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TMI Blog1988 (10) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... e made in respect of such interest. The alternate plea before the IAC (Asst.) was that the deposits received from the public to the extent of Rs. 47,80,609 had been credited to a separate bank account. Income-tax was paid from the said bank account and as such these deposits had been utilised entirely for the payment of income-tax and that the interest attributable to such deposits should, therefore, be excluded from the purview of s. s. 40A(8) of the Act. The IAC (Asst.) accepted the alternate contention and accordingly computed disallowance under s. 40A(8) with reference to the net amount of interest of Rs. 10,64,088 i.e. gross amount of interest amounting to Rs. 17,11,224 minus interest of Rs. 6,47,126 paid on deposits credited to the separate account. He, accordingly, worked out the disallowance at Rs. 1,59,600. 3. The assessee went in appeal before the CIT(A). It was submitted on behalf of the assessee before the CIT(A) that apart from the deposits amounting to Rs. 47,80,609 which had been specifically earmarked for payment of income-tax, the other deposits which had been credited to the composite bank account were also utilised for the purpose of payment of tax and since th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0A(8) of the Act. It was because of the direct nexus between those deposits and the payment of tax that the interest was not subjected to disallowance under s. 40A(8) of the Act. As far as other borrowings and deposits are concerned, they were effected not specifically for payment of taxes. They were effected for providing working funds for the business. It is not shown to us by any material that particular borrowing had gone for payment of particular amount of taxes. Consequently, as far as other borrowings and deposits are concerned, they were general borrowings and deposits constituted the working funds of the business and such interest thereon would be allowable as deduction not under s. 80V of the Act but under s. 36(1)(iii) of the Act. To such interest provisions s. 40A(8) will be applicable. Sec. 80V laid down that in computation of the total income of the assessee these shall be allowed by way of deduction in interest paid by him in the previous year on any money borrowed for the payment of tax due from him under this Act. This is a specific provision and in order to claim deduction under this provision the assessee has to show direct nexus between particular borrowing and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The IAC (Asst.) found that the assessee had added back a sum of Rs. 2,48,623 under s. 40(C) and another sum of Rs. 1,73,305 under s. 40A(5). He did not accept the computation of disallowance made by the assessee and recomputed the disallowance on the following lines: "(i) He applied the provisions of s. 40A(5) instead of s. 40(c) in respect of the remuneration paid to the Directors. (ii) He included the expenditure on repairs and maintenance of flats occupied by the Directors and employees in the value of perquisites. (iii) He also included the expenditure incurred on repairs of cars allotted to the Directors/employees. (iv) Depreciation on such cars to the extent of 1/3rd was considered as per quisite, and Medical reimbursements and club fees etc. were also treated as perquisites in computing the disallowance under s. 40A(5)." The assessee went in appeal before the CIT(A). The CIT(A) held as under: (i) the provisions of s. 40(C) should be invoked in the case of employee directors; (ii) the expenditure incurred on repairs and maintenance of flats provided to the employees and directors will not constitute a perquisite within the meaning of s. 40(c)/40A(5); (iii) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e light of the above directions. 8. Ground No. 3 is as follows: On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in allowing relief of Rs. 36,335 on account of professional fees and commission under s. 80VV. The IAC (Asst.) had disallowed Rs. 42,385 being professional fees paid to the consultant on the ground that the entire fees was covered by s. 80VV of the Act. The facts were identical with the facts in the asst. yr. 1981-82. Relying upon the decision in the appeal for asst. yr. 1981-82, the CIT(A) held that only a sum of Rs. 6,050 would be attributable to representation before the Tax Authority and, would, therefore, be covered by s. 80VV and that the balance would be allowable under s. 37(1) of the Act. 9. We find that against the order of the CIT(A) for asst. yr. 1981-82, the Department had come in appeal before the Tribunal in ITA No. 1675/Bom/85. The Tribunal had considered the entire facts on record and held that out of composit amount only a sum of Rs. 9,305 for that year was attributable to the appearances before the IT Authorities and confirmed the finding of the CIT(A). For the year with which we are concerned, no material ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Company, Nepal. The ground is partly allowed. 12. Ground NO. 5 is as follows: On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in allowing investment allowance on computer used as office appliance. The learned departmental representative argued that according to his instructions computers were installed as office appliances and as such the decisions of the Bombay High Court in the case of CIT vs. I.B.M. World Trade Corporation (1981) 130 ITR 739 (Bom) and CIT vs. I.B.M. World Trade Corpn. (1986) 161 ITR 673 (Bom) which the assessee has relied were not applicable. We find that this submission cannot be accepted. The CIT(A) had recorded a finding that the computers were installed in the factory of the assessee company and an appropriate certificate had been issued by the Chief Inspector of Factories. The CIT(A) relied on the decision of the Tribunal in the case of Rajeev Arora (ITA No. 453/Bom/ 82) and also the decisions of the Bombay High Court and allowed the same. We find that there is no error in the finding of the learned CIT(A) that the computers were installed in the assessee's factory. In the circumstances, the decisions of the Bom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t this ground. 16. Ground No. 7 is as follows: On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the interest correctly levied under s. 216. The IAC (Asst.) has not given any reason for charging interest under s. 216 of the Act. He has not considered the facts on the basis of which relevant estimates were field by the assessee. It is now well settled by the decision of the Allahabad High Court in CIT vs. Elgin Mills Ltd. (1980) 123 ITR 712 (All) that charging of interest under s. 216 is not automatic and that assessing officer is required to consider whether the estimate filed by the assessee was in fact an under-estimate or was honest estimate based on the facts available at the time of preparation of the estimate. The estimate is to be considered with reference to the time when it is prepared and not with reference to the amount assessed in the assessment order. In the present case, the CIT(A) has found that the assessee had taken into account the facts available at the relevant time in preparing the estimates. The estimates were based on the facts as were known to the assessee at the relevant time. Consequently, there was no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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