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of <h1>Disallowance of lamination expenses & bonus upheld; initial depreciation rejection in tax appeal</h1> <h3>PLASTIC PRODUCTS LTD. Versus INCOME TAX OFFICER.</h3> The disallowance of lamination expenses claimed by the assessee for setting up a plant was upheld as the expenses were considered capital for a new ... - Issues:1. Disallowance of lamination expenses claimed by the assessee for setting up a plant.2. Disallowance of initial depreciation on plant and machinery installed after 31st May, 1974.3. Disallowance of bonus paid to workers based on an agreement made after the accounting period.Detailed Analysis:1. The appeal pertains to the disallowance of Rs. 28,500 claimed as lamination expenses by the assessee for the assessment year 1975-76. The expenses were incurred to establish a plant for manufacturing laminating bags. The Income Tax Officer (ITO) disallowed the claim, stating it was not part of the business carried on by the assessee. The Commissioner of Income Tax (Appeals) [CIT (A)] upheld the disallowance, considering the expenditure as capital since it was for a new project. The Appellate Tribunal agreed, noting the expenses were of a preliminary nature for a new line of manufacturing activity, not an extension of the existing business. Therefore, the disallowance was upheld.2. The issue of initial depreciation on plant and machinery installed after 31st May, 1974, was raised. The CIT (A) directed the ITO to examine the claim based on facts, and the Tribunal found no grievance against such a direction. Consequently, this ground was rejected.3. The final issue concerned the disallowance of a bonus paid to workers amounting to Rs. 36,400. The CIT (A) disallowed this claim as the agreement for the additional bonus was made after the accounting period. The Tribunal agreed with the CIT (A), stating that the claim could only be allowed in the year when the agreement was entered into. Therefore, the disallowance of the bonus payment was deemed justified, leading to the dismissal of the appeal.
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