Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment years 1993-94, 1995-96 and 1996-97 - Assessing Officer disallowed claim of assessee in respect of replacement of old machinery by new one on ground that same could not be treated as a revenue expenditure and treated MODVAT credit relating to replacement of machinery as capital - Commissioner (Appeals) and Tribunal held claim of assessee could not be disallowed as said replaced machinery did not bring about any asset or any distinct advantage to assessee and no structural change was also brought in - Whether expenditure incurred by assessee on replacement of machinery was deductible as revenue expenditure - Held, yes - Whether since cost of replacement was allowed as revenue expenditure, addition made on account of MODVAT credit relating to machinery was a revenue expenditure - Held, yes Section 80HHC of the Income-tax Act, 1961 - Deductions - Exporters - Whether sales tax and excise duty does not form part of total turnover for purpose of calculation of deduction under section 80HHC - Held, yes Section 40A(2) of the Income-tax Act, 1961 - Business disallowance - Excessive or unreasonable payments - Assessee paid Rs. 6,08,250 each to its four directors as remuneration and claimed same as deduction - Assessing Officer restricted claim of payment of remuneration to two male directors at Rs. 25,000 per month and payment to two lady directors at Rs.8500 per month - Commissioner (Appeals) gave part relief to assessee and while holding that payments made by assessee to lady directors was excessive, upheld payment made to first two directors and directed Assessing Officer to allow claim of payment of salary to male directors and to restrict payment of salary to lady directors at Rs.15000 per month - Tribunal upheld order of Commissioner (Appeals) - Whether since both authorities below had concurrently given finding that those directors had rendered services, disallowance made by Assessing Officer towards remuneration payable to directors was not fair - Held, yes - Whether therefore, order of Tribunal was to be upheld - Held, yes CASES REFERRED TO CIT v. Janakiram Mills Ltd.…

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