TaxTMI 
TaxTMI 
1991 (6) TMI 103
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.... assessee under F.T.A Scheme, no extra foreign exchange was claimed or sanctioned and it was not a case of the assessee having taken any permission from the Reserve Bank of India for business trip abroad nor did the assessee was able to justify their foreign travel as having been necessitated by business considerations. In this view of the matter he sustained the disallowance for the assessment year 1983-84. For similar reasons the Commissioner (Appeals) sustained the disallowance of Rs. 23,440 for the assessment year 1984-85 as it was part of the total expenditure incurred on foreign travel which had come up for his consideration in the assessment year 1983-84. 3. We have heard rival submissions. In the affidavit filed by the managing partner it has been stated that the object of the visit was to contact manufacturers of workshop machineries and garage equipments and to explore the possibilities of securing from such manufacturers indenting or agency rights is regard to their products and also to visit the manufacturers of automobiles spare parts in Germany and Italy and the Industrial Fair held in West Germany and such foreign travel was undertaken solely and exclusively for t....
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.... the Income-tax Act. 8. The next point at issue is about the disallowance of a sum of Rs. 5,845 being the total of two payments, namely, Rs. 2,745 and Rs. 3,096 to the employees at Bombay branch. The former amount consisted of Rs. 1,755 being the salary and arrears of increment of Rs. 990 totalling Rs. 2,745. The latter amount consisted of monthly salary and wages in lieu of unavailed leave. As the payments we made in cash exceeding Rs. 2,500 it was disallowed under section 40A(3). The disallowance was sustained. 9. We have heard rival submissions. In our considered opinion, the payments are governed by the residuary clause of rule 6DD(j) of the Income-tax Rules as only salary, wages and unavailed leave salary were paid to the employees on their exit from the assessee's concern. In the circumstances in which the payment was made it can also be presumed that the leaving employees could have insisted on cash payment. Thus the disallowance is deleted. 10. The last point at issue in the assessee's appeal for the assessment year 1984-85 is about the disallowance of a sum of Rs. 48,217 being the interest paid to one Smt. Elsy Thomas on the ground that it was hit by section 40(b)....
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....st of Rs. 4,03,313 to several trusts. The reasons for the disallowance as stated by the ITO are as follows: (a) There is an intimate connection between the settlors of the trust, beneficiaries and the partners. This factor was analysed into four classifications: (i) Where the settlors and trustees are partners-Annexure C to the assessment order; (ii) where settlors are not partners but trustees are partners-Annexure D to the assessment order; (iii) Where settlors are partners but not trustees-Annexure D to the assessment order; (iv) Residuary category-Annexure F to the assessment order. (b) In the residuary category the niece of one of the partners and the daughter of another partner is the settlor and the daughter and son-in-law of one of the partners are the trustees. The beneficiaries are grand children of the managing partner and niece and in-laws of two other partners. 15. Thus she arrived at the conclusion that in most cases the settlors and trustees, are partners or the trustees are partners and in all cases the beneficiaries are close relatives of the partners. She noticed that the trusts are private discretionary trusts where in complete discretion and....
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....disputed this fact nor has brought on record any material to the contrary; and, therefore, the disallowance made by the Assessing Officer was uncalled for and the ratio laid down in McDowell's case (1985) 154 ITR 148 will not apply to the facts of this case. In this context he referred to the observations in M.V. Valliappan v. ITO (1988) 170 ITR 238 (Mad.) at page 280 and also Craven (Inspector of Taxes) v. White (Stephen)(1990) 183 ITR 216 (HL) and the observations of Lord Templeton at page 220 thereof. 19. Having heard rival submissions and the materials on record, we reject the Revenue's contentions. All the trusts involved are those that have been created under the Indian Trusts Act, 1882. The creation of each of these trust is evidenced by a trust deed executed by the settlor or the trustees of the respective trusts. Some of these trusts were created on 1st November, 1971, some on 1st June, 1974, certain others on 28th May, 1973 and the remaining ones on 1st May, 1975. The beneficiaries of the trusts created on 1st November, 1971, 1st June, 1974 and 28th May, 1973 were the minor son and minor daughter of one of the brothers of the managing partner of the present firm of Pop....
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....poration and National Business Enterprises, were in their turn, dissolved on 30th September, 1980 and their assets were distributed among their partners (which were the trusts). The trusts which were partners and received their shares in the assets of the firm and also the trusts which got their deposits back from the partnerships on their dissolution took the assets so obtained and deposited them in the assessee firm on 30th September, 1980. Page 23 of the paper book gives the details as to the date and source of deposits originally brought by the trust to the assessee firm. The photo copies of the assessment orders for the earlier years testify the fact that no such disallowance of interest had been made. From the evidence produced before us as found in the paper book we are satisfied that the amounts which the trusts have deposited in the assessee firm represent the payment that the respective trusts had received on the dissolution of the partnerships in which they were either represented as partners or have had their deposits. Obviously and incontestably, the deposits that the trusts so placed were earned and accumulated over a period of years prior to 30th September, 1980 on w....
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.... an advantage of enduring nature. In the light of the decision of the Supreme Court in Empire Jute Co. v. Commissioner (1980) 124 ITR 1 (SC) and Commissioner v. Associated Cement Co. Ltd. (1988) 172 ITR 257 (SC) at page 262, we hold that the expenditure incurred by the assessee was only revenue in nature. The Commissioner (Appeals) has rightly allowed the same. The Revenue 's ground is rejected. 22. The next point at dispute in the Revenue's appeal is against the deletion of disallowance of sales-tax paid beyond the accounting period. The previous year of the assessee ends on 30th April, 1983. The total payment is Rs. 63,190. The assessee has explained in its letter dated 24th January1986 addressed to the ITO that out of the sum of Rs. 63,190.40 except Rs. 5,840.40 all other sums were paid during the previous year relevant to the assessment year. Such sums represent additional sales-tax, i.e., sales-tax on sales-tax pertaining to its Coimbatore branch. Major payment related to the accounting period. Regarding the sum of Rs. 5,840.40 it was explained that it was a provision for sales-tax in respect of the collections of April which was paid subsequenly on 10th May, 1983 i.e., wit....
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....th June, 1984 Rs. 38,159 Total Rs. 5,70,356 From the body of the assessment order it is seen that the amount represented tax collected in the last month of the accounting year paid in the next month which fell in the subsequent accounting year. It was further argued that so long as the sales-tax amount was not debited to the profit and loss account section 43B cannot be invoked. The Assessing Officer rejected the contentions and disallowed the amount. The first appellate authority following the decision of the Tribunal reported in S. Govindaraja Reddiar v. ITO (1986) 19 ITD 177 (Coch.) and also the decision of the Tribunal in Income-tax Appeal No. 84 (Coch.)/1988 deleted the disallowance. 24. We have heard rival submissions. In our considered view the decision of the Patna High Court in (1991) 91 CTR (Pat.) 19 supports the order of the Commissioner (Appeals). So long a....
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....against the deletion of the disallowance of commission payments. The Assessing Officer invoked section 37(3A) and made disallowance as follows: Payment to hotels Rs. 63,104 Commission paid on Sales Rs. 9,15,177 Rs. 9,78,281 20 per cent thereof Rs. 1,95,656 A sum of Rs. 9,15,177 included in the above sum represented the commissions paid for procuring orders. Such commission was paid to the persons after the sales are completed. Not only that. The commission was paid to only such persons who have brought the customers and the sales were effected through these persons. So the Commissioner (Appeals) held that it is an ordinary sales commission and it will not fall under sales promotion expenses to attract the provisions of section 37(3A). Thus, he deleted the addition of commission payments. The Revenue is aggrieved. 28. We have heard rival submissions. The usual commissions which are paid to persons in ....