TaxTMI 
TaxTMI 
2007 (4) TMI 249
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....cturing of sugar, country liquor as well as Indian made foreign liquor in its factory at Shamli. On scrutiny of accounts submitted by the assessee for the assessment year 1986-87, for which previous year ended on 30th September, 1985, the Assessing Officer noticed that the assessee did not disclose any value of 7265 bales of Bagasses. On query it was stated before him that bagasse was meant for initial fuel and not for sale. It was further stated that for the purposes of valuation, there is no further cost of bagasse in the hands of the assessee company except for cost of wire used for baling and labour charges, which have been duly accounted for. The assessee followed this practice consistently in earlier years which have been accepted. It was argued before the Assessing Officer that he had no right to deviate from consistent practice accepted by the Department. The Assessing Officer did not accept the assessee's contention. According to him, the bagasses, which remained unconsumed, was closing stock available with the assessee as a byproduct which has a market value. On the basis of purchases of bagasses made by M/s Babri Paper Mills, he valued the closing stock of bagasses at th....
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....d. 5. The facts relating to question no.2 are that Assessing Officer disallowed Rs. 62,291/- was guest house expenses. This disallowance was made out of guest house expenses, depreciation and repair and maintenance of the guest house. On appeal, learned Commissioner of Income Tax (Appeal) confirmed the disallowance. This was done by him following the order of his predecessor for the assessment year 1985-86. The assessee then brought the issue in appeal before the Appellate Tribunal and submitted that the Tribunal has consistently held that expenditure on account of providing food etc. to the employees may be disallowed at 30% of the claim. In support of above, Tribunal's order in ITA No. 6047/Delhi/88 and C.O. No. 288/Delhi/89 dated 18.2.1991 read with M.A. No. 97/Delhi/91 dated 6.11.1991 were cited. The Appellate Tribunal following earlier orders cited before it, held that 30% of the claim may be disallowed out of guest house expenses on providing food etc. to the employees of the company. The Tribunal directed accordingly. 6. The facts relating to question no.3 are that the assessee was allowed refund of Rs. 14,23,356/- under section 141A on 15.4.1987 while on regular assessm....
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....and Sri S.D. Singh, learned counsel appearing for the respondent assessee. 8. Sri A. N. Mahajan, learned standing counsel submitted that admittedly the assessee has not shown closing stock of Bagasse which is a byproduct and according to him Bagasse has some value which ought to have been shown in the closing stock. The Tribunal has erred in deleting the addition made on account of closing stock of Bagasse. He further submitted that in view of the specific provisions of sub-sections (3), (4) and (5) of Section 37 of the Act, the Tribunal was justified in restricting the disallowance at 30% out of guest house expenses of Rs. 55,629/-. In support of his aforesaid submissions he relied upon a decision of the Apex Court in the case of Britannia Industries Ltd. v. CIT (2005) 278 ITR 546. He further submitted that as the assessee had deposited the tax less than what was ultimately assessed by the Assessing Authority, the interest under Section 220 of the Act has rightly been levied. 9. Sri S. D. Singh, learned counsel appearing for the respondent assessee, however, submitted that admittedly the assessee has not sold the Bagasse and it has been using the same as fuel. According to him....
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....he assessee while determining the cost of fuel used by it. Thus, in any event, the Tribunal was justified in coming to conclusion that the valuation of the closing stock shown at the cost price was correct. So far as the question of disallowance of guest house expenses is concerned, we find that the assessee had not given a detailed break up and it had only claimed guest house expenses at Rs. 50,289/- and repairs at Rs. 5,000/- apart from claiming depreciation including worker welfare expenses. Under sub-sections (4) and (5) of the Section 37 of the Act expenditure on the maintenance of any residential accommodation in the nature of guest house has to be disallowed. Providing of lodging or boarding and lodging to any person including any employee on tour or visit to the place at which such accommodation is situated is also treated as accommodation in the nature of a guest house. It is not in dispute that the guest house which the assessee is maintaining is in the nature of guest house as the assessee has its units at Shamli and Pilkhani. Any expenditure incurred even on employees in the guest house in the form of lodging or boarding on tour or visit to a place at which such accommo....