in the assessee's own case for the asst. yr. 1968-69. Facts and circumstances being similar, we for similar reasons, uphold the allowance of this expenditure made by the CIT(A). This ground is, accordingly, rejected. 11. The next ground of appeal, is in relation to the allowability of a sum of Rs. 4,25,000 representing expenditure on cost of loose tools purchased during the year bring consumables. Upto the asst. yr. 1979-80 the assessee wrote of 10% of the value of the loose tools each year and carried forward the balance as in item of book inventory. However, as this metho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee even a slight change by the Government in its policies made by rendered them inaccurate as the difference in prices varied considerably from time to time. It was submitted that merely because the assessee was agitating with the Government regarding the cost reimbursement and also the increase in price it could not be presumed that when the assessee submitted its estimates of income, it would have worked these estimates taking it for granted that its claim had been allowed by the Government. In addition, in detail various other facts were submitted by the assessee before the CIT(A) justifying the non levy of interest under s. 216. These submissions have been discussed by him in para 10.3 of his order which in brief are as follows: (i) The estimate are prepared on the basis of the data available on the date when the estimate are made; (ii) The first estimate was made taking into consideration the uncertainties existing in the Steel Market; (iii) The appellant's claim for reimbursement of cost escalations was pending with the Government. No final order has been passed in this connection by which the assessee was fully aware as to how much cost it would recoup (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The appellant has filed the following statement giving the basis on which the estimates were filed. Instalment of Advance-tax Actuals for the year 1st 2nd 3rd 1. Production of saleable steel Tonnes: 1,50,000 1,500,000 1,505,000 1,536,800 2. Despatches 1,382,000 1,382,000 1,318,000 1,372,600 3. Average Realisation:Rs. P.t. 2090 2092 2250 2377 4. Average cost " 1762 1817 1850 1866 5. Profit Margin " 328 275 400 511 6. Profit on steel. Rs. Crores 45.33 33.40 52.72 59.13 7. Add:Reimbursement of cost escalations -- 19.65 17.00 17.65 45.33 53.05 69.72 76.78 8. Profit on miscellaneous products Rs. Crores 10.68 10.68 15.17 18.65 56.01 63.73 84.89 95.43 9. Interest dividend " 2.50 2.75 2.75 3.25 58.51 66.48 87.64 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 2.75 crores as estimated in the first three instalments. Just as final and actual income of the appellant had gone up, similarly the expense have also gone up correspondingly the final expenditure under the head "Selling Administration etc. Went up to Rs. 3.77 crores as against Rs. 2.50, Rs. 2.25 and Rs. 270 croers estimated in the first three instalments. The rist of expenditure is marginal and the difference between the first instalment and the last instalment is mainly due to the increased income. Under the circumstances, in view of the test laid down by the Allahabad High Court supra it has to be seen whether the appellant had property basis and justification or not at the time of filing of the estimate. As explained by the appellant representative the ITO has proceeded to levy interest under s. 216 on the basis that the jump from the first estimate to second estimate is double and as computed to the income in second estimate the income in the third estimate is more than double. The reasons of this jump have been furnished at length and mainly the jump was duo to three factors. Firstly, the appellant's claim for the reimbursement of cost escalation for the period 1979-80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt while filing second estimate but the second factor regarding the partial decontrol of price w.e.f. March, 1981, could not be foreseen even at the time of filing the second estimate. The result of the cost reimbursement granted and the price increase allowed on the valuation of the closing stock could not be foreseen at the time of filing second estimate. In fact, the market reaction to the increased prices could not be foreseen even at the time of filing the last estimate on 15th March, 1981, as the appellant could not accepted by their market. As submitted that the appellant's representative, at no pint of time during the year, could be appellant have expected a partial decontrol in an industry which was controlled since 1943. The improvement in profit on this count was in fact a windfall to the steel industry in general and the appellate in particular and it was impossible to estimate the extent of the windfall accruing before 31st March, 1981. Consideration all these factors, it cannot be said that the appellant did not have a proper basis and justification for the estimate filed by it on 15th Sept., and 15th Dec., 1980. The appellant had taken all reasonable care to make its ..... X X X X Extracts X X X X X X X X Extracts X X X X
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