1979 (2) TMI 21 - HC - Income Tax

Court rules in favor of assessee on tax issues including deductions under section 80J and 80G

The court held in favor of the assessee on all issues. The relief under section 80J was continued for the assessment year 1969-70, deductions under ... Donation To Charitable Institution, Industrial Undertaking, Manufacturing Company Issues Involved:1. Continuation of relief u/s 80J for the assessment year 1969-70.2. Deduction u/s 80G for donations made in kind.3. Application of section 40(a)(v) regarding expenditure on the building occupied by the managing director.Summary:Issue 1: Continuation of Relief u/s 80JThe Tribunal held that the relief granted u/s 80J for the assessment year 1968-69 should continue for the subsequent year 1969-70 unless the initial year's relief is disturbed. The Tribunal emphasized that the ITO cannot withdraw the relief without disturbing the initial year's assessment. The High Court affirmed this view, stating that the relief under s. 80J can only be withheld if the initial year's relief is disturbed on valid grounds. The court referenced the decision in Addl. CIT v. Tarun Commercial Mills Ltd. [1978] 113 ITR 745, supporting the principle that specific enactments override general ones. Thus, question No. 1 was answered in the affirmative, in favor of the assessee.Issue 2: Deduction u/s 80G for Donations in KindThe Tribunal upheld the deduction of Rs. 1,051 for the value of cement bags donated to a charitable trust, despite the donation being in kind. The Tribunal and the High Court referenced the Bombay High Court decision in CIT v. Associated Cement Co. Ltd. [1968] 68 ITR 478, which allowed similar deductions. The High Court agreed that the substance of the transaction should be considered, and thus, the deduction was justified. Question No. 2 was answered in the affirmative, in favor of the assessee.Issue 3: Application of Section 40(a)(v)The Tribunal applied section 40(a)(v) to the expenditure of Rs. 88,701 incurred on the building occupied by the managing director, directing a minimum disallowance of Rs. 76,701. The High Court referenced its decision in Addl. CIT v. Tarun Commercial Mills Ltd., concluding that specific provisions for directors' expenses should prevail over general ones. Consequently, question No. 1 in Income-tax Reference No. 238 of 1975 was answered in the negative, in favor of the assessee, and question No. 2 was not pressed.Conclusion:In Income-tax Reference No. 238 of 1975, question No. 1 was answered in the negative, favoring the assessee, and question No. 2 was not pressed. In Income-tax Reference No. 239 of 1975, both questions were answered in the affirmative, favoring the assessee. The Commissioner of Income-tax was ordered to pay the costs to the assessee.