1977 (4) TMI 46 - AT - Income Tax

Summary

Issues:
1. Disallowance of shop repairs expenses.
2. Disallowance of advertisement expenses.
3. Disallowance of car expenses.
4. Disallowance of accident insurance expenses.

Detailed Analysis:

1. Disallowance of Shop Repairs Expenses:
The appeal pertains to the disallowance of Rs. 14,472 out of shop repairs expenses claimed at Rs. 17,971 for the assessment year 1975-76. The Income Tax Officer (ITO) disallowed the claim, considering the expenditure as capital expenditure due to the creation of a new asset. The Appellate Assistant Commissioner (AAC) allowed deduction of Rs. 3,499 spent on repairs, while disallowing the rest. The Appellate Tribunal held that expenditure on making a cabinet was not allowable, restricting the addition to Rs. 3,000 only.

2. Disallowance of Advertisement Expenses:
The second ground of appeal was against the disallowance of Rs. 12,000 out of advertisement expenses. The ITO disallowed the amount due to certain payments not made by crossed cheque or crossed draft. The AAC confirmed the disallowance. However, the Tribunal, after considering the evidence presented by the assessee, held that the disallowance was not justified and deleted the amount, stating that the payments were not covered by the relevant provisions.

3. Disallowance of Car Expenses:
The next ground of appeal was against the disallowance of Rs. 4,898 out of car expenses. The ITO disallowed half of the car expenses and depreciation for personal use of the car by the partners. The AAC agreed with the ITO, but the Tribunal found the disallowance to be excessive and restricted it to 1/4 only, along with the depreciation in the same proportion.

4. Disallowance of Accident Insurance Expenses:
The final ground of appeal was against the disallowance of Rs. 400 for expenses incurred on accident insurance of the Manager, who was a close relative of the partner. The ITO and AAC held that since there was no condition of employment regarding the insurance, the expenditure was not allowable. The Tribunal agreed with the lower authorities and confirmed the disallowance.

In conclusion, the Tribunal allowed the appeal in part, directing the ITO to modify the assessment in the case of the firm and the partners accordingly.