TaxTMI 
TaxTMI 
2000 (11) TMI 37
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....hstanding the provisions of section 80VV of the Income-tax Act, 1961, the assessee was entitled to a deduction in respect of the sum of Rs.58,250 paid by the assessee in respect of the proceedings of Garden Silk Weaving Factory? (iv) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that the assessee was entitled to a deduction of the sum of Rs.65,832 paid to the income-tax practitioners in respect of the proceedings of the Garden Silk Mills Pvt. Ltd.? (v) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that notwithstanding the provisions of section 80VV of the Income-tax Act, 1961, the assessee was entitled to a deduction in respect of the sum of Rs.65,832 paid by the assessee to the income-tax practitioners in respect of the proceedings of Garden Silk Mills Pvt. Ltd.?" Only a few facts deserve to be noticed for deciding the questions referred. The assessee, Garden Silk Mills Private Limited, Surat (hereinafter referred to as "the assessee-company" for short), under an agreement executed on December 1, 1971, purchased the assets with all lia....
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....extra-shift allowance as depreciation under section 32(1) was rightly allowed. Strong reliance has been placed on the later decision of the Supreme Court in the case of CIT v. Karnataka Power Corporation [2001] 247 ITR 268. We have considered the submissions made by learned counsel for the Revenue and the assessee on question No. (i) relating to extra-shift allowance on air-conditioning plant. After going through the decisions of the Supreme Court including the latest decision in the case of CIT v. Karnataka Power Corporation [2001] 247 ITR 268, on which heavy reliance has been placed, we find that they are distinguishable and are of no assistance to the contentions raised on behalf of the assessee. We find that such extra-shift allowance on air-conditioning plant was rightly held not allowable in view of certain provisions contained in section 32(1)(ii) read with rule 5 and Appendix I to the Income-tax Rules which were in force at the relevant period. Assuming that the air-conditioning plant is essential in the manufacturing process of artificial silk and is an integral part of the composite plant of the assessee, in view of the specific provisions contained in Part I of Appen....
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....ver of any liability under the Act, the proviso to section 80VV, however, restricted the deduction on this head to the extent of only Rs.5,000. The case of the assessee before the tax authorities was that, irrespective of the provisions of section 80VV, the remuneration paid to the income-tax practitioners by the assessee as a liability of the firm, from which it purchased the running business, should be allowed as business expenditure under section 37 of the Act. It is on the above factual and legal premises that questions Nos. (ii) to (v) have been posed. A bare look at the questions would show that questions Nos. (ii) and (iii) are overlapping in relation to the claim towards business expenditure in the sum of Rs.58,250 paid to the income-tax practitioners and questions Nos. (iv) and (v) are overlapping which are in relation to the sum of Rs.65,832 paid as remuneration to the income-tax practitioners. The said questions Nos. (ii) to (v), therefore, can conveniently be dealt with together and a common answer may be given. The Tribunal held that the income-tax practitioners have been so paid by the assessee-company on behalf of the predecessor firm and the said payments, there....
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....r section 37 of the Act. On behalf of the Revenue, it is also argued that the decision of the Bombay High Court in the case of Bombay Hing Supply Company [1966] 61 ITR 672, is clearly distinguishable on the facts noted by the Tribunal in its order. Learned counsel appearing for the assessee in supporting the reasonings and conclusion of the Tribunal, strenuously urged that the remuneration payable to the income-tax practitioners was liability of the firm taken over with assets by the assessee-company, but the said liability towards income-tax practitioners was discharged by the assessee-company as its business expenditure. The income-tax practitioners continued to represent the assessee-company and fees payable to them by the predecessor firm were required to be paid to maintain cordial relationship with the income-tax practitioners. It was, therefore, a business expenditure of the assessee-company, may be, this payment towards remuneration was a past liability of the firm. Reliance is placed on certain observations of Chagla C. J. delivering the judgment for the Division Bench of the Bombay High Court reported in the case of Aruna Mills Ltd. v. CIT [1957] 31 ITR 153. It is submi....
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....n over with assets by the successor-company and it was discharged by the assessee in the assessment years in question not as a "business expenditure" but as a past liability against the firm which was agreed to be discharged by the assessee-company under the terms of the agreements. As the going concern was purchased with assets and liabilities, the liability constituted an integral part of the purchase consideration. It is not possible to agree with the submission made on behalf of the assessee-company that the outstanding remuneration payable by the predecessor firm was paid by the assessee-company to maintain cordial relationship with the same practitioners who continued to represent the assessee-company in its income-tax cases. It is likely that in clearing the past liabilities towards remuneration to the income-tax practitioners, one of the considerations was to maintain good relationship with standing counsel of the assessee-company but it cannot be held that past liability towards remuneration was discharged solely as "business expenditure". Under the express terms of the agreement, along with the other liabilities, liability towards remuneration was also taken over by the a....