ORDER
Smt. Moksh Mahajan, Accountant Member
1. These two appeals filed by the assessee for assessment years 1986-87 and 1988-89 are consolidated as these contain common issues. The assessee modified the original grounds of appeal which are taken into consideration for deciding the appeals for assessment year 1986-87 and assessment year 1988-89.
2. The first issue common to both the assessment years relates to taxability of entertainment tax realised by the assessee. While in assessment year 1986-87 the same amounted to Rs. 1,24,990, in assessment year 1988-89 it was shown at Rs. 15,36,120. Shri C. S. Jain, the learned AR submitted that the assessee runs a cinema under the name and style of Shubhra Theatre at Mahuabagh, Ghazipur. It collected entertainment tax as payable to the concerned State Authority. Under a scheme as floated by the U.P. Government, any entrepreneur who had built a permanent structure for exhibiting film was to be allowed a grant in aid for three years. This was linked with the entertainment tax. While in the first year 100% of the entertainment tax was to be reimbursed, in the second year it was 75% of the entertainment tax as collected. In the third year of the running of the cinema the grant-in-aid was payable at 50% of the tax collected. Accordingly, the amount so collected was credited to the entertainment account in the books of the assessee. While in the original return of income, the same was shown as part of the trading receipt, in the revised return it was excluded. This was for the reason that the aforesaid amount in fact constituted a subsidy not amounting to income. The Assessing Officer wrongly treated the entertainment tax as a part of the trading receipt relying on the decisions of the Hon’ble Supreme Court in the cases of Chowringhee Sales Bureau (P.) Ltd. v. CIT [1973] 87 ITR 542; Punjab Distillary Industries Ltd. v. CIT [1959] 35 ITR 519 and Sinclair Murray & Co. (P.) Ltd. v. CIT [1974] 97 ITR 615. The learned CIT (Appeals) confirmed the order of the Assessing Officer without considering the assessee’s submissions in detail. In fact the assessee showed entertainment tax under the head “suspense account” for the reason that this was payable to the Government. Even for the sake of argument it is accepted that the entertainment tax constituted the revenue receipt, the same was deemed to have been paid to the Government for which reason the deduction was allowable to the assessee. Grant-in-aid was allowed to the assessee for encouragement of cinema industry in a place where no other channel of entertainment was open to the public, as such it constituted capital receipt. The learned DR on the other hand, strongly supported the order of the learned CIT (Appeals). It was submitted that since the entertainment tax was collected as a part of the trading receipt, the same constituted income in the hands of the assessee and as such was taxable. As it was not paid to the U.P. Government no deduction could be allowed to the assessee under section 43B of the Act. As to the grant-in-aid it was conceded that the same being a capital receipt had to be treated as such.
3. We have carefully considered the rival submissions and have also gone through the relevant provisions of the U.P. Entertainments & Betting Tax Act, 1979 read with the U.P. Entertainment & Betting Tax Rules, 1981. The English translation of the scheme as relied upon by the assessee was also enclosed. We find that under the U.P. Entertainment & Betting Tax Act, 1979, the tax on payment for admission to entertainment is levied. As per section 3 of the Act, the entertainment tax at such rate not exceeding one hundred and ten per cent of each such payment as the State Government may from time to time notify in this behalf is to be collected by the proprietor from the person making the payment for admission and to be paid to the Government in the manner prescribed. As per the Explanation, the State Government is not precluded from notifying different rates of entertainment tax and surcharge for different areas or for different classes of entertainment or for different payments for admission to entertainment. As per section 8 of the Act, the State Government may prescribe the manner in which the tax is to be collected and paid to it.
Section 9 of the Act lays down rules for refund of tax collected in excess. Section 11 of the Act provides for exemption of entertainment tax under certain conditions. The State Government may by general or special order exempt in public interest any class of audience or spectators from liability to pay tax under the Act. The circumstances mentioned are (a) if the entertainment is wholly of an educational character, partly for educational or party for scientific purposes by a society not established for profit or solely for the purpose of promoting public health or the interests of agriculture, or a manufacturing industry etc. etc. Sub-section (5) of section 11 provides that where any exemption from payment of tax is granted, the proprietor of such entertainment is to furnish to the District Magistrate such documents and records and in such manner as may be prescribed. Rules on the other hand provide for manner of collection and levy of tax, form of ticket, security and circumstances where the prosecutions could be launched.
Thus as per the Act unless and otherwise exempted the proprietor is to pay entertainment tax to the State Government. Under the scheme as relied upon by the assessee, grant-in-aid was provided to the permanent cinema hall constructed in a stipulated period. As per the scheme any party constructing a cinema hall in zone/place of less than one lakh population as per last census of 1981 was to be provided grant-in-aid as given as under :-
“A. (1) The zones/places having a population more than 20,000 but less than 1 lac according to the census 1981.
Amount of Grant-in-aid
(a) First Year : Hundred per cent amount equal to due entertainment tax in respect of film shown in the Cinema Hall in question.
(b) 2nd year : 75% amount of due entertainment tax in respect of film shown in the Cinema Hall in question.
(c) 3rd year : The amount equal to 50% of E. Tax, due on the show of the film in the Cinema Hall in question.
(d) 4th year & thereafter : No Grant-in-aid.”
As per clause 4 of the scheme the cinema owner is to prepare account of income received from issuance of tickets and the tax so collected is to be shown separately. It is also contained therein that the cinema owner will have to comply with conditions under section 8 of U.P. Entertainment & Betting Tax Act, 1979. The grant-in-aid to be adjusted from tax due for the purpose for which the cinema owner is to prepare the details in the weekend. The cinema owner is then to deposit the required amount of tax due in cash after deducting the amount of grant-in-aid within 3 days after the weekend in the Government Treasury under the rule 24 of U.P. Entertainment & Betting Rules, 1981, clause (d) of the scheme which is important reads as under :-
“(d) Cinema owner is not required to deposit the equal amount of grant-in-aid and it will be observed in this regard that he has also deposited the equal amount of grant-in-aid as per direction issued under rule 24 of U.P. Entertainment & Betting Rules and Regulations 1981 but for the proper adjustment in each quarter it will be necessary that cinema owner will prepare the total bill in proforma 42-G in respect of admissible grant-in-aid according to rule 209 of Finance Handbook Volume-V Part-I and he will deposit the same in the treasury within 7 days after the expiry of quarter by indicating ‘Payment of account through transfer’ on the top of the bill after getting it countersigned from District Magistrate along with three copies of challan. The owner of the Cinema Hall will prepare the details of quarterly admissible grant-in-aid and the same should be got countersigned by the District Magistrate. Therefore, on the basis of submitted countersigned bill, the Treasury Officer instead of making cash payment by debiting the amount of grant-in-aid under the account Head of Grant-in-aid/State Relief contribution for the encouragement of construction of New Cinema Halls and other tax 245-articles and services will credit under the Collection head ‘045 – other tax on articles and services (a) Entertainment tax (i) Collection of taxes’. The enclosed attested/countersigned particulars with the bill will be treated as sub-vouchers.”
Proforma-I along with the Notification further provides for certain conditions, the relevant clauses are as under :-
“(2) The Cinema Owner will comply the conditions under section 8 of U.P. Entertainment and Betting Act, 1979 and the account of income received from the tickets issued for each show will be prepared in Proforma ‘B’ according to Rule 13 of U.P. Entertainment and Betting Rules, 1981 but during the period of Grant-in-aid, the amount of tax will be shown separately and at the week-end the weekly statement in prescribed Proforma will be prepared giving the total income from the sale of tickets, the amount of due tax on normal rates, the amount of admissible grant-in-aid on above mentioned rates and net amount of due tax after deducting the amount of Grant-in-aid.
(5) It will not be necessary for the Cinema Owner to deposit the taxable amount equivalent to Grant-in-aid in cash and in this connection it will be presumed that he has also deposited the amount equivalent to Grant-in-aid as per the directions issued under the rule 24 of U.P. Entertainment and Betting Rules & Regulations 1981 but for the compilations of accounts it will be necessary that for complete quarter the Cinema Owner will prepare the bill for total amount in the prescribed Form 42-G under 20-G of rule Financial Hand Book Volume 5, Part-I. At the top ‘Payment of account through transfer’ and number and date of order should be indicated and the owner should deposit the same in the treasury after getting it counter-signed from the District Magistrate within 7 days after the expiry of quarter along with three copies of treasury challan of equal amount. The Cinema Owner will also enclose the details of admissible amount of Grant-in-aid along with the above bill and the same should be verified by the District Magistrate. While counter signing the bill the above details and the treasury challans will also be countersigned by the District Magistrate. Therefore, on the basis of submitted countersigned bill, the Treasury Officer instead of making cash payment by depositing the amount of grant-in-aid under the Account Head of Grant-in-aid/State Relief contribution for the encouragement of construction of New Cinema Halls and other tax 245-articles and services will credit under the Collection head ‘045-other tax on articles and services (a) Entertainment Tax (i) Collection of taxes’. The enclosed attested/countersigned particulars with the bill be treated as sub-vouchers.”
4. Reading together the Act and the Scheme it is clear that the assessee is not exempted from entertainment tax under section 11 of the U.P. Entertainment & Betting Tax Act, 1979. The assessee collected entertainment tax as provided under the Act. As per the provisions of the Act the assessee was to comply with all the formalities which are necessary for collection of tax and its deposit in the Government treasury. Even under the scheme, the assessee was to prepare account of income receipt from the issuance of tickets of each show in Proforma B in accordance with Rule 13 of the U.P. Entertainment & Betting Rules, 1981. The assessee was also to deposit the required amount of tax due in cash though after deducting the amount of grant-in-aid within three days after the weekend in the Government Treasury. As the assessee was not required to deposit equal amount of grant-in-aid, he was to prepare the total bill in Proforma 42-G in respect of admissible grant-in-aid according to the rules as provided. He was then required to prepare the details of quarterly admissible grant-in-aid which was to be countersigned by the District Magistrate. It was on the basis of countersigned bill that the Treasury Officer instead of making cash payment by debiting the amount of grant-in-aid under the head ‘Grant-in-aid’ was to credit it under the other head as provided under the Rules. Thus while on one hand the entertainment tax as collected was payable to the State Government, on the other hand, the assessee was allowed to retain a part of the collection in the form of grant-in-aid. It was in respect of the latter that the adjustment entries were passed as mentioned above.
5. The above makes it clear that the assessee collected entertainment tax as a part of its receipts, hence it constituted revenue receipt. As for deduction allowable under the Act, the amount was allowed to be paid in the manner as prescribed under the Scheme. While in respect of amount equivalent to grant-in-aid adjustment entries were to be made, in regard to the remaining amount the same was to be deposited in the treasury within three days of collection. Thus on the facts could it be said that the assessee paid entertainment tax (which was allowed to be retained by him in the form of grant-in-aid) as per provisions of section 43B of the Act. The expression “paid” has been defined in section 43(2) of the Act as under :-
“(2) ‘paid’ means actually paid or incurred according to the method of accounting upon the basis of which the profits or gains are computed under the head ‘Profits and gains of business or profession’;”
Under section 43(2) of the Act the expression “paid” includes two types of payments – one where it is paid in fact and the other where it is incurred as per method of accounting. The letter type of payment has been given a go by in section 43B of the Act. As per the non obstante clause irrespective of method of accounting deduction is to be allowed when it is actually paid by the specified date.
6. The next question which needs to be answered is whether the payment as per the procedure laid down by the State authorities could be covered under the expression ‘actually paid’ as used in section 43B of the Act. This would depend on the interpretation of expression ‘actually paid’. Whether the same is to be interpreted literally to mean the passing of an amount from one hand to the other in actuality or it could be by way of any mode of payment as generally understood in any common parlance. For this, we may advert to the intention of the Legislature while bringing the provisions of section 43B on the Statute. Circular No. 372 dated 8-12-1983 explaining the circumstances in which the relevant provisions were brought on the Statute reads as under :-
“(xxvi) Disallowance of unpaid statutory liability – Section 43B – 35.1 Under section 145 of the Income-tax Act, 1961, profits and gains of business or profession are computed in accordance with the method of accounting regularly employed by the assessee. Broadly stated, under the mercantile system of accounting, income and expenditure are accounted for on the basis of accrual and not on the basis of actual receipts or disbursements. For the purpose of computation of profits and gains of business or profession, section 43(2) of the Income-tax Act defines the word ‘paid’ to mean ‘actually paid or incurred’ according to the method of accounting on the basis of which the profits or gains are computed.
35.2 Several cases have come to notice where taxpayers do not discharge their statutory liability such as in respect of excise duty, employer’s contribution to provident fund, Employees’ State Insurance Scheme, etc., for long periods of time, extending sometimes to several years. For the purpose of their income-tax assessments, they claim the liability as deduction on the ground that they maintain accounts on mercantile or accrual basis. On the other hand, they dispute the liability and do not discharge the same. For some reason or the other, undisputed liabilities also are not paid.
35.3 To curb this practice, the Fiance Act, 1983, has inserted a new section 43B to provide that deduction for any sum payable by the assessee by way of tax or duty under any law for the time being in force or any sum payable by the assessee as an employer fund or any other fund for the welfare of employees shall irrespective of the previous year in which the liability to pay such sum was incurred, be allowed only in computing the income of that previous year in which such sum is actually paid by the assessee.
35.4 The section also contains an Explanation for the removal of doubts. The Explanation provides that where a deduction in respect of any sum aforesaid is allowed in computing the income of any previous year, being a previous year relevant to the assessment year 1983-84, or any earlier assessment year, in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under section 43B in respect of such sum on the ground that the sum has been actually paid by him in that year. In other words, the assessee who has already been allowed deduction of a liability on account of tax or duty or in respect of any sum payable as contribution to any fund for the assessment year 1983-84, or any earlier year in which the liability to pay was incurred, cannot, in respect of that liability, be allowed a deduction in the assessment year 1984-85, or any subsequent year on the ground that he has actually made a payment towards such liability in that year.
35.5 The amendment takes effect from 1st April, 1984, and will accordingly apply in relation to the assessment year 1984-85, and subsequent years.
[Section 18 of the Finance Act, 1983].
As per above Circular the modes of payments were specified for discharge of liability towards the authorities. From above it is evident that the provisions of section 43B have been brought on statute for effective discharge of liability. On comparison of two Provisos inserted by Finance Act, 1987 in respect of clause (a) and Finance Act, 1989 in regard to clause (b) of section 43B of the Act, it would be clear that the conditions for payment in respect of clause (b) are more restrictive. For ready reference the Proviso as introduced are quoted below :-
Provided that nothing contained in this section shall apply in relation to any sum referred to in clause (a) [or clause (c)] [or clause (d)] which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return :
Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36, and where such payment has been made otherwise than in cash, the sum has been realised within fifteen days from the due date.”
The assessee’s case falls in clause (a) wherein the expression used in “actually paid” by specified date. There is no qualification of payment by cash or by issue of a cheque or draft or by any other mode as laid down for clause (b) of section 43B of the Act. Therefore, what is to be seen is whether this would cover the mode of discharging of liability as laid down by the authority to whom the payment is to be made. From the discussion as made earlier it is clear that the State authority allowed the assessee to make payment it respect of entertainment tax equivalent to grant-in-aid by way of adjustment entries. Instead of first making the payment in cash or in cheque and then receiving the amount back, the State authority permitted the assessee for making the payment by way of adjustment entries. It would be pertinent to note that the formalities as prescribed under the Act were not waived of by the State authorities. In this context, we would like to cite the decision of the Hon’ble Supreme Court in the case of J. B. Boda & Co. Ltd. v. CBDT [1997] 223 ITR 271/89 Taxman 311. The issue in question related to deduction under section 80-0 of the Act. The facts were that Oil & Natural Gas Commission had insured their offshore oil and gas exploration and production with an Indian Insurance Co. For covering the risk the assessee contacted the company in London who were brokers for placement of re-insurance business. After contracting the party concerned the Indian company handed over the total premium to be paid by it to the foreign reinsurance company for onward transmission. Application was also furnished to the Reserve Bank of India for procurement of necessary permission and the statement was furnished showing the total reinsurance premium payable to the foreign parties. The payment was made after deducting the brokerage due to the assessee for technical services rendered. The assessee sought approval of the Central Board of Direct Taxes in terms of section 80-O of the Income-tax Act. It was alleged that the reinsurance brokerage retained in India under agreement with the London brokers amounted to receipt of income in convertible foreign exchange. The CBDT refused the approval and the High Court dismissed the writ petition filed by the assessee. On appeal to the Supreme Court it was held that the retention of fee due to the assessee for the services rendered was in U.S. dollars. While holding it so it was observed by their Lordships, “The two ways traffic is unnecessary. To insist on a formal remedies first and thereafter to receive the commission from the foreign reinsurer, will be an empty formality and meaningless ritual on the facts of the case.” In our considered opinion the payment made by the mode as prescribed by the State authority under a scheme tantamounts to payment actually made as provided under section 43B(a) of the Act. Accordingly while on the one side the entertainment tax collected was revenue receipt on the other side the assessee would be entitled to deduction under section 43B of the Act. In the net result, there would be no affect on income as such.
7. The next ground common to both the appeals relates to assessability of income from rent and service charges in respect of bank portion of the building. According to the learned AR the bank portion of the building is mixed up with cinema portion. Passages and entrance being common, the whole structure is commercial in character. Therefore, the income should have been brought to tax under the head “Profit & gains of business” and not “property” and other sources as done by the Assessing Officer and as confirmed by the learned CIT(Appeals). Reliance was placed on the decision of the Hon’ble Supreme Court in the case of Karnani Properties Ltd. v. CIT [1971] 82 ITR 547. The learned DR on the other hand, submitted that as the property was given on rent in view of the rent lease deed the same has to be brought to tax under the head “property” and the receipt for services under the head “other sources”. There being no infirmity in the order of the learned CIT(Appeals) the same needs to be upheld.
8. We have carefully considered the rival submissions. We find that as per the lease deed the property was given to the bank for a period of 10 years with the opinion of renewal for 5 years to the lessee. The lessee was also provided with certain facilities for which he was charged extra. As per the terms of the lease deed, the lessee was also allowed to remove the strong room door and all other fittings and fixtures belonging to it at the time of vacating the premises. This was in view of sub-clause (e) of clause (1) of the lease deed whereby it was allowed to incur expenses on fixtures or fittings. The assessee was also at liberty to assign or sub-let the whole or any part of the demised premises on the terms granted with consent in writing of the lessor. Reading the lease deed as a whole the intention of the assessee becomes clear that the premises were let out for earning the rent and not as a business proposition. The argument that the premises were given to facilitate the deposit of the receipts in the bank would not by itself change the nature of income as the learned AR would like us to believe. It is the intention with which the property was let out which would determine the head under which the income is to be taxed. There is no direct nexus between the activity in running of a cinema and that of let out the property on rent. This is the only portion of the building which has been let out to the bank. The facts in the case of Karnani Properties Ltd. (supra) are distinguishable. In the aforesaid case the assessee-company owned the Karnani Mansion consisting of numerous residential flats and other dozen shops. These were let out to tenants who made monthly payments including charges for electric current for the use of lifts, for the supply of hot and cold water and other facilities. The assessee also installed its own power house within the premises and supplied the power to the tenants. It also maintained a separate water pump house and a boiler for the supply of hot and cold water to the tenants. For all these facilities the assessee maintained a large number of permanent staff. The assessee claimed the entire receipts to be assessable as income from business. The Assessing Officer rejected the claim and split the receipts into two parts. The High Court held that the entire receipts were assessable as income from property under section 9 of the Act. It was held by the Hon’ble Supreme Court that “the services rendered by the assessee to its tenants were the result of its activities carried on continuously in an organised manner with a said purpose and with a view to earn profit. Hence those activities have to be considered as business activities.” In the case of assessee it is not so. No material was placed before us to show that the services rendered by the assessee to the bank were as a result of activities continuously carried on in an organised manner. On the other hand, all the facilities which were available the premises were perforced to be availed of by the bank. Accordingly we would uphold the order of the learned CIT(Appeals) on the issue.
9. In the next ground common to both the appeals it has been contended as under :-
“2(iv) That, without prejudice to the ground raised in Ground No. (III) above, the authorities below erred in not properly evaluating the written down value of the Cinema Portion of the combined Commercial Building for purposes of depreciation when its proper cost of construction was available on record and, consequently in allowing depreciation at a figure lower than the one at which it was properly admissible.”
It was the argument of the learned AR that the entire building should be apportioned between the cinema and the bank on the basis of cost of construction as adopted for the purpose of allowing depreciation. We find force in the argument of the learned AR and would direct the Assessing Officer that it be done, so we order accordingly.
10. Connected with this issue the assessee has also raised an additional ground of appeal during the course of appellate proceedings contending that while determining the rate of depreciation, the cinema building be considered as a plant in view of the ratio of Hon’ble Supreme Court’s decision in the case of Scientific Engg. House (P.) Ltd. v. CIT[1986] 157 ITR 86/[1985] 23 Taxman 66. As no investigation into facts is required we admit the additional ground and direct the Assessing Officer to determine the rate of depreciation on cinema building in the light of the ratio of Hon’ble Supreme Court’s decision in the case Scientific Engg. House (P.) Ltd. (supra). For this the matter is restored back to the file of the Assessing Officer.
11. For assessment year 1986-87 the assessee raised the ground relating to the upholding of disallowance for Rs. 7,000 out of travelling and conveyance expenses. It was submitted that the total expenses claimed by the assessee were at Rs. 4,423 and as such is not understood as to how an addition of Rs. 7,000 came to be made. Despite the explanation rendered before the revenue authorities, no attempt was made to verify the facts. Our attention was drawn to the profit & loss account for assessment year 1988-89 wherein the corresponding figure for travelling for assessment year 1986-87 was shown at Rs. 4,423. This was not controverted by the learned DR. In the circumstances, we would deleted the disallowance as confirmed by the learned CIT(Appeals).
12. Ground No. 6 relating to disallowance of Rs. 11,651; ground No. 7 relating to disallowance of Rs. 6,750 & Rs. 4,000; and ground No. 8 relating to travelling and conveyance expenses are not pressed and are not discussed.
13. For assessment year 1988-89 it is contended by the assessee that the disallowance of Rs. 40,000 out of the directors remuneration was not called for. It was submitted that disallowance was made on the ground that excessive payment was made to the directors. In fact, explaining the learned AR, the period for assessment year 1988-89 consisted of 18 months as would be evident from page 22 of the Paper Book Salaries paid remained the same as were paid in the earlier assessment year. There being no increase in the salaries. It was submitted that no disallowance was called for. The learned DR did not controvert the material as placed on page 22 of the Paper Book.
14. On going through the information as placed before us we find that there were three directors who were paid the salaries as under :-
Assessment Year Assessment year
1986-87 1988-89
1. Shri R. K. Dutta Rs. 14,000.00 (@ Rs. 3,500 Rs. 63,000.00 @
P.M. for 4 months) Rs. 3,500 P.M.
for 18 months).
2. Shri S. K. Dutta Rs. 8,000.00 (@ Rs. 1,000 Rs. 18,000.00
P.M. for 8 months). (@ Rs. 1,000
P.M. for
18 months)
3. Smt. Sushma Dutta Rs. 10,000.00 Rs. 45,000.00
(@ Rs. 2,500 P.M. for (@ Rs. 2,500
4 months). P.M. for
18 months).
--------------------------- ----------------
Rs. 32,000.00 Rs. 1,26,000.00
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The above would show that there was no increase in the payment of salaries per month to all the directors. The increase in the amount was on account of the salaries being paid for 18 months in assessment year 1988-89 as against 8 months in assessment year 1986-87. On the facts as pleaded we would delete the addition as sustained by the learned CIT (Appeals).
15. The next ground raised in assessment year 1988-89 relates to disallowance of Rs. 10,000 out of travelling expenses. It was submitted that complete details were given in respect of expenses claimed for travelling. Our attention was invited to pages 100 & 101 of the Paper Book wherein as per details no disallowance was called for. In this context we find that the assessee furnished the details under Rule 6D of the Income-tax Rules. While the Assessing Officer disallowed Rs. 20,000 considering the lesser expenses claimed for assessment year 1986-87, the learned CIT(Appeals) reduced the same to Rs. 10,000 without considering that no disallowance was called for under Rule 6D of the Income-tax Rules. As no mistake was pointed out by the learned DR in the details as furnished, we would delete the addition as sustained by the learned CIT(Appeals).
16. This brings us to the next addition of Rs. 3,139 made out of the repair and maintenance expenses. The expenses were claimed on account of repair and maintenance of the cinema building. As per the details furnished on page 102 of the Paper Book. We find that the same were in respect of pump repair and other parts. Expenditure being on repair of plant, no disallowance is called for. Hence we would delete the same.
17. Another contention raised for assessment year 1988-89 pertains to an addition of Rs. 9,900 made on account of interest free advance to sister concern namely Shubhra Motel. It was submitted by the learned AR that no funds were borrowed during the year under consideration and as such no disallowance was called for. On the other, hand, the assessee had interest-free fund with it from which temporary loan was given to the sister concern. The revenue authorities wrongly disallowed Rs. 9,900 on the ground that the interest bearing funds were diverted for non-business purposes. On going through the aforesaid we find that during the year under consideration there was decline in the unsecured loans from Rs. 20 lakhs and odd to Rs. 19,50,000. This also included an amount of Rs. 70,500 borrowed from share-holders. On the other hand, advance to M/s. Shubhra Motels was Rs. 55,000. There being no evidence to hold that there was a direct nexus with the borrowed funds, we would delete the addition of Rs. 9,900 as sustained by the learned CIT (Appeals).
18. The next contention pertaining to the assessment year 1988-89 relates to disallowance of Rs. 15,000 made out of travelling and conveyance expenses. On going through the details we find that the assessee has not worked out the expenses incurred under different heads as per Rule 6D of the Income-tax Rules. The total expenses claimed on the other hand are Rs. 72,901. We find that this included the expenses incurred on print bill which are substantial. Considering this we would reduce the disallowance to Rs. 5,000. The assessee gets relief of Rs. 10,000.
19. The next ground of appeal relating to disallowance of Rs. 30,000 and the contention regarding period of 18 months are not pressed and hence not discussed.
20. In the result, both the appeals are partly allowed.