Disallowance of Rs. 25,000 Expenditure Overruled; Assessee Prevails

The direction for disallowance of Rs. 25,000 made by the Inspecting Assistant Commissioner was deemed invalid as it exceeded the defined statutory powers. The expenditure in question was held to be revenue in nature, similar to previous cases where such expenses were allowed. Consequently, the direction to disallow the expenditure was unsustainable. The assessee was entitled to the deduction, with the court ruling in favor of the assessee. No costs were awarded, and both judges concurred with the decision.

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Issues involved:
The legality of the direction given by the Inspecting Assistant Commissioner under section 144B for the disallowance of Rs. 25,000 as an addition to the assessment year 1972-73.

Summary:
The Income-tax Officer made an addition of Rs. 25,000 towards charges for a feasibility report of a new project. The Appellate Assistant Commissioner upheld the disallowance as a new project expenditure. The Tribunal affirmed the addition, stating the Inspecting Assistant Commissioner could give such a direction under section 144A. The question referred was the lawfulness of the direction.

Legal Analysis:
The Inspecting Assistant Commissioner's direction was deemed unlawful as it was beyond the scope of powers defined by the statutes. The Tribunal's reframed question was not new, as any act beyond defined powers is ultra vires. The direction was not lawful as the expenditure was revenue in nature. The payment was for a feasibility report related to the major raw material of the assessee's products, akin to a previous case where such expenditure was allowed as revenue. Thus, the direction to disallow the expenditure was unsustainable.

Conclusion:
The direction for disallowance of Rs. 25,000 was deemed invalid, and the assessee was entitled to the deduction. The question was answered in the negative and in favor of the assessee. No costs were awarded. Both judges concurred with the decision.

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