1980 (1) TMI 120 - AT - Income Tax

Income Tax Appeal Outcome: Conveyance allowance & bonus partially allowed, Subscription account deduction modified

The Tribunal partially allowed the appeal, directing the Income Tax Officer (ITO) to re-examine the disallowance of the Managing Director's conveyance ... - Issues Involved:1. Disallowance of Rs. 1,800 from the Managing Director's Conveyance Allowance.2. Disallowance of Rs. 7,008 being the Bonus actually paid over the provisions made in earlier years.3. Disallowance of Rs. 3,926 from the Subscription & Donation account.Issue-wise Detailed Analysis:1. Disallowance of Rs. 1,800 from the Managing Director's Conveyance Allowance:The Income Tax Officer (ITO) disallowed Rs. 1,800 from the Managing Director's conveyance allowance, deeming it excessive and unreasonable. The assessee claimed Rs. 22,800, an increase from Rs. 19,461 in the previous year, with the ITO finding the Rs. 300 monthly increase unjustified. The Appellate Assistant Commissioner (AAC) concurred with the ITO's reasoning.Upon appeal, the Tribunal noted that the disallowance should be based on whether the allowance was paid and incurred solely for business purposes. The burden of proving the justification for the allowance rested on the assessee. Since neither party provided sufficient material to adjudicate the matter, the Tribunal restored the case to the ITO. The ITO was directed to re-examine the disallowance with an opportunity for the assessee to produce evidence.2. Disallowance of Rs. 7,008 being the Bonus actually paid over the provisions made in earlier years:The ITO disallowed Rs. 7,008 from the bonus paid to employees, treating it as income for the assessment year under appeal. The assessee claimed a total deduction of Rs. 44,008, which included Rs. 37,000 as a provision for the current year's bonus. The disallowed amount represented actual payments related to earlier years. The AAC upheld the ITO's decision.The Tribunal observed that the agreement for bonus, presented by the assessee, lacked verification and evidential value. The Tribunal noted the absence of material justifying the agreement's timing and the percentage of bonus provisioned in the books. Due to insufficient facts, the Tribunal restored this aspect to the ITO for fresh adjudication, allowing the assessee to present additional evidence.3. Disallowance of Rs. 3,926 from the Subscription & Donation account:The ITO disallowed Rs. 3,926 from the subscription and donation account, reasoning that the expenses were unrelated to business needs. The AAC upheld this disallowance.Upon review, the Tribunal found that Rs. 1,293 should have been allowed as a deduction based on the details provided. Consequently, the Tribunal directed the deletion of the disallowance to the extent of Rs. 1,293.Conclusion:The Tribunal partly allowed the appeal, restoring the cases related to the Managing Director's conveyance allowance and the bonus payments to the ITO for fresh consideration, while modifying the disallowance related to subscriptions and donations.