Court disallows certain expenses, rejects others in tax dispute. Revenue's appeal dismissed, stay application rejected.

The Court upheld the disallowance of expenditure incurred on aircrafts, commission to non-residents, and interest amount given to subsidiary companies for non-business purposes. However, the disallowance of professional charges to non-residents, advertisement expenses, and expenses related to earning dividend income and tax-free interest were rejected. The Court also dismissed the disallowance of commission and sitting fees to directors without deducting tax at source. Overall, the appeal filed by the revenue was dismissed, and the application for stay was also rejected.

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Issues:
1. Disallowance of expenditure incurred on running and maintenance of aircrafts.
2. Disallowance of professional and consultancy charges to non-residents.
3. Disallowance of advertisement, publicity, and sales promotion expenses to non-residents.
4. Disallowance of expenditure in respect of earning dividend income and tax-free interest.
5. Disallowance of interest amount given to subsidiary companies for non-business purpose.
6. Disallowance of commission and sitting fees to directors without deducting tax at source.
7. Disallowance of commission to non-residents without considering supporting documents.

1. Disallowance of Expenditure on Aircrafts:
The appeal filed by the revenue challenged the Tribunal's deletion of disallowance of expenditure on aircrafts, which the revenue argued were also used for personal purposes of directors. The Court noted that the issue was similar to a previous case where the appeal was dismissed, binding the revenue. Therefore, the disallowance was upheld.

2. Disallowance of Professional Charges:
The Tribunal deleted the disallowance of professional and consultancy charges to non-residents. The Court referenced a Supreme Court decision and a High Court ruling, stating that the persons liable to deduct tax cannot be expected to do the impossible, excusing the alleged disobedience of law. Consequently, the disallowance was rejected.

3. Disallowance of Advertisement Expenses:
The disallowance of advertisement, publicity, and sales promotion expenses to non-residents was deleted by the Tribunal. The Court found that the expenses were in respect of income accrued outside the territory, following previous decisions. Thus, this disallowance was also rejected.

4. Disallowance of Dividend Income and Interest:
The Tribunal deleted the disallowance of expenses related to earning dividend income and tax-free interest. The Court found that the assessing officer did not provide reasons for rejecting the assessee's claim, and the disallowance was unjustified. The disallowance was overturned in favor of the assessee.

5. Disallowance of Interest Amount to Subsidiary Companies:
The disallowance of interest amount given to subsidiary companies for non-business purposes was challenged. The Court noted that the disallowance was similar to a previous case where the question was rejected. Therefore, this disallowance was also upheld.

6. Disallowance of Commission and Sitting Fees:
The disallowance of commission and sitting fees to directors without deducting tax at source was challenged. The Court found that the amendment to the relevant section was not applicable for the assessment year in question. Following previous rulings, this disallowance was rejected.

7. Disallowance of Commission to Non-Residents:
The disallowance of commission to non-residents without supporting documents was deleted by the Tribunal. The Court referenced previous decisions where similar questions were rejected. Consequently, this disallowance was also upheld.

In conclusion, the Court dismissed the appeal filed by the revenue, answering the substantial questions of law against the revenue. The connected application for stay was also dismissed with the appeal.

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