TMI Blog2004 (8) TMI 624X X X X Extracts X X X X X X X X Extracts X X X X ..... sales tax subsidy at Rs. 2,39,40,194 as revenue receipt. (6)That the ld. Commissioner of Income-tax (Appeals) (C) adjudicating the appeal summarily ignored to adjudicate the following ground of appeal : The ACIT was not justified to disallow sums aggregating to Rs. 4,19,545 out of interest account under section 36(1)( iii ) on account of advances made to certain parties free of interest. Various amounts were advanced in the earlier years out of c/c a/c in which sales proceeds as well as subsidy receipts, etc., were deposited and that the advances were not out of interest bearing loans. Disallowance made is highly unjustified. " If non-consideration could be presumed as rejection, the ld. Commissioner of Income-tax (Appeals)(C) was not justified to uphold disallowance of sums aggregating to Rs. 4,19,545 under section 36(1)( iii ) out of interest account. 2. First, we shall take up ground No. 1 of the appeal of the assessee relating to disallowance of Rs. 36,000 on account of rent for the building which was being used as office premises. 2.1 The relevant and material facts for the disposal of this ground of appeal are that according to the Assessing Officer, the house ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y shall be using a house which is far away from the new office complex for official purposes when the new office building is sufficient for the purpose of carrying out the official duties. In such a case, the claim could be entertained if some evidence is furnished to show that the house was actually required as the new office complex did not have sufficient space for office work. In the absence of any evidence to establish that the house in question was being used for office purposes, I find it difficult to accept the claim of the appellant. The claim has also to be considered in the background of rules laid down by the Chandigarh Administration which prohibits a residential house from being used for the office purposes. If the residential house cannot be used for office purposes, it cannot be accepted that the company used the residential building in question for its office when it had its own office, sufficient enough for its requirement. In the circumstances, I hold that the Assessing Officer was justified in making the impugned disallowance. The disallowance of Rs. 36,000 is sustained. The appellant fails on this ground." 2.4 Before us also, Ld. A.R. for the assessee reite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n expenditure of Rs. 1,03,172. The details of these expenses claimed by the assessee have been mentioned in Para-4 at page-4 of the order of the Assessing Officer. He disallowed these expenses as these expenses were in the nature of personal expenses, charity and donation but were debited by the assessee under the head Staff Welfare Expenses . In his assessment order, the Assessing Officer has singled out these expenses incurred for donations made to Mandir, Gurdwara, feed to cows, milk supplied to Mansadevi Dharamsala, Shagan paid to M/s. Raj Awasthi, and other expenses without indicating the nature thereof. The Assessing Officer was of the opinion that these expenses incurred by the assessee have no connection with the running of the business of the assessee. Lastly, while disallowing the expenditure, the Assessing Officer observed that these expenses have neither any connection with the running of the business of the assessee-company nor any effort has been made by the assessee-company to justify the business expediency of these expenses. 3.2 Aggrieved with the order of the Assessing Officer, the assessee went in appeal before the CIT(A) and submitted that expenditure for o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see for the welfare of the staff, should be allowed as revenue expenditure. 3.5 Ld. DR for the revenue supporting the orders of the tax authorities below submitted that they have rightly disallowed the expenditure incurred by the assessee under the head Staff Welfare Expenses . 3.6 We have considered the rival submissions, perused the records and carefully gone through the orders of the tax authorities below. 3.7 In our opinion, merely because the assessee has debited the expanses under the head Staff Welfare Expenses Account , the same cannot be allowed to the assessee, as revenue expenses. In our opinion, from the controverted observations of the tax authorities below, it is clear that since this expenditure was incurred for the purposes of donation made to Mandir, Gurdwara, Feed for Cows, Milk supplied to Mansadevi Dharamsala, Shagun to M/s. Raj Awasthy, and other expenses without indicating the nature thereof as to how they were for the welfare of the staff and further because the assessee-company has not been able to justify the business expediency of this expenditure, so in these circumstances, in their well reasoned and well discussed order, the tax authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven by the Assessing Officer. On the fact of such finding, I have no hesitation in upholding the action of the Assessing Officer." 4.4 Before us, Ld. AR for the assessee reiterated the submissions which he made before the Commissioner of Income-tax (Appeals) and in addition thereto, further contended that in the instant case, since the expenditure has not been disputed and the expenditure has been incurred for the renovation of the office, so the tax authorities below were not justified in treating the same as capital expenditure. 4.5 Whereas, on the other hand, Ld. DR for the revenue placing reliance on the reasoning given in the orders of the tax authorities below, submitted that in the instant case, since the assessee has not clarified the nature of services rendered by M/s. Kan Dee Kay Associates, so in absence of any evidence in support of the contention of the assessee, the tax authorities below were fully justified in treating the expenditure as capital in nature. 4.6 We have considered the rival submissions, perused the records and carefully gone through the orders of the tax authorities below. 4.7 In the instant case, the assessee neither before us nor be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt expenses as held by the ITAT Chandigarh Bench for the assessment years 1992-93 to 1994-95 in ITA Nos. 19,142 and 347/Chandi/97 vide order dated 26-5-2004. Ld. AR for the assessee submitted that in the order dated 26-5-2004 ( supra ) of the Tribunal, the relevant findings have been given in para 7.3 wherein the Tribunal had held that no disallowance can be made out of Festival Expenses Regarding the Business Expenses which contained gift items like watches, etc., Ld. AR for the assessee conceded that this issue was restored back to the file of the Commissioner of Income-tax (Appeals) by the Bench vide its order dated 26-5-2004 ( supra ). He further submitted that no disallowance could have been made in respect of the Festival Expenses and the Staff Welfare Expenses. 5.4 Ld. DR for the revenue, on the other hand, submitted that the assessee had claimed Staff Welfare Expenses separately and in the Festival Expenses, silver articles were included which were in the nature of entrainment expenses. He accordingly submitted that the Commissioner of Income-tax (Appeals) had rightly sustained the impugned addition made by the Assessing Officer. 5.5 We have considered the rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying on the decision of the ITAT Mumbai Bench "J" Special Bench in the case of Dy. CIT v. Reliance Industries Ltd. [2004] 88 ITD 273, by making following observations : "Before us, ld. AR for the assessee contended that the issue whether the sales tax incentive allowed to the assessee during the previous year in terms of the relevant Government Order constituted capital receipt and was not be taken into account in computation of total income, came for consideration before the ITAT, Mumbai Bench "J" Special Bench in the case of Dy. CIT v. Reliance Industries Limited [in ITA Nos. 3890 and 4045 (Bom.) 1991 assessment year 1986-87 dated October 23, 2002] reported in 88 TTJ 273, and the Tribunal vide its consolidated order dated October 23, 2003, decided the issue in favour of the assessee. He further contended that the same issue also came up for consideration before the ITAT Chandigarh Bench in the case of Abhishek Industries Limited v. Asstt. CIT in ITA No. 1017/Chandi/97 assessment year 1993-94 and the Tribunal vide its order dated 27-2-2004 also decided the issue in favour of the assessee and against the revenue. Hence, Ld. AR for the assessee contended that in vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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