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TMI Blog1989 (5) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... l 3,01,181 ---------------- The Income-tax Officer only allowed Rs. 30,000 under section 37(2A) and disallowed the balance amount of Rs. 2,71,181. The ITO's order does not give the details of the amount of Rs. 30,000. 3. In appeal the learned Commissioner of Income-tax (Appeals) did not accept the assessee's submission that expenses incurred out of humanitarian considerations could not be termed as expenditure on the provision of hospitality. So far as the other contention raised on behalf of the assessee namely that expenses on presentation, rail and road fares, cinema tickets, dry fruit on Diwali and a part of unsegregated expenses on refreshment to company's staff and guests should be treated separately and not processed u/s. 37(2A) is concerned, the learned Commissioner of Income-tax (Appeals) noticed that no details had been examined by the Income-tax Officer and therefore, it was necessary to send back the matter to him for a decision afresh. 4. Before us on behalf of the assessee, the contentions raised before the Income-tax authorities were sought to be reiterated. Additionally it was pointed out that so far as lunches, dinners at hotels, soft drinks, tea and juices etc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the Appellate Tribunal dated 31-7-1986 referred to above. 6. The next ground relates to the disallowance of Rs. 12,797 by way of expenditure on temples. The details of the same were as follows Rs. "a. Lucknow Temple Maintenance Expenses 5,006.00 b. Kasauli Construction of Mandir in village (out of other staff welfare expenses) 7,791.00 ----------------- Total 12,797.00" ----------------- The Income-tax Officer had disallowed these expenses. 7. In appeal the disallowance was confirmed by the learned CIT(A) on the basis that the temples atLucknowas well as at Kasauli being outside the assessee's business premises and the expenses being therefore, in the nature of religious donations and not business expenses, were not allowable. 8. Before us the learned counsel for the assessee drew our attention to the details of the expenses and pointed out that the temple atLucknowwas within the factory premises. He therefore. urged that at least the amount of Rs. 5,006 should be allowed. Reliance was also placed by him in this connection on the decision of the Hon'ble Punjab & Haryana High Court in the case of Atlas Cycle Industries Ltd. v. CIT [1982] 134 ITR 458. On the other ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter was set aside to the Income-tax Officer for ascertaining whether any part of the cost of provisions fell outside the ambit of maintenance of guest house. Since the facts and the contentions raised on both the sides remain the same, we restore the matter to the Income-tax officer for a decision afresh on this point with similar directions. 13. The next ground relates to the disallowance of Rs. 31,209 out of farm land operation expenses inBhutan. The ITO as well as the CIT(A) made and sustained the disallowance as in the past and for the same reasons. 14. This point also arose for the preceding A.Y. 1980-81 before the Appellate Tribunal and the Appellate Tribunal vide its order dated 10-5-1985 referred to above, directed the ITO to ascertain all the facts regarding this item and to find out the nature of expenses and to deal with the matter in the light of the observations made by the Appellate Tribunal in the immediately preceding assessment year 1979-80. For the assessment year in question also we restore the matter to the ITO with similar directions. 15. The next ground relates to the rejection of the claim of deduction of the amount of sur-tax payable under the Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Government of India under Maruti Ltd. (Acquisition and Transfer of Undertakings) Act, 1980 with effect from13-10-1980. According to the assessee nothing was recoverable from the new company or from the Government because the Act made a provision for the payment of Rs. 4.34 crores only for the disbursement of the claims against the company. It was also contended that the amount was provided for payment for discharging certain liabilities of the company which exceeded the amount provided for and that no provision was made for payment to share-holders for their holdings in the company. However, the ITO noticed that in their report, the auditors had mentioned at page 41 that the ultimate realisability of the investment at that stage was undeterminable. He also noticed that the proceedings before the Commissioner of Payments appointed by the Government under the said Act were also not over. He took the view that it was premature for the assessee to say that nothing would be realisable by the assessee-company. He, therefore, disallowed the assessee's claim regarding capital loss of Rs. 10,01,000. He clarified that the assessee would be entitled to claim the loss when the final posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Maruti Ltd. which has been acquired. The finding of the ITO was that as found by the auditors of the assessee-company, the ultimate realisability of the investment was not determinable and that the proceedings before the Commissioner of Payments appointed by the Government under the said Act, were also not over. This being the factual position, the income-tax authorities were quite justified in taking the view that the claim of loss of the assessee was pre-mature. The claims of various persons were yet to be settled and as long as the company itself did not indicate that there was nothing left after settling of the claims, it could not be said that the shares had become worthless. We, therefore, maintain the orders of the income-tax authorities on this point. 24. The next ground relates to the charging of interest u/s. 139(8). The grievance of the assessee in that regard was that the ITO should have exercised his discretion suo motu under Rule 117A of the Income-tax Rules, 1962 for reducing/waiving interest. The learned CIT(A) held that it was for the assessee to move the ITO in that regard. He had, therefore, directed the ITO to examine the matter if and when the assessee moved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case, where the residential accommodation has been hired by the assessee, include also the rent paid in respect of such accommodation. " The argument in favour of the viewpoint adopted by my Ld. Brother, following earlier orders of the Tribunal, is that the non-obstante clause with which sub-section (4) of section 37 begins makes it override the provisions of sub-sections (1) and (3) of section 37 only, and that sub-section (4) does not override the provisions of sections 30, 31 and 32 of the Act, and so the said sections will have their normal operation. Section 30 provides that rent, rates, taxes, repairs and insurance for premises, used for the purpose of business, should be allowed. Section 31 directs allowance of expenditure on repairs and insurance of machinery, plant or furniture used for the purpose of business. Section 32 directs that depreciation be allowed to the assessee in respect of buildings, plant, machinery or furniture owned by the assessee and used for the purposes of the business. Section 37 reads, inter alia, as below : "Any expenditure (not being of the nature described in sections 30 to 36, and not being in the nature of capital expenditure or personal e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c prohibition for allowance of depreciation and for rent of a hired guest house. Other expenses ascribable to the maintenance of a guest house have also been specifically prohibited. 2. The position, therefore, is that we are faced with two provisions of law, sections 30, 31 and 32, on the one hand, and section 37(4) on the other, which cannot be simultaneously given effect to, for they are in conflict with each other. How to interpret them, then ? The following principles of interpretation of statutes have to be borne in mind (i) That so far as possible the various provisions of the Act should be harmonized. (ii) Such an interpretation which will make a certain provision of law redundant, otiose and non-operative must be avoided, and (iii) the special law should prevail over the general law - Generalia specialibus non derogant. If the interpretation preferred by my Ld. Brother is adopted, it appears to me that a very substantial part of section 37(4) is made redundant and non-operative. Depreciation, though not allowable u/s 37(4)(ii), would still be allowed u/s 32 ; rent of the hired guest house, though specifically prohibited by sec. 37(4)(i) read with Explanation (ii) ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 89,609 was all owed and the balance of Rs. 4,54,195 was disallowed, which consisted of salaries and wages Rs. 77,252 and cost of provisions Rs. 3,76,943. 3. The contention raised before the Bench was that a similar point had come up for consideration before the Appellate Tribunal for the preceding assessment year 1980-81, which following a still earlier order relating to the assessment year 1979-80 held that the expenses, which fell under sections 30, 31 and 32 should not be disallowed as part of the expenses on the maintenance of the guest house but at the same time the matter was set aside to the Income-tax Officer for ascertaining whether any part of the cost of provisions fell outside the ambit of expenses on maintenance of guest house expenses. Following this order of the Tribunal the learned Judicial Member held that since the facts and the contentions raised on both the sides remain the same, the matter should be restored to the Income-tax Officer for a decision afresh on this point with similar directions. By this the learned Judicial Member did not express any view on the question of allowability of any expenditure except that he stated in his own words what the ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 37(4) will emerge. I, therefore, hold that effect cannot be given to sections 30, 31 and 32 in the face of sec. 37(4), following the principle of generalia specialibus non derogant. Section 37(4) being the special provision relating to guest houses must prevail over the provisions of sections 30, 31 and 32, which are general provisions." 5. On carefully going through the order of both the learned Members, it transpired that in so far as the allowance of expenditure under sections 30, 31 and 32 are concerned, there could not be any difference of opinion except a misunderstanding of the order proposed by the learned Judicial Member. The amount of expenses to the allowance of which objection was taken to by the learned Accountant Member as falling within the scope of sections 30, 31 and 32 amounted to only Rs. 89,609 as noted above in the earlier part of this opinion. This amount was allowed by the Commissioner (A), against which the department filed an appeal before the Tribunal. The Tribunal by its order in ITA No. 2959 (Delhi) of 1984 disagreed with the view of the Commissioner (A), cancelled his order on that point and restored that of the Income-tax Officer. Thus the disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Officer directing him to ascertain whether any part of cost of provisions would fall out of the ambit of maintenance of guest houses. The facts of the case and the legal provisions continue to be the same and we, therefore, give similar directions in this year as well." It will be seen from this order of the Tribunal that the expenses relatable to sections 30, 31 and 32 were not allowed by the Bench keeping in view the amended provisions of law but remitted the case back to the Income-tax Officer for quantification of those expenses incurred on the cost if provisions, which might fall out of the ambit of the maintenance of guest house expenses meaning thereby that if there are any expenses incurred on provisions otherwise than on maintenance of guest houses, those expenses could be allowed because the claim made was a consolidated claim which included the expenses incurred on staff welfare and maintenance of guest houses. So the anxiety of the Tribunal was to separate the expenses incurred on the staff welfare from the maintenance of guest houses expenses and direct that portion to be allowed as not covered by section 37(4). Since separation became necessary, the matter was rema ..... X X X X Extracts X X X X X X X X Extracts X X X X
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