TMI Blog1993 (8) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure incurred on consultation and feasibility study by the assessee as revenue expenditure." 6. The Assessing Officer noticed that a sum of Rs. 13,041 was paid for consultation and feasibility study which ultimately did not materialise. He treated the same as capital expenditure relying on the decision of the Gujarat High Court in the case of CIT vs. Digvijai Cement Co. (1986) 53 CTR (Guj) 273 and accordingly disallowed the assessee's claim for deduction. Thereafter, the CIT(A) observed that the assessee had got a comuterised feasibility study which recommended that the assessee had no need for immediate in house installation of computer and certain alternatives were suggested. Thereafter, he accepted that it was for the purpose of improving the normal running of the assessee's business and would be allowable as revenue expenditure. He made no reference to the case relied upon by the Assessing Officer. The Revenue is now in appeal before us. 7. We have heard the rival submissions. Our attention has been invited to the report of computerisation feasibility study, a copy of which is available in the paper book. It is seen that the principal recommendations were that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss than 240 days. However, the assessee claimed that the minimum number of days of 240 days stipulated in the IT Rules, should be reduced to 80 days only, since, the previous year of the assessee for this assessment year comprised of only 4 months, This claim was rejected by the Assessing Officer. The CIT(A) discussed the matter in the appellate order and thereafter, at the end gave a decision that "extra shift allowance in this case will be allowed to the appellant in proportion to the actual number of days during which the factory worked". The CIT(A) has not clarified whether the assessee's appeal was being allowed or rejected on this ground, and the Revenue has apparently filed this appeal before us as a measure of precaution. 12. After hearing both sides, we are satisfied that the assessee's claim cannot be upheld and the computation by the Assessing Officer must be upheld. We uphold this view since there is no satisfactory basis for reducing the stipulated 240 days to 80 days in the IT Rules, as claimed by the assessee. We hold accordingly and allow this ground. 13. Ground No. 5 reads as under: "On the facts and in the circumstances of the case and in law, the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (f) Entire expenditure on provision of sweepers for both official and personal use as perquisite." 19. Regarding ground No. 1(a) the learned counsel for the assessee accepted that house rent allowance paid formed part of salary, but not to the extent to which it was exempt under s. 10(13A) of the IT Act. Reliance was placed on the decision of the Bombay High Court in the case of CIT vs. Hindustan Petrolieum Corpn. Ltd. (1990) 87 CTR (Bom) 98 : (1991) 187 ITR 1 (Bom) where a decision was given that gratuity in excess of the amount exempt under s. 10(10) only should be considered for disallowance under s. 40A(5). We accept the contention. This ground is partly allowed. 20. Ground No. 1(b) is covered in favour of the Department by the decision of the Special Bench of the Tribunal in the case of Glaxo Laboratories vs. Second ITO (1986) 26 TTJ (Bom) 214 (SB) : (1986) 18 ITD 226 (Bom)(SB). This ground is accordingly rejected. 21. Ground No. 1(c), (d), (e) and (f) were considered by the Tribunal in the assessee's own case for asst. yr. 1983-84 in ITA No. 6 to 9/Bom/1987 dt. 29th Sept., 1992. The learned counsel for the assessee very fairly accepted that they were decided against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otels; (b) expenditure incurred on payments of salaries to drivers as expenditure on running and maintenance of motor cars." 26. The only point pressed before us during the hearing by the learned counsel for the assessee was that 1/3rd of the expenses incurred on payments to restaurants were held in asst. yr. 1983-84 to be attributable to the assessee's own employees and, therefore, not includible in the computation for disallowance under s. 37(3A). 27. After hearing rival submissions, we accept this contention and direct that 1/3rd of the expenditure on restaurants may be taken outside the perview of s. 37(3A) on the basis that they were incurred on the assessee's own employees. 28. The assessee has filed an additional ground of appeal according to which the CIT(A) erred in holding that repairs to vehicles ought to be considered for disallowance under s. 37(3A) of the Act. Since a legal question has been raised, the additional ground has been admitted by us. 29. After hearing the rival submissions, on merits we find merit in the contention of the assessee, which is supported by the decision of the Bombay High Court in the case of CIT vs. Chase Bright Steel Ltd. (198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions. In the case of T. Khemchand Tejoomal vs. CIT, which is an order dt. 12th Sept., 1985, the Bombay High Court considered its earlier decision in CIT vs. Pannalal Narottamdas Co. and found that the facts were altogether different. In that case in the course of its business the assessee had purchased bills of lading, etc., from certain parties in respect of import of some goods. It was found at the time of customs clearance that the imports were unauthorised and liable to be confiscated and a penalty was imposed. The assessee paid the penalty for saving the goods being confiscated. It was held by the Bombay High Court that on the facts and circumstances, the actual cost of the goods to the assessee was not only what it had paid to the importers but in addition thereto what it had to pay by way of penalty in order to save the goods from being confiscated. However, the facts in the case of T. Khemchand Tejoomal vs. CIT were that it was the assessee who had got the import licence and imported the goods and it was the fault of the assessee if the goods imported did not conform to the licence. The penalty was levied on the assessee for the default of the assessee itself, and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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