1990 (4) TMI 74 - AT - Income Tax

Summary

Issues:
1. Disallowance of Rs. 1,500 out of telephone expenses.
2. Disallowance of Rs. 697 for road tax on a motor car.

Analysis:

Issue 1: Disallowance of Rs. 1,500 out of telephone expenses
The appellant, a registered firm for the assessment year 1984-85, appealed against the disallowance of Rs. 1,500 out of total telephone expenses of Rs. 20,253 by the ITO. The CIT(A) reduced the disallowance from Rs. 6,200 to Rs. 1,500. The appellant argued that based on past assessments, the disallowance had been maintained at Rs. 400 in earlier years and urged for a reduction. The ITAT examined the history of the case and decided to sustain a disallowance of Rs. 500, considering the past disallowances and the consistency in expenditure. The ITAT directed the ITO to allow necessary relief and recomputed the taxable income accordingly.

Issue 2: Disallowance of Rs. 697 for road tax on a motor car
The ITO disallowed the claim of Rs. 697 for road tax on a motor car, stating that the car was not utilized for business purposes and was not in working condition. The CIT(A) upheld the disallowance, noting that the car was kept for sentimental reasons and not used for business. The appellant argued that the car was a business asset, and the expenditure was incurred for maintaining it, citing previous years where similar deductions were allowed. However, the ITAT upheld the disallowance, emphasizing that the car was not actively used for business and was kept only for sentimental reasons. The ITAT ruled that the expenditure on road tax alone did not prove maintenance of the business asset, as additional expenses like servicing charges or spare parts were not evidenced. The ITAT concluded that the expenditure was rightly disallowed by the ITO, and therefore, upheld the disallowance.

In conclusion, the ITAT partly allowed the appeal, sustaining a disallowance of Rs. 500 for telephone expenses and upholding the disallowance of Rs. 697 for road tax on the motor car.