1995 (2) TMI 119 - AT - Income Tax

Summary

Issues involved:
1. Disallowance of interest payment to directors.
2. Disallowance of revenue expenditure treated as capital expenditure.
3. Disallowance of travelling and conveyance expenses.
4. Disallowance of deduction under section 80HHC.
5. Applicability of provisions of section 215 on interest payable.

Disallowance of interest payment to directors:
The Assessing Officer disallowed excess interest payment to directors, which was added as income. CIT(A) upheld the disallowance. However, the tribunal found that past history showed interest @18% had been allowed for the same parties, indicating no necessity for disallowance. The tribunal concluded that the addition was made on conjectures and deleted the disallowance.

Disallowance of revenue expenditure treated as capital expenditure:
The Assessing Officer disallowed repair and replacement expenses as capital expenditure for enduring benefit. CIT(A) confirmed the disallowance. The tribunal noted that the expenditure was on repairing existing assets, not additions. Therefore, it held the expenditure to be of revenue nature and deleted the disallowance.

Disallowance of travelling and conveyance expenses:
The Assessing Officer disallowed a portion of claimed travelling expenses. CIT(A) sustained the disallowance. The tribunal found no discrepancies in the expenses and that the disallowance was based on estimates. It concluded that no disallowance was warranted and deleted the addition.

Disallowance of deduction under section 80HHC:
The Assessing Officer disallowed the deduction under section 80HHC as the assessee did not export directly. CIT(A) upheld the disallowance. The tribunal noted evidence provided by the assessee and directed the Assessing Officer to re-examine the issue based on the evidence.

Applicability of provisions of section 215 on interest payable:
The Assessing Officer charged interest under sections 215/217. The assessee contended that interest was not chargeable as section 209 was not applicable. CIT(A) directed the Assessing Officer to verify and revise the interest. The tribunal found this issue consequential and left it to the Assessing Officer for further examination.

Note: Ground Nos. 6 and 7 were not pressed by the counsel and were rejected. The appeal was allowed in part.