2000 (9) TMI 13 - HC - Income Tax

High Court favors assessee on tax deductions for Investment Department expenses and 'Reserve for doubtful debts'.

Commissioner of Income Tax Versus General Insurance Corporation of India (No. 2).

The High Court ruled in favor of the assessee on both issues. Regarding the first issue, expenses for the Investment Department's salary were found to be ... - Issues involved: 1. Whether expenses incurred on salary for the Investment Department are directly related to earning dividend income for deduction under section 80M of the Income-tax Act, 1961Rs. 2. Whether debiting an amount to 'Reserve for doubtful debts' violates rule 5 of the First Schedule to the Act, read with section 36(1)(vii)Rs.Issue 1 - Expenses for Salary and Dividend Income: The assessee claimed expenses for earning dividend income, which the department disputed by including additional costs. The first appellate authority ruled in favor of the assessee, upheld by the Tribunal. The High Court, referring to a previous judgment, found in favor of the assessee due to vague grounds of appeal and lack of specific details on investment expenses.Issue 2 - Reserve for Doubtful Debts: The Department contended that the assessee violated section 36(1)(vii) by debiting an amount to 'Reserve for doubtful debts'. The Department argued that rule 5 of the First Schedule required adding back such amounts. The assessee argued that the transfer to the reserve account complied with the law, citing relevant judgments. The High Court found in favor of the assessee, stating that the debt was written off as required by law, and the Department failed to raise the pertinent question on irrecoverability.In conclusion, the High Court ruled in favor of the assessee on both issues, dismissing the appeal with no costs.