1998 (3) TMI 196 - AT - Income Tax

Tax Tribunal allows cross-objections, deems cash incentive taxable as revenue.

ASSISTANT COMMISSIONER OF INCOME TAX. Versus AMBADI ENTERPRISES (P) LTD.

The Appellate Tribunal ITAT MADRAS-C allowed the assessee's cross-objections by condoning the delay in filing and admitting them. The cash incentive ... - Issues:1. Condonation of delay in filing cross-objections.2. Taxability of cash incentive received by the assessee.3. Rejection of claim under section 80HHC.4. Disallowance of guest house expenses.Issue 1: Condonation of Delay in Filing Cross-objections:The Appellate Tribunal considered the delay in filing cross-objection by the assessee and the reasons provided for the delay. The Tribunal referred to the provisions of the Income Tax Act, 1961 and the power of the Tribunal to admit an appeal after the specified period if sufficient cause is shown. The Tribunal acknowledged the retrospective amendment by the Finance Act, 1990, affecting the income of the assessee. Following the principles laid down by the Supreme Court, the Tribunal decided to condone the delay and admitted the cross-objections filed by the assessee.Issue 2: Taxability of Cash Incentive Received:The appeal by the Revenue questioned the taxability of cash incentive received by the assessee. The Departmental Representative highlighted the retrospective amendment by the Finance Act, 1990, which made the cash incentive taxable as revenue receipt. The Tribunal agreed with the Departmental Representative's view, citing the specific sections added by the amendment. Relying on a Supreme Court decision, the Tribunal directed the inclusion of the cash incentive in the assessee's income under the head 'Profits and gains of business or profession,' ultimately allowing the Department's appeal.Issue 3: Rejection of Claim under Section 80HHC:The assessee's cross-objections included a challenge to the rejection of its claim under section 80HHC. The authorized representative argued that the Assessing Officer (AO) should have given an opportunity to create the required reserve for the deduction. However, the Departmental Representative emphasized the strict compliance needed for availing the deduction under section 80HHC. The Tribunal found that the creation of the reserve was a prerequisite condition, and as the assessee failed to fulfill this condition, the claim was rejected based on the plain language of the statute.Issue 4: Disallowance of Guest House Expenses:Regarding the disallowance of guest house expenses, the assessee contended that the expenses were for a transit house used by its staff and not for maintaining a guest house as per the relevant sections. The Tribunal considered a previous decision and agreed that the expenses were allowable, directing the AO to delete the amount from the assessee's income. The cross-objections were allowed in part on this issue.This judgment by the Appellate Tribunal ITAT MADRAS-C addressed various issues related to the tax assessment of the assessee for the assessment year 1986-87. It involved considerations of delay condonation, taxability of cash incentives, rejection of deduction claims, and disallowance of expenses. The Tribunal's analysis and decisions were based on the specific provisions of the Income Tax Act, relevant amendments, and judicial precedents, ultimately providing a detailed resolution for each issue raised in the appeal and cross-objections.