Appeal partially allowed in salary dispute for general manager; investment allowance disallowed for fishing trawler.

The appeal was partially allowed, with the disallowance of salary reduced from Rs. 9,000 to Rs. 3,000 for the general manager. The Tribunal considered the increased responsibilities due to the firm's new business segment in fishing. However, the disallowance of investment allowance for a fishing trawler was upheld as the assessee's primary business activities in fish processing did not meet the criteria for claiming investment allowance under section 32A.

---

---

Issues:
1. Disallowance of a portion of salary paid to the general manager.
2. Disallowance of investment allowance in respect of a fishing trawler acquired by the assessee.

Analysis:

1. Disallowance of Salary:
The appeal pertains to the assessment year 1978-79, challenging the disallowance of a portion of the salary paid to the general manager of the assessee-firm. The Income Tax Officer (ITO) disallowed Rs. 9,000 of the total salary of Rs. 36,000 under section 40A(2) of the Income-tax Act, 1961. The Tribunal considered the increase in turnover and responsibilities of the general manager due to the firm's engagement in a new business segment, fishing. The Tribunal upheld a reasonable salary of Rs. 33,000, reducing the disallowance to Rs. 3,000. The decision was based on the justification of new investments and increased responsibilities, distinguishing it from a previous ruling where no material supported the enhancement.

2. Disallowance of Investment Allowance:
The second issue involves the disallowance of investment allowance claimed for a fishing trawler acquired during the relevant period. The ITO disallowed the claim, stating that investment allowance is only admissible for ships, not fishing boats. The Tribunal referred to a previous decision regarding development rebate on fishing boats, classifying them as ships. The Tribunal held that a fishing trawler qualifies as a ship for investment allowance under section 32A. However, the Tribunal rejected the claim based on the requirement that the assessee must be engaged in the business of operating ships, which the assessee, primarily involved in fish processing and export, did not meet. The decision was influenced by a prior ruling indicating that an entity engaged in fish processing cannot be considered a shipping concern, thus failing to satisfy the conditions for investment allowance.

In conclusion, the appeal was partially allowed, with the disallowance of salary reduced and the disallowance of investment allowance upheld due to the assessee's business activities not aligning with the criteria for claiming investment allowance under the relevant provisions.

---