TMI Blog1986 (6) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... premises, i.e., 10 per cent was sublet for the first time in 1975 to a connected concern, namely, ABS Worldwide. Tech. Services (I) (P.) Ltd. on a monthly rent of Rs. 500 per month. In the assessment years 1978-79 and 1979-80, the rent was increased to Rs. 1,000 per month because of the additional space given to them and the additional charge of expenses. The assessee claimed the net rent paid by it, i.e., by reducing the receipt of rent. In the assessment year 1977-78, the ITO treated the receipt of Rs. 6,000 as income from other sources as in his opinion, the income was from subletting and the income of subletting has always been assessed as other sources. After allowing 10 per cent of the expenses on electricity calculated at Rs. 1,804, he brought the balance of Rs. 4,160 to tax under the head 'Income from other sources'. The Commissioner (Appeals) has confirmed the assessment of this income under the head 'Income from other sources'. He, however, allowed Rs. 4,357 being 10 per cent of the rent paid by the assessee, besides the electricity expenses of Rs. 1,804 allowed by the ITO. Similarly in the assessment years 1978-79 and 1979-80, the proportionate expenses on rent and elect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it to purchase premises for accommodation of their surveyors. Till date they could not get a suitable place the money was deposited in the fixed deposits. The assessee could not get any suitable accommodation as contemplated. Therefore, the money was returned to New York office in 1978. In these circumstances the Commissioner (Appeals) held that the interest income was the yield of exploitation of the funds brought for commercial purposes. We agree with the Commissioner (Appeals) that the funds brought from the New York office were for commercial purposes and its retention in fixed deposits till their purpose was achieved or their return would be the income from business. Therefore, ground No. 1 in each of the assessment years 1977-78 and 1978-79 and ground No. 2 in the assessment year 1979-80 in the appeals by the revenue are dismissed. 6. The next substantial dispute in the assessee's appeal as well as in departmental appeal is concerning with the applicability of section 44C of the Income-tax Act, 1961 ('the Act'). In the assessee's appeal for the assessment year 1977-78 it has been challenged that the provisions of section 44C do not apply. To elaborate the argument Shri Da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d total income' means the total income computed in accordance with the provisions of this Act, without giving effect to the allowance referred to in this section or in sub-section (2) of section 32 or the deduction referred to in section 32A or section 33 or section 33A or the first proviso to clause (ix) of sub-section (1) of section 36 or any loss carried forward under sub-section (1) of section 72 or sub-section (2) of section 73 or sub-section (1) of section 74 or sub-section (3) of section 74A or the deductions under Chapter VI-A; (ii) 'average adjusted total income' means,--- (a) in a case where the total income of the assessee is assessable for each of the three assessment years immediately preceding the relevant assessment year, one-third of the aggregate amount of the adjusted total income in respect of the previous years relevant to the aforesaid three assessment years; (b) in a case where the total income of the assessee is assessable only for two of the aforesaid three assessment years, one-half of the aggregate amount of the adjusted total income in respect of the previous years relevant to the aforesaid two assessment years; (c) in a case where the total incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt, we are inclined to hold that if any one or more of the computations under clause (a), (b) or (c) of section 44C is not conceivable in a particular case, it will have to be held than non obstante provisions contemplating disallowance of 'head office expenditure' under section 44C does not apply." 9. It is not a case in this appeal before us; may be because of losses it did not apply in this year but that does not mean that clause (a) of section 44C is not conceivably applicable in the case of the assessee. It could not be said that the assessee would never have any adjusted total income. The fact that there is no dispute in the assessment years 1978-79 and 1979-80 goes to prove that there was presumably adjusted income in those years and clause (a) would, therefore, be workable. In our opinion, therefore, this case could have helped the assessee only when there is conceivably no possibility of any computation under clause (a) of section 44C and not in a case where it could not be worked out in a year or two. 10. The case of the Supreme Court relied upon by the learned counsel of the assessee is again on the theory of 'conceivability'. This was a case under the Super Profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead office. This ground contemplates the full allowance of head office expenses up to 1-6-1976, the date when section 44C was introduced. Since we have rejected the departmental appeal, this ground becomes infructuous. 12. In the assessment year 1978-79 the nature of expenses is more or less the same as in the assessment year 1977-78. The amount of travelling expense is $ 15,310, miscellaneous expenses Rs. 1,858 and on plan approval Rs. 6,33,588. For the reasons discussed in earlier paragraph for the assessment year 1977-78, we hold that these expenses were not head office expenses and confirm the order of the Commissioner (Appeals). There is one another item of expenditure of Rs. 9,120 incurred on printing and stationery in this year. This expense was disallowed because of the absence of proper proof of recovery of the same from the clients. Like miscellaneous expenses, these expenses were also for specific jobs and, therefore, could not be treated in the nature of head office expenses under section 44C. 13. The assessee has challenged the treatment of $ 926 on travelling treated as head office expenses. The disallowance is on the ground that these expenses were not for any sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Rules, 1962. The expenses on travelling according to the assessee, were incurred in the context of their business and, therefore, it was contended that nothing could be disallowed under section 37(3) of the Act read with rule 6D. The department's appeal is against the direction of the Commissioner (Appeals) to calculate the disallowance of expenses on the basis of 'per person' as against 'per trip' under rule 6D. The disallowance per trip basis worked out by the ITO is Rs. 25,125 whereas it works out to Rs. 24,715 on per person basis. Both the points are covered by the Special Bench decision of the Tribunal. The case of Sundaram Finance Ltd. v. IAC [1984] 7 ITD 845 (Mad.) (SB) upheld the applicability of rule 6D even in cases where the travelling expenses were otherwise allowable as business expenditure and the case of Blackie Sons (India) Ltd. [IT Appeal Nos. 706-707 (Bom.) (SB) of 1975-76 dated 20-10-1976] upheld the calculation of per person basis. We, therefore, reject this ground in both the appeals by the assessee as well as by the department. 16. In departmental appeal for the three years ground Nos. 2 and 3 each in the assessment years 1977-78 and 1978-79 and ground Nos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of guest-house. The decision in assessment year 1977-78 was followed in the assessment year 1978-79 and in this appeal for the assessment year 1979-80 also. No appeal was filed by the department for the assessment years 1977-78 and 1978-79 but since there was an amendment in the provisions by insertion of sub-section (5) in section 37 with effect from 1-4-1979, it was contested by the department in this assessment year 1979-80. Two defences were put forward by Mr. Dastur before us, one being that section 37(5) applies only to a guest-house and not to all premises. In the present case, the Beach House is a sort of holiday home where only the employees of the assessee stay. A premises to be guest-house must be to house the guests and employees could not be termed as guests. The second defence of Mr. Dastur is that the non obstante provisions contained in section 37(4) did not prohibit the claim of depreciation under section 32 of the Act even if the Beach House is treated as a guest-house. To understand the controversy it would be appropriate to look at the provisions of section 37(4) and 37(5). "By section 5 any accommodation whether maintained, hired, reserved or otherwise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords, depreciation has to be allowed under section 32 there being no dispute for the maintenance of guest-house was for the purposes of business. We, therefore, uphold the decision of the Commissioner (Appeals) allowing the depreciation though on two different grounds. 19. The last ground in departmental appeal for the assessment year 1979-80 being ground No. 9 is against the deletion of addition of Rs. 9,425 made by the ITO under section 37(1), read with section 80VV, of the Act. The facts are that the sum of Rs. 13,000 was paid by the assessee to Ferguson Co., C.A. Out of this Rs. 13,000 a sum of Rs. 3,575 alone was for the expenses on the representation before the authorities, the balance of Rs. 9,425 was for other matters. The Commissioner (Appeals) disposed of the matter in light of the Tribunal's decision in the case of International General Electric Co. (I) Ltd. v. ITO [IT Appeal No. 24 (Bom.) of 1974, dated 5-10-1979]. After having gone through the details and the orders of the authorities, below, we are of the opinion that the Commissioner (Appeals) was right in holding that Rs. 9,425 was not subject to the provisions of section 80VV but were allowable under section 37 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
