1992 (2) TMI 137 - AT - Income Tax

Summary

Issues:
1. Reopening of assessment under section 147 for annuity income.
2. Withdrawal of investment allowance on fishing boats.
3. Application of section 155(4A) for withdrawal of investment allowance.
4. Disallowance of contribution to trust exceeding actual expenditure.

Analysis:

Issue 1: Reopening of assessment under section 147 for annuity income
The original assessment for the assessment year 1978-79 was reopened under section 147 to consider annuity income that had escaped assessment. The Income-tax Officer withdrew the investment allowance on fishing boats, leading to an appeal by the revenue. The CIT(Appeals) held that withdrawal of investment allowance should be done under section 155 and not through section 147 proceedings. The tribunal upheld the CIT(Appeals)'s order, stating that the time limit for withdrawal had expired, and section 147 cannot be used for this purpose.

Issue 2: Withdrawal of investment allowance on fishing boats
The tribunal upheld the CIT(Appeals)'s order regarding the withdrawal of investment allowance on the fishing boat named Ragam, as the conditions under section 155(4A) did not apply since the boat was sold within eight years. The same decision was applied to another fishing boat named Jyothi, which was lost at sea and not sold or transferred.

Issue 3: Application of section 155(4A) for withdrawal of investment allowance
Section 155(4A) allows for the withdrawal of investment allowance if machinery is sold or transferred within eight years. The tribunal emphasized that the time limit for withdrawal is crucial and that section 147 proceedings cannot be used to correct such mistakes. The tribunal clarified that a special provision like section 155 excludes the general provision of section 147.

Issue 4: Disallowance of contribution to trust exceeding actual expenditure
The tribunal addressed the disallowance of contribution to a trust by the Income-tax Officer. The tribunal reviewed the trust deed and found that the trust's activities aligned with the objects stated. The tribunal held that recoverable advances made by the trust were considered as expenditure on employee welfare, allowing a deduction based on the actual expenditure incurred by the trust. The tribunal referred to a circular by the Board of Direct Taxes to support this decision.

In conclusion, the tribunal dismissed one appeal and partly allowed another, emphasizing the importance of following specific provisions like section 155 for withdrawal of investment allowance and ensuring that deductions are based on actual expenditure incurred by trusts.