Tribunal News  


Yogesh G. Shah         
B.Com., L.L.B., F.C.A.

1. DCIT v. The Assam Tribune (70 TTJ 39) (Guwahati)
    Assessment year 1991-92, Order dated 31st July, 2000

ISSUES :

  • Whether Pooja expense is allowable as business expenditure ?

  • Whether employee's contribution to P.F. etc. can be 
    disallowed u/s. 43B of the Act if not paid within due date ?

HELD :

  • Biswakarma puja is a necessary event which is to be performed by the employees working in the printing press and, therefore, the expenditure cannot be said to have been incurred for non-business purposes and same is deductible.

  • Employee's contribution to provident fund etc. is deemed to be income of assessee-employer and consequently there is a corresponding liability to contribute the same to the provident fund. Therefore, clause (b) of section 43B is applicable and the contribution if not paid or deposited within due dates are to be disallowed.

2. Metallizing Equipment Co. (P.) Ltd. vs ACIT (70 TTJ 365) (Jodhpur)
    Assessment year 1987-88, Order dated 18th December, 2000

ISSUE :

  • Whether prior period adjustments can be disallowed when net 
    resulted in credit during the year ?

  • Whether disallowance for personal expenses can be made case 
    of limited companies ?

HELD :

  • Prior period adjustment in this case are having net credit 
    results in the current year and this being so, no addition is 
    really warranted on this issue.

  • No disallowance on account of personal expenses can be made 
    in the case of limited companies and hence disallowance out of 
    telephone expenses deleted.

3. Orient Cosmetics Ltd. V. DCIT (70 TTJ 490) (Madras)
    Assessment year 1988-89 & 1989-90, Order dated 6th August, 1999

ISSUE :

  • When assessee is conducting trial runs only and no manufacture, purchase or sale takes place expenses incurred are allowable or sale takes place expenses incurred are allowable as deduction ?

  • Whether on the above facts depreciation and investment allowance are admissible ?

HELD :

  • There was no commercial activity during the relevant previous year. It was stated in Director's report that plant has not fully gone into commercial production nor the assessee was engaged in trading activity. It was only conducting trial runs for a short period. There was no manufacture, purchase or sale of finished goods. Expenses incurred by assessee not allowable as deduction.

  • Investment allowance is admissible when the plant and machinery owned by the assessee is wholly used for the purpose of business carried on by him. Business implies continuous activity in carrying on a particular trade or a vocation. Assessee was only conducting trial runs and no commercial activity is carried on and therefore, depreciation and investment allowance are not admissible.

4. DCIT vs Wolkem (P) Ltd. (70 TTJ 573) (Jodhpur)
    Assessment year 1986-87, Order dated 28th February, 2000

ISSUE :

  • Whether deduction of investment allowance has to be allowed before deduction u/s. 80HHC of the Act ?

HELD :

  • The provisions of section 80AB are clearly attracted in relation to computation of deduction allowable under any of the provisions appearing in Chapter VI-A including deduction allowable under section 80HHC. Section 80B(5) defined "gross total income" which means total income computed in accordance with the provisions of this Act before making any deduction under VI-A. Therefore, investment allowance has to be reduced before allowing deduction u/s. 80HHC of the Act.

5. Lupin Agrochemical (I) Ltd. V. DCIT (70 TTJ 723) (Mumbai)
    Assessment year 1990-91 to 1993-94, Order dated 29th October, 1999

ISSUE :

  • Whether interest and commission incomes are to be excluded while 
    computing profits u/s. 801 of the Act ?

HELD :

  • Deduction u/s. 801 is allowable only in respect of profits derived from the industrial undertaking. Interest income derived by investing money in banks, be it out of borrowed money or otherwise, is an independent source of income and not an income derived from industrial undertaking. Similarly, income from commission is an independent source of income. Therefore, interest and commission income are not to be taken into account for computing deduction u/s 801.

6. Lavrids Knudsen Maskinfabrik (I) Ltd. V. ACIT (77 ITD) 212 (PUNE - SMC)
    Assessment Year 1993-94, Order dated April 18, 2000

BRIEF FACTS : 

  • Assessee Company allotted certain shares to LKM Denmark. RBI permitted assessee to open foreign exchange account in Denmark. Assessee received equity contribution from LKM Denmark out of which payment were made suppliers for machinery purchased. On foreign exchange fluctuations assessee had a gain.

ISSUES :

  • Whether gain received as above is a capital receipt ?

  • Whether gain received as above is a capital receipt ?

  • Whether gain can be treated as causal receipt u/s 10(3) of 
    the Income-tax Act ?

HELD :

  • When foreign exchange was obtained not in course of trading but for the purpose of allotment of equity, fluctuation gain would be a capital receipt and not a revenue receipt.

  • Section 10(3) not being a charging provision; it is impermissible to bring to tax under section 10(3) of the Income-tax Act. When such receipt was capital receipt, it was wrong to treat it as income in hands of assessee and bring it to tax under section 10(3).

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