Court affirms deduction for duty draw-back expenses, highlights need for commercial expediency

The High Court upheld the Tribunal's decision to allow the deduction of expenses incurred by the assessee for duty draw-back, noting the necessity and commercial expediency of engaging a commission agent. The court emphasized that Assessing Officers lack expertise to judge such commercial decisions and disallowing genuine expenditures on grounds of excessiveness is not warranted. The dismissal of the appeal affirmed the allowance of the deduction for the expenses in question for the assessment year 1986-87.

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Issues:
Assessment of excessive payment for duty draw-back expenses incurred by the assessee for the assessment year 1986-87.

Analysis:
For the assessment year 1986-87, the assessee had incurred expenses of Rs. 2,37,000 to get duty draw-back of Rs. 25 lakhs released from the Central Government. The Assessing Officer disallowed a sum of Rs. 1,23,130 as excessive payment, but the Commissioner of Income-tax (Appeals) deleted the disallowance, a decision upheld by the Tribunal.

The High Court noted the difficulty in recovering lawful amounts from the Government without incurring expenses and facing harassment. The court acknowledged that engaging a commission agent and incurring a sum of Rs. 2,37,000, approximately 10 per cent of the amount, was not excessive or uncalled for. It was deemed a prudent business decision to avoid delays and harassment in receiving due money early for business use. The court emphasized that Assessing Officers lack the expertise to judge commercial expediency of such expenditures, and disallowing a part of genuine expenditure on grounds of excessiveness is not provided for.

Therefore, the Tribunal's decision to allow the deduction was considered justified. The High Court found no substantial question of law requiring consideration, leading to the dismissal of the appeal in limine.

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