Tribunal partially allows appeal, directs deletion of disallowance. Staff welfare expenditure upheld as allowable.

The Tribunal allowed the appeal in part, dismissing the revenue's appeal and directing the deletion of the disallowance of Rs.35,41,700 claimed by the assessee for diminution in the value of securities. The Tribunal upheld the deletion of the disallowance of staff welfare expenditure, considering it allowable under sec.40A(9) of the Act. The decision was based on the assessee's consistent treatment of securities as current investments and the similarity to a liability account for staff welfare contributions.

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Issues:
1. Disallowance of diminution in the value of securities
2. Disallowance of staff welfare expenditure

Issue 1: Disallowance of diminution in the value of securities:
The case involved the disallowance of Rs.35,41,700 claimed by the assessee as expenditure due to the diminution in the value of its current investments made in Government of India securities. The tax authorities contended that the assessee had made long-term investments, while the assessee argued that the securities were part of its stock in trade or current investment. The assessee consistently valued the securities at cost or market value, whichever was lower, and treated them as current investments. The Tribunal found that the assessee's accounting policy was permissible under the law, and the disallowance was unjustified. The Tribunal directed the AO to delete the disallowance, emphasizing the assessee's consistent treatment of the securities as current investments.

Issue 2: Disallowance of staff welfare expenditure:
The revenue challenged the deletion of the disallowance of staff welfare expenditure by the Ld CIT(A). The Tribunal referred to a previous case related to the assessment year 2004-05 involving similar issues. The Tribunal noted that the contributions to the staff welfare scheme were made by the employees and collectively accounted for by the assessee. The scheme was considered akin to a liability (Creditors) account, and the Tribunal agreed with the Ld CIT(A) that the expenditure was allowable under the provisions of sec.40A(9) of the Act. The Tribunal upheld the relief granted by the Ld CIT(A) on this issue, consistent with the decision in the assessment year 2004-05.

In conclusion, the appeal filed by the assessee was partly allowed, and the appeal of the revenue was dismissed based on the detailed analysis and findings on the issues of disallowance of diminution in the value of securities and staff welfare expenditure.

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