1. In this appeal filed by the revenue, following three grounds are taken: (i) On the facts and in the circumstances of the case and in law, the learned AAC erred in deleting the amount of Rs. 3,000 disallowed under Rule 6D(1) and added back by the ITO on account of foreign travel expenses of Shri M.K. Advani, employee of the assessee.
(ii) On the facts and in the circumstances of the case and in law, the learned AAC further erred in directing the ITO to consider the said amount of Rs. 3,000 for the purpose of granting deduction under Section 35B. (iii) On the facts and in the circumstances of the case and in law, the learned AAC further erred in directing the ITO to allow depreciation on air-conditioner fitted to the car at 20 per cent.
2. The assessee has also come up by way of cross-objection taking up following five grounds:-- (i) in not considering the deduction under-section 80J of the Income-tax Act as claimed by the assessee, (ii) in disallowing the investment allowance claimed by the assessee, (iii) in confirming the ITO's order and thereby restricting the claim of depreciation under Section 38(2) for a limited period, (iv) in confirming the order of the ITO and rejecting the claim made by the assessee under Section 80V with regard to interest paid for late payment of taxes on voluntarily disclosed income, and (v) in disallowing Rs. 1,500 out of conveyance and miscellaneous expenses.
3. The learned departmental representative submitted at the time of hearing as under: 3.1 In respect of the disallowance made under Rule 6D(1), of the Income-tax Rules, 1962 ('the Rules') it was submitted that the AAC was in error in observing in para 6 of the order that the said rule does not apply to foreign travels. In fact, the said rule is applicable to foreign travels only.
3.2 In respect of the second ground concerning weighted deduction under Section 35B of the Income-tax Act 1961 ('the Act'), it would be consequential to ground No. 1.
3.3 In respect of the third ground, it was submitted that as per the Rules, Appendix I, Part I, the rate of depreciation allowable on air-conditioner is 15 per cent only and, therefore, the AAC should not have decided the rate of depreciation at 20 per cent instead of 15 per cent.
4. On behalf of the assessee, the learned counsel reiterated the submissions made before the authorities below. In respect of the depreciation 6n the air-conditioner fitted in the car, it was argued that the air-conditioner was a part of the car just as a tyre which is also a part of the car. Since the tyre cannot be separated from the car and is entitled to 20 per cent rate, the same would be the position in case of the air-conditioner.
5. We have considered the submissions made by both the parties and have also gone through the orders of the authorities below.
6. The AAC was certainly in error in stating that Rule 6D was not applicable to the expenditure in respect of the foreign travel. In fact, Rule 6D is concerned with expenditure in connection with foreign travel, etc., as provided vide Clause (i) of Sub-rule (1) of the said rule. Therefore, the first and second grounds are required to be redecided by the AAC and, therefore, to that extent his order is set aside.
7. In respect of the depreciation on air-conditioner fitted in the car, a query was put to the learned counsel for the assessee that if the air-conditioner was fitted in the office building, does it become a part of the building entitled to same rate of depreciation as the office building would be entitled to. No answer had come from the learned counsel for the assessee. It is not the case of the assessee that the air-conditioner was the integral part of the machineries necessary for the car. Therefore, this issue is decided against the assessee because it is specifically provided in the Rules vide entry B(2) in Section III of Part I to Appendix I as per Rule 5 of the Rules that the same would be entitled to 15 per cent depreciation.
8. We now take up the cross-objection filed by the assessee. In the first ground in respect of deduction under Section 80J of the Act, it was submitted by the learned counsel that though this ground was taken before the AAC, he has not dealt with the same, probably because it was missed. The learned departmental representative also agreed with this view seeing the statement of facts and, therefore, on this ground, the matter shall have to be sent back to the AAC for the purpose of his decision. Therefore, we direct the AAC to pass the appropriate order in accordance with law after giving an opportunity to the assessee.
8.1 In respect of investment allowance, the learned counsel for the assessee gracefully submitted that the Special Bench decision of the Tribunal Delhi, is against the assessee and the ground is agitated to keep the matter alive. Therefore, this ground is decided against the assessee.
8.2 In respect of restricting the allowance of depreciation on assets under Section 3 8(2) of the Act in proportion to the period of nine months when the business was taken over by a partnership firm with effect from 1-10-1977, it was submitted that the restriction is without any basis because Section 38(2) is not applicable to the facts of the case.
We are fully in agreement with the learned counsel for the assessee because Section 38(2) is applicable to a case where an asset is not exclusively used for the purposes of business and not to a case where the asset though exclusively used for the purpose of the business, is used for part of the year. The depreciation on asset is allowable under Section 32 of the Act and an assessee would be entitled to the depreciation allowance at full rate even if an asset is used for a day during the previous year relevant to the assessment year. Therefore, this ground is decided in favour of the assessee.
8.3 In respect of the fourth ground, it was submitted by the learned counsel that under Section 80V of the Act, interest paid on the borrowings raised for the purpose of payment of tax is allowable. In this case, the assessee had made disclosure under the Voluntary Disclosure Scheme, 1975, which was subsequently known as VDS. According to the Scheme, the assessee was required to make the payment of taxes for which the borrowings were made and the interest was paid. The ITO and the AAC disallowed the deduction on the ground that the expenditure is allowable only if the money is borrowed to pay the taxes under the Act. The VDS, subsequently converted into an Act, was a separate Act of a different nature and, hence, the borrowings for the payment of taxes under the said Scheme would not come under the purview of Section 80V.On behalf of the assessee, reliance was placed on the decision of the Supreme Court in the case of Ahmed Ibrahim Sahigra Dhoraji v. CWT  129 ITR 314, where it was held that while computing the net wealth of the assessee, liability in respect of income-tax payable on the income disclosed is deductible as a 'debt owed' on the valuation date under Section 2(m) of the Wealth-tax Act, 1957.
8.4 The learned departmental representative relied upon the order of the AAC. In computing the total income of an assessee, there shall be allowed by way of deduction any interest paid by him in the previous year on any money borrowed for the payment of any tax due from him under this Act.
'tax' in relation to the assessment year commencing on the 1st day of April, 1965, ... means income-tax chargeable under the provisions of this Act, ...
To appreciate the slender point involved, we shall have to look at the VDS. So doing, it appears that it has relation to the incomes and wealth which escaped tax under the Act. Section 3 of the Voluntary Disclosure of Income and Wealth Act, 1976, ('the 1976 Act'), talks of charge of income-tax on voluntarily disclosed income, chargeable to tax under the Indian Income-tax Act, 1922, and also the 1961 Act. Section 5 talks of time for payment of income-tax. Section 7 of the 1976 Act, talks of mode of recovery and Sub-section (2) of Section 7 specifically states that provisions contained in Sections 221 to 227, 229, 231 and 232 of the 1961 Act and the Second and Third Schedules to the said Act and any rules made thereunder shall, so far as may be, apply to the provisions of this Act and referred to income-tax and sums payable by way of penalty and interest under the 1976 Act instead of to tax and sums by way of penalty and interest payable under the 1961 Act.
Therefore, for purpose of collection and recovery of outstanding income-tax, the 1976 Act provides that the word 'tax' under the 1961 Act shall mean income-tax under the 1976 Act.
Why then this meaning should not be attached to payment of tax under the 1961 Act for purpose of Section 80V which itself contains provision regarding payment of tax so as to facilitate collection and recovery After all borrowal for the payment of taxes is to accelerate the process of collection and recovery.
Section 80V as referred to above talks of any tax. It would be necessary to consider the meaning of word 'any'. The book of Bindra's Conveyancing, etc., mentions at page 454 of the 4th Volume of the 6th edition that the word 'any' excludes limitation or qualifications. It connotes wide generality. From various decisions, it is clear that the word 'any' should be given a meaning as wide as possible in the context. It is also noted that the word 'any' made in certain context imply 'all'. While so interpreting the word 'any' as prefix with tax under Section 80V, it shall have to be understood that even the income-tax payable under 1976 Act and remaining outstanding partakes the character of tax under the provisions of the 1961 Act.
Even considering the administrative aspect, it would be agreed that at the time of VDS, great importance was attached to collection of taxes, which having been reached as targeted, even bonus was paid to the income-tax officials for doing excellent work mainly for collection and recovery of taxes. This could not have been achieved without insisting for the early payment of taxes at the time of disclosure as provided vide Section 5. Therefore, it is but obvious that many assessees might have ensured payments after borrowing funds. And in this world of unpenetrable jungle of legal complexities, many assessees must have borrowed funds with bona fide belief that interest would be allowed as deduction under Section 80V.Besides, can it not be said that the 1976 Act is nothing but a supplemental Act to the main Act of 1961 After all what makes it a completely different Act Administrative authorities were same, charge is on incomes contemplated in the 1961 Act, the assessees remaining same more or less under both Acts, collection and recovery matters subsequent to expiry of date of declaration are to be carried out as per provisions of the 1961 Act and Rules thereunder.
Besides, it is the rule of interpretation that construction most agreeable to justice and reason should be adopted. Where to apply words literally would produce unreasonable results, we must do some violence to the words so as to produce rational construction. On this reasoning, we are not inclined Jo believe that the interest on borrowings for the purpose of payment of taxes under the 1976 Act cannot be allowed.
8.7 While ending, we could like to state that the case relied upon by the assessee supra is not fully applicable to the issue involved in the appeal because in that case the Supreme Court was concerned with VDS declared by the Finance Act, 1965, which was embodied in Section 6 of the 1961 Act itself. While in the case under consideration, we are concerned with separate enactment, viz., the 1976 Act, though concerning the taxation on income and wealth contemplated under the 1961 Act.
The last ground is taken in respect of the disallowance of Rs. 1,500 and it was submitted on behalf of both the parties that the ground may be decided as thought proper by us.
The ITO has disallowed the sum out of conveyance, miscellaneous and other debits for want of details. This disallowance is made by the ITO in customary way without assigning reasons though the assessment is completed under Section 143(3) of the Act. The AAC has confirmed the disallowance by stating that no proper details were furnished to the ITO.We are of the view that the AAC has not applied his mind. Such types of disallowance on ad hoc basis cannot sustain the test of law. In absence of any cogent reasons or defects in the accounts, it would not be proper to make such types of disallowances. The AAC has not stated what proper details were required by the ITO and not furnished to him. If it was so, it was his duty to verify the position and give his reasoning for confirming the disallowance. It is now time that administrative authorities put an end to this type of obsolete and out dated modes of collecting more revenue in the light of changing pattern in the arena of jurisprudence.
We direct the ITO to modify the assessment and pass the appropriate order in accordance with law.
9. In the result, both the appeal and the cross-objection are allowed in part.