Law: Income Tax Ordinance, 1979

Section: 23(l)(vii),24(g)

(a) Income Tax Ordinance (XXXI of 1979)-----S. 23(l)(vii)---Business expenditure---Interest paid by an existing assessee on loan borrowed for the expansion of his business can, at his option, be claimed as capital expenditure or revenue expenditure---Interest paid on borrowing is revenue expenditure whether the borrowing was for a capital or a revenue purpose. Law of Income Tax in India by V.S. Sunderam, 12th Edn., Vol.2, p.560; State of Madras v. G.J. Coelho (1964) 53 1TR 186; Indian Cement Ltd. v. CIT (1966 ) 60 ITR 52; Bombay Steam Navigation Co. v. CIT (1965) 56 ITR 52 and CIT v. Insotex Ltd. (1984) 150 ITR 195 (Knt.) ref. (b) Income Tax Ordinance (XXXI of 1979)--- ----S. 24(g)---Deduction---Provident fund---Disallowance---Held, only that sum was not to be allowed to be deducted as was expended by the assessee to pay to any provident fund not recognized---Contention that any sum in the account of provident fund which included the workers' share and the profit earned on that shall be added as income of the assessee was repelled---What was required to be disallowed was the expenditure incurred by the assessee by way of payment to the fund---Any sum which had not been expended by the assessee could not be added to his income. ORDER The assessee a State-owned Corporation which is incorporated as a private limited company is engaged in the business of exploration. Development and exploitation of mineral deposits of salt coal silica sand china and clay through various projects at various places. In its return of income for the Assessment year 1990-91 originally the income was declared at Rs.14,348,285 which were later on revised to Rs.10,638,285. The assessing officer accepted the trading results. He, however, made the following add backs out of the profit and loss account expenses:--- 1. On account of specific provisions Rs. 48,68,000 2. On account of mark-up on exploration projects Rs. 73,20,000 3. On account of extraordinary Rs. 8,56,000 4. On account of written off equity fund and coal washing plant Rs.4,58,91,000 5. On account of provident fund and gratuity Rs.4,89,51,000 6. On account of perquisites under section 24(i) Rs. 17,75,000 2. Similarly the…

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