TaxTMI 
TaxTMI 
1992 (1) TMI 163
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....a supported the action of the ITO making disallowances as perquisites. As against this, the learned counsel for the assessee Shri Pradeep Dinodia pointed out that the same issue came up for consideration before the Tribunal and the Tribunal has decided the matter in favour of the assessee in assessment year 1982-83, vide order dated 23rd September 1991 in Income-tax Appeal Nos. 4596/Del/86 & 3973/Del/86. 3. We have considered the rival submissions. We find that this issue is covered by the decision of the Tribunal in assessment year 1982-83 cited above. Since facts are similar in this year, therefore, for the reasons given in that order, we do not find any substance in the Departmental ground. 4. The next grievance in the Revenue's appeal is that the Commissioner (Appeals) erred in deleting the disallowance of Rs. 5,000 being the commitment charges in respect of the unutilised loan of Rs. 10 lakhs when expenditure is related to the capital structure of the assessee and thus is capital in nature. The assessee company was sanctioned a term loan of Rs. 25 lakhs by ICICI Ltd. in December, 1980 for modernisation/replacement of carbon steel blade production facility against securit....
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....assessee was that the expenditure is of revenue in nature. Reliance was placed on the decision of the Supreme Court in the case of Commissioner v. Kalyanji Mavji (1980) 122 ITR 49 (SC). However, the ITO disallowed the claim holding it expenditure of capital in nature. 9. When the matter came before the Commissioner (Appeals) he held that this expenditure is of revenue in nature. The learned Departmental Representative submitted that this expenditure is capital in nature. Therefore, the ITO has rightly disallowed it. However, the learned counsel for the assessee supported the action of the Commissioner (Appeals). 10. We have considered the rival submissions. The Commissioner (Appeals) has noted that the fire has taken place in May 1982 which caused damage to the machinery and electric wiring. The expenses on the replacement of electrical wiring and making of the brick floor were in order to resume business of the assessee. Keeping in view this fact finding, we are of the opinion that this is an expenditure of revenue in nature. Therefore, the Commissioner (Appeals) has rightly allowed the same. No interference is called for. 11. The next grievance in the Revenue's appeal is....
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....learned counsel for the assessee supported the action of the Commissioner (Appeals). 14. We have considered the rival submissions. In view of the fact that this expenditure was incurred during the course of conference for providing food and beverages, etc., and at the time of meeting for providing snacks, tea etc. to the salesmen/sales supervisors, etc., the Commissioner (Appeals) has rightly allowed it as expenditure of business nature under Explanation to section 37 (2A). No interference is called for. 15. The next grievance of the Revenue in this appeal is that the Commissioner (Appeals) erred in deleting the addition of Rs. 4,67,524 made by the ITO while making cash assistance, duty drawback and insurance claims for shortage of goods on accrual basis. The company explained that the method of accounting for export incentives has been changed from mercantile to cash systems during the year owing to the inordinate delays in settlement of these claims, difficulties in quantifying them. Most of the claims have been settled after a lapse of about 3/4 years and in certain cases the claims have been rejected or sanctioned for lesser amounts. It has been necessitated by the practi....
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....sessee, we are of the opinion that this amount cannot be added back to the profits of the assessee. The Commissioner (Appeals) has rightly deleted this amount. 23. The next grievance in the Revenue's appeal is that the Commissioner (Appeals) erred in holding that the amount of Rs. 14,31,493 received from National Insurance Co. Ltd. and credited to Suspense A/c cannot be treated as income of the assessee even though the assessee did not furnish the basis of computation of the above amount. The facts in brief are that a fire took place in Shed Nos. 34 & 36, Okhla Industrial Estate of the assessee on12th May 1982. The fire resulted in damage of capital as well as revenue assets of the assessee. The book value of fixed assets partially damaged by fire was determined at Rs. 8.51 lakhs and the value of assets completely destroyed by the fire was fixed at Rs. 10.69 lakhs which included Rs. 10.31 lakhs of current assets, i.e., stock of raw material, packing and process material, finished stock, etc., and Rs. 0.38 lakhs being written down value of capital assets completely destroyed. The assessee filed its first tentative claim with the insurance company at a figure of Rs. 69.09 lakhs. T....
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....e assets of the appellant have suffered damage, some assets have been totally destroyed while others are partially damaged. Unless the amount of compensation is finally ascertained and satisfied against various assets capital and revenue, it would be premature to include any amount received from insurance company under section 41(1) or 41(2). Moreover, the distinction brought out by the learned counsel between the contractual liability and statutory liability is amply supported by Supreme Court decision in Commissioner v. Swadeshi Cotton and Flour Mills (Pvt.) Ltd. (1964) 53 ITR 134 (SC). Relying upon the Supreme Court decision, the Allahabad High Court in Swadeshi Cotton Mills Co. Ltd. v. Commissioner (1980) 125 ITR 33 (All) has held that contractual liability arises when it is ascertained whereas statutory liability under mercantile system of accounting is allowable irrespective of non- quantification thereof. The contractual liability of the insurance company under the insurance policy would be said to accrue or arise only after the claim has been processed, sanctioned and agreed to between the parties. In the instant case it was only in December, 1985 that the final settlement ....
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....ring it to others. The destruction or loss of the asset, no doubt, brings about the destruction of the right of the owner or possessor of the asset, in it. But it is not on account of transfer. It is on account of the disappearance of the asset. The extinguishment of right in the asset on account of extinguishment of the asset itself is not a transfer of the right but its destruction. Our view is supported by the decision of the Supreme Court and the ratio laid down by various High Courts cited in the arguments of the learned counsel for the assessee. 27. The next grievance in the Revenue's appeal is that the Commissioner (Appeals) erred in directing the ITO to allow depreciation at the rate of 15 per cent on plant and machinery. After hearing the parties, we are of the opinion that this issue came up for consideration before the Tribunal in assessee's own case for assessment year 1982-83 and the Tribunal vide its finding given in paragraph 5, has held that the assessee is entitled to depreciation at the rate of 15 per cent. Since the facts in this year are same, therefore, respectfully following the decision of the Tribunal in assessee's own case for assessment year 1982-83, we....
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....e are of the opinion that the Commissioner (Appeals) has rightly allowed extra shift allowance. No interference is called for. 33. The next grievance in the Revenue's appeal is that the Commissioner (Appeals) erred in directing to allow investment allowance being the cost of machinery purchased out of investment allowance reserve credited in the assessment year under consideration. The ITO rejected the claim of the assessee for investment allowance at Rs. 1,93,188 and restricted the same to Rs. 1,02,700 on the ground that since the utilisation of reserve amount was in fulfilment of the condition laid down under section 32A (4), the assessee would not be entitled to claim a further benefit of investment allowance. 34. When the matter came before the Commissioner (Appeals), he, following the earlier year's order in appeal No. 136/85-86 for assessment year 1982- 83 dated 22nd June 1987, held that there is no specific prohibition against allowance of investment allowance in case of purchase of machinery out of investment allowance reserve. 35. The learned Departmental Representative supported the action of the ITO and submitted that this cannot be allowed. As against this, the....
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....stitution in 1976-77. Using statistical quality control methods, they laid down quality control procedures for critical processes. We are following the system. For in-process quality control checks we use dial gauges, special fixtures & gauges, microscopes of varying magnifications, gonyometers, profile projectors, etc. We have separate quality control laboratory housed in the factory building in both the plants where sophisticated instruments for checking various quality parameters are installed. Process Inspectors plot a chart or prepare records of the readings at various processes. These are analysed by Q.C. Supervisors and Q.C. Manager. Works Manager overseas the interaction between quality control and production and monitor quality complaints and feed back from the market and the consumer." The assessee had mentioned that the function of Quality Control Manager, Supervisor, other members of the staff are aimed at the production of blades. The expenditure incurred by the assessee had necessarily to be done for the production of blades. Without such expenditure production would not have been possible. Therefore, it is allowable. However, the ITO disallowed the claim of the as....
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....t the Commissioner (Appeals) erred in not allowing the purchase tax amounting to Rs. 60,266. The assessee company purchased process material and packing material free of sales tax from Delhi on the strength of registration certificate issued under Delhi Sales Tax Act giving an undertaking that the manufactured goods in which the packing and process material purchased free of tax is used would be sold only within the Union Territory of Delhi. The assessee company claimed deduction of a sum of Rs. 66,670 on account of provision for sales tax liability on the ground that the STO has been sending orders raising demand of sales tax in respect of goods transferred to its depots outside theterritoryofDelhi. For the assessment year 1983-84 no such demand has been raised by the sales tax authorities and order from the sales tax authorities had, however, been received for the assessment year 1977-78 raising such demand against the assessee. Sales tax Tribunal on appeal, held that the liability with regard to process material is leviable and no such liability in respect of packing material can be levied. On the basis of these facts, the ITO held that since no liability for the assessment year....
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.... Rs. Exhaust fan 1,127 Air circulator 10,668 Steel shelves 10,723 Erection of steel partition support 3,538 In so far as additional depreciation is concerned proviso to clause (iia) of sub-section (1) of section 32 list out certain items of plant and machinery which were excluded from its purview. Such items on which no additional depreciation is to be allowed are : (a) Any machinery or plant installed in any office premises or any residential accommodation; (b) Any office appliance or road trans....
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....esaid items of machinery are installed in the shop floor and cannot be constituted as office appliances for denying additional depreciation or investment allowance. Learned counsel has relied upon Delhi High Court decision in the case of R.C. Commercial Industries v. Commissioner (1982) 134 ITR 331 (Del) in support of his contention. On careful consideration of the matter I have come to the conclusion that the appellant is not entitled to additional depreciation or investment allowance on four items of assets aggregating to Rs. 26,056. These assets are not being used by the appellant as an integral part of its apparatus of manufacturing operations. Exhaust fan and air circulator are clearly of the nature of office appliances which are not in any manner connected or related with the manufacturing operations carried on by the appellant. Similarly steel shelves and steel partition are a part of "setting" and are not being used for the manufacturing operation. The view I am taking here is re inforced by the Delhi High Court decision in R.C. Commercial Industries v. Commissioner being relied upon by the learned counsel. Their Lordships have discussed the principle which governs the scop....
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....o finding whether the steel partition has been put up in order to separate manufacturing processes carried on in the factory from other places. The allowability of investment allowance is on the functional test. Therefore, we send the matter back to the file of the ITO to verify the same and redecide it on the basis of functional test. 51. The next grievance in the assessee's appeal is that the Commissioner (Appeals) erred in disallowing depreciation on factory building. The learned counsel for the assessee very fairly admitted that this issue was decided by the Tribunal in assessment year 1982-83 against the assessee. Keeping in view this factual position, we are of the opinion that no depreciation is allowable on factory building. No interference is called for. 52. The next grievance in the assessee's appeal is that the Commissioner (Appeals) erred in upholding the disallowance of time barred liability written back amounting to Rs. 9,016. The amount of Rs. 9,016 was transferred during the year under appeal to the profit and loss account comprised of two items Rs. 3,331 on account of unclaimed bonus for the year 1977 and another amount of Rs. 4,025 being unclaimed wages. The....
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....sp; (Rs. in lacks) ---------------------------------------------------------- Profit before tax (loss) Estimate of income filed in Form 29 ---------------------------------------------------------- 15-6-1982 (2) NIL ---------------------------------------------------------- 15-9-1982 (2) 25 -------------------------------------------------....