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of <h1>Court rules in favor of assessee on expenditure, depreciation, and refreshments claims. Detailed analysis and legal precedents cited.</h1> The court ruled in favor of the assessee on all three issues. It allowed the selling agency commission as expenditure, stating it was for services ... Benefit To Person With Substantial Interest, Business Expenditure, Company, Depreciation, Entertainment Expenditure Issues:1. Allowability of selling agency commission as expenditure.2. Depreciation rate for sugar mill machinery.3. Treatment of expenditure on providing refreshments.Issue 1 - Selling Agency Commission:The judgment addresses the controversy surrounding the allowance of selling agency commission paid by the assessee to a company as expenditure for the assessment years 1975-76 and 1976-77. The court refers to the Division Bench judgment in Avon Cycles' case, emphasizing that the legal status of a company places it in a better position compared to a firm. The court concludes that even if the selling agency company had a substantial interest in the assessee-company, the payment made was in exchange for services rendered and not as remuneration, falling outside the purview of section 40(c) of the Income-tax Act. The court reiterates that the benefit received by the company from the payment does not amount to remuneration and is not disallowable under section 40(c).Issue 2 - Depreciation Rate for Machinery:The judgment also settles the dispute regarding the depreciation rate for the sugar mill machinery of the assessee. Citing the Division Bench decision in CIT v. Saraswati Industrial Syndicate Ltd., the court rules that the claim for 15% depreciation due to the corrosive effect of chemicals on the machinery is not valid. The court clarifies that the term 'corrosive chemicals' does not include chemicals mixed with sugarcane juice for filtration purposes. It highlights that the mere presence of lime and sulphuric acid in the juice does not classify it as a corrosive chemical, as the chemicals are used for filtration and lose their effect before coming into contact with the machinery.Issue 3 - Expenditure on Providing Refreshments:The judgment addresses the controversy surrounding the expenditure incurred on providing refreshments during meetings of the company's board of directors and general body meetings. Referring to the decision in CIT v. Haryana Financial Corporation Ltd., the court rules that such expenditure falls under section 37(2A) of the Income-tax Act. The court holds that even if the refreshments were provided during business activities, they are considered as expenditure and are only allowable to the extent permitted by the said provision.In conclusion, the judgment clarifies the legal positions regarding the selling agency commission, depreciation rate for machinery, and treatment of expenditure on providing refreshments, providing detailed analysis and referencing relevant legal precedents to support its conclusions.
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