TaxTMI 
TaxTMI 
TaxTMI 
1989 (9) TMI 161
X X X X Extracts X X X X
X X X X Extracts X X X X
....is issue against the Revenue in view of the Supreme Court decision in the case of Kedarnath Jute Mfg. Co. vs. CIT (1971) 82 ITR 363 (SC). It was, however, pointed out that the assessee had received the refund of Rs. 40,18,816 on6th March, 1984and of Rs. 35,39,284 some time in August, 1987. It was submitted that, in view of the fact that the assessee had received the refund, it was for consideration whether this liability of Rs. 75,40,680 should be allowed in the year relevant to the asst. yr. 1981-82. 3. The learned counsel for the assessee denied the assessee's having received any refunds as alleged by the Departmental Representative. It was further submitted that, even assuming, though not admitting that such refunds had been received by the assessee later on, the liability for the year under consideration was a real liability and had to be allowed as a deduction from the total income of the assessee. In case the Department came to know that the assessee had received the refund, then it could take action under the provisions of the IT Ac, which existed in plenty. The learned counsel also placed reliance on the decision of the jurisdictional High court (Punjab and Haryana High Co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mployer company, the ceiling for disallowance under Rs. 40(c) of the It Act, 1961 should be worked out accordingly. It was submitted that, in the case of the Managing Director, the value of the perquisite in respect of car taken at Rs. 55,127 has not been worked out in accordance with the aforesaid decision of the jurisdictional High Court. It was also submitted that in respect of the Managing Director, 50 per cent telephone expenses were treated as personal, but in respect of other employees, full expenses have been disallowed with was not proper. It was pointed out in particular that, in the case of Shri G.S. Chadha, who was the sales manager of the company, payment in respect of telephone expenses was Rs. 34,028. The reason for such higher expenditure was that the Sales Manager was carrying on business of the assessee-company even from his residence. It was stated that he was not related to the Directors of the Company. It was submitted that no company would allow incurring of such a higher expenditure if it were not for business purposes. Reliance was also placed on the Board's Circular F. No. 35/5/65-IT(AI) dt.1st July, 1965, appearing at pages 1430 and 1431 of the Income-tax ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... It appears that the claim of the assessee had been accepted in respect of the other additions because the Department was agitating only about the two items of additions referred to above. On a similar point, the matter had been set aside by the Tribunal for the asst. yr. 1980-81. The learned Departmental Representative, therefore, submitted that, for this year also, the matter may go back to the AO for re-examination with reference to the receipts issued in favour of the assessee and the matter may be considered afresh. 12. The learned counsel for the assessee submitted that the IT authorities had accepted the claim of the assessee on all matters except the claim of Rs. 15,000 in respect of two donations referred to above. Our attention was drawn to page 259 of the assessee's paper book on which is passed a copy of the assessment order for the asst. yr. 1981-82 in the case of Shri Jeevan Jagan Charitable Trust,Faridabad. It was submitted that the receipt of donation by the said trust has been accepted as genuine by the ITO and as such relief under s. 80G may be allowed in respect of the donation of Rs. 10,000 without verification. 13. We have carefully considered the submission....
X X X X Extracts X X X X
X X X X Extracts X X X X
....conference and the expenditure incurred on them would be allowable as business expenditure and could not be treated as expenditure in the nature of entertainment. Reliance in this regard was placed on the decision of the Tribunal, Delhi Bench 'D' in the case of Kelvinator of India Ltd. vs. IAC (1989) 34 TTJ (Del) 80 : (1989) 29 ITD 469 (Del). The learned counsel for the assessee also placed reliance on the Delhi High Court's decision in the case of CIT vs. Supreme Motors (P) Ltd. (1984) 41 CTR (Del) 75 : (1984) 147 ITR 48 (Del). 19. We have carefully considered the rival submissions. In the case of Kelvinator of India Ltd. relied upon by the assessee's counsel, the facts were that the entertainment expenses included the expenses on the employees who participated in business meetings and expenses in respect of refreshments served to the employees during office hours. On these facts, the Tribunal considered 25 per cent expenditure referable to the employees as reasonable. The entire expenditure in the present case is in respect of conference at Taj Mahal Hotel,Bombay. No details as to the number of employees present and the number of visitors who participated in the conference have ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unsel whether it would be possible for the assessee to give details of the customers to whom the goods were presented and the nature of goods presented. The learned counsel expressed his inability and submitted that it may not be possible to given any details to the Tribunal or to the assessing authority because the same would not be available to the assessee after such a lapse of time. In the absence of the details, it is not possible to appreciate what the assessee wants to convey. It does not look probable that the assessee would be presenting only a cup or plate to the customers while it was purchasing dinner sets and costly purses. Any item to be presented would normally consist of dinner sets or purse and not of parts of the dinner set. We, therefore, do not see any merit in the assessee's contention and uphold the entire disallowance of Rs. 11,965. 23. This disposes of Ground No. 8 of the assessee's appeal as well. 24. The last ground in the Revenue's appeal is regarding the relief of Rs. 6,276 allowed by the CIT(A) out of total entertainment expenditure of Rs. 21,276. In the assessee's appeal, the assessee has challenge the relation of disallowance of Rs. 15,000 vide Grou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he learned counsel for the assessee submitted that for the asst. yr. 1980-81, the assessee had purchased a motor car which was also being used by the Managing Director. On the other hand, in the year under consideration the assessee had purchased a Matador, which was exclusively used for carrying on research work. It was also pointed out that, for the asst. yr. 1980-81, a similar disallowance was made and the Tribunal, vide its order dt.23rd May, 1988allowed the assessee's claim subject to verification of satisfaction of s. 35(1)(iv). It was submitted that, in the year under consideration, there were stronger reasons for allowing the assessee's claim because the matador was used for scientific purpose. 29. The learned Departmental Representative relied upon the orders of the authorities below. 30. We have carefully considered the rival submissions. The assessee's claim was accepted for the asst. yr. 1980-81 by the Tribunal. This year, the assessee's claim rests on a stronger footing in the sense that, instead of a car, the assessee had purchased Matador and it is nobody's case that this was being used by the Managing Director as well. We, therefore, allow the assessee's claim of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....earned counsel for the assessee. The total expenditure incurred on the building of the Chamber of Commerce and Industries was a staggering amount of more than Rs. 20 crores and the assessee's contribution was only a sum of Rs. 10,000. The assessee's contribution did not create any asset for itself. The assessee indisputably was having dealings with the Chamber of Commerce and Industry and the construction of a building would have facilitated the conduct of such activities. In that way, the assessee was to benefit from this contribution and there would, therefore, be a nexus between he expenditure incurred and the benefit that may accrue to the assessee-company. Having regard to the totality of circumstances and the case-law cited, we allow the claim of the assessee in this regard. 36. The next ground is against the disallowance of claim of Rs. 1,000 in respect of payment to Faridabad Industries Association and of Rs. 151 to United Bank of India Employees Association under s. 37. 37. It was submitted by the learned counsel for the assessee that the payments of the above amounts did not result in the creation of any asset to the assessee. These payments were made out of business ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....8. This was restricted to Rs. 10,000 by the CIT(A) who granted a relief of Rs. 6,248. 42. The learned counsel for the assessee submitted that these expenses were in respect of replacement of exhaust fans and electric motors which were replaceable items and no asset of capital nature had, in fact, come into existence. Reliance was placed in this regard o the decision of Gujarat High Court in the case of Addl. CIT vs. Desai Bros. reported in (1977) 108 ITR 14 (Guj), in which the replacement of a petrol engine by a diesel engine was held to be an item of revenue nature. It was submitted that the expenditure in question constituted replacement of small obsolete times of machinery on account of wear and tear and the replacement could be termed as current repairs. The learned Departmental Representative relied upon the orders of the authorities below. 43, We have carefully considered the rival submissions. We find substantial merit in the submissions of the learned counsel for the assessee. The learned CIT(A) has restricted the disallowance to Rs. 10,000 on ad hoc basis without appreciating the nature of replacements made. We are satisfied that the expenditure in question was in respec....