Tribunal Decision: Key Tax Deduction Rulings Upheld and Reversed

The Tribunal directed the ITO to allow the deduction of accrued interest on a deferred payment basis, disallowing the discounting charges. Disallowance of interest for non-business purposes was overturned as the debit balances were related to business transactions. An addition under s. 40A(7) for payment to LIC was deleted, upheld by the Tribunal. Disallowance of travelling expenses under r. 6D was reversed, aligning with the decision in S.V. Ghatalia vs. ITO. Deductions for unpaid sales tax and provident fund were allowed if paid within the due date. Applicability of s. 43B to family pension fund and ESI was confirmed. Deduction of interest for late payment of sales tax was allowed. Deduction u/s 80-I for new unit profits was permitted despite losses in the old unit. The assessee's appeals were allowed, and the Revenue's appeals were dismissed.

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Issues Involved:
1. Deduction of accrued interest on deferred payment basis.
2. Disallowance of interest for non-business purposes.
3. Addition under s. 40A(7) for payment to LIC.
4. Disallowance of travelling expenses under r. 6D.
5. Deduction of unpaid sales tax and provident fund u/s 43B.
6. Applicability of s. 43B to family pension fund and ESI.
7. Deduction of interest for late payment of sales tax.
8. Deduction u/s 80-I for new unit profits.

Summary:

1. Deduction of accrued interest on deferred payment basis:
The assessee claimed deduction of accrued interest of Rs. 1,00,900 for the assessment year 1984-85, which was disallowed by the ITO, allowing only Rs. 26,000 based on actual payment. The CIT(A) upheld the ITO's decision. The Tribunal directed the ITO to allow the deduction of Rs. 1,00,900 on an accrual basis, subject to verification, and to withdraw the deduction of Rs. 26,600 allowed as discounting charges.

2. Disallowance of interest for non-business purposes:
The ITO disallowed Rs. 35,351 out of interest for not charging interest from two concerns, considering it a diversion of borrowings for non-business purposes. The CIT(A) deleted the disallowance, and the Tribunal confirmed this deletion, noting that the debit balances were due to business transactions and no interest was charged on similar transactions with other parties.

3. Addition under s. 40A(7) for payment to LIC:
The CIT(A) deleted an addition of Rs. 30,389 made under s. 40A(7), which was upheld by the Tribunal, citing that the payment to LIC was an actual payment and not merely a provision, supported by the Tribunal's decision in the case of Gujarat Machine Tools.

4. Disallowance of travelling expenses under r. 6D:
The ITO's disallowance of travelling expenses under r. 6D was reversed by the CIT(A), who held that the calculation should consider all tours made by a person during the previous year. The Tribunal upheld this view, referencing the decision in S.V. Ghatalia vs. ITO.

5. Deduction of unpaid sales tax and provident fund u/s 43B:
The CIT(A) directed the ITO to verify and allow deductions for unpaid sales tax and provident fund if paid within the due date, which was confirmed by the Tribunal, aligning with the decision in Chandulal Venichand & Ors. vs. ITO.

6. Applicability of s. 43B to family pension fund and ESI:
The CIT(A) deleted additions of Rs. 4,718 and Rs. 1,035 for ESI and family pension fund under s. 43B, which the Tribunal upheld, noting that these amounts were deducted from employees' salaries and deposited within the prescribed time.

7. Deduction of interest for late payment of sales tax:
The CIT(A) allowed the deduction of Rs. 23,326 for interest on late payment of sales tax, considering it compensatory and not penal. The Tribunal confirmed this view, supported by various judicial precedents.

8. Deduction u/s 80-I for new unit profits:
The CIT(A) directed the ITO to allow deduction u/s 80-I for the new unit's profits, despite the absence of separate books of accounts and losses in the old unit. The Tribunal upheld this direction, referencing the Supreme Court decision in CIT vs. Canara Workshops Pvt. Ltd. and other relevant cases.

Conclusion:
The assessee's appeals were allowed, and the Revenue's appeals were dismissed.

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