1991 (6) TMI 17 - HC - Income Tax

Tribunal rules in favor of assessee, allowing business use of bungalows and legitimate expenses.

The Tribunal ruled in favor of the assessee on all issues presented in the case. The use of bungalows for business purposes was partially allowed for ... Business Expenditure, Disallowance Issues Involved:1. Use of bungalows for business purposes during employee leave.2. Exclusion of 50% of Rs. 1,84,127 for computing disallowance u/s 40A(5).3. Deletion of disallowance of Rs. 12,294 and Rs. 20,608 u/s 37(3) and 37(2B).4. Income from transporting crude oil and its attribution to the business of mineral oil production.5. Entitlement to relief u/s 80-I on income from transporting crude oil.6. Classification of oil wells as plant for development rebate.7. Entitlement to development rebate on drilling expenditure.Summary:Issue 1 & 2: Use of Bungalows and Exclusion for Disallowance u/s 40A(5)The Tribunal observed that the bungalows were partly used by employees and partly for the business of the assessee-company. It held that 50% of the amount should be considered for disallowance computation u/s 40A(5). However, since the Tribunal allowed the entire Rs. 18,32,944 for repairs and maintenance of bungalows, questions 1 and 2 became academic and were not answered.Issue 3: Deletion of Disallowance u/s 37(3) and 37(2B)The Tribunal found that the expenditure on travelling and entertainment was incurred in the field during drilling operations, as per the second supplemental agreement. Therefore, the disallowance by the Income-tax Officer was not proper. The Tribunal's decision to delete the disallowance was upheld, and question 3 was answered in the affirmative, favoring the assessee.Issue 4 & 5: Income from Transporting Crude Oil and Relief u/s 80-IThese issues were covered by a previous judgment in the same assessee's case (CIT v. Oil India Ltd. [1992] 196 ITR 366). Following this precedent, questions 4 and 5 were answered in the affirmative, favoring the assessee.Issue 6: Classification of Oil Wells as PlantThe Tribunal held that oil wells are apparatus used for deriving income from crude oil, thus qualifying as plant. This classification was supported by departmental circulars and Supreme Court judgments. Question 6 was answered in the affirmative, favoring the assessee.Issue 7: Entitlement to Development Rebate on Drilling ExpenditureThe Tribunal allowed development rebate on drilling expenditure, considering oil wells as plant. This decision was consistent with previous rulings and departmental circulars. Question 7 was answered in the affirmative, favoring the assessee.Conclusion:All relevant questions were answered in favor of the assessee, with no order as to costs.