TaxTMI 
TaxTMI 
1981 (4) TMI 143
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....n of this amount as business expenditure. But the ITO did not accept the claim. On appeal before CIT (A) it was submitted on behalf of the assessee that the expenses incurred on the occasion of inauguration of the assessee's business by inviting distinguished guests including Ministers of Rajasthan and of Central Government constituted business expenditure and, therefore, the same was admissible as a deduction under s. 37 of the IT Act, 1961. The ld. CIT(A) did not agree with the above contention of the assessee. He held that the expenditure was not incurred in the course of carrying of the business and, therefore, the same had rightly been disallowed by the ITO. 3. It is submitted before us on behalf of the assessee that the company started production on 15th March, 1976 and the inauguration ceremony was performed on 23rd April, 1976. It has been contended before us that the expenses are admissible as a deduction under s. 37(1) of the Act as these expenses were incurred wholly and exclusively for the purpose of business. In this connection the ld. counsel relied upon the decisions of the Gujarat High Court in CIT vs. R. Tolat & Co. (1981) 20 CTR (Guj) 81:(1980)126 ITR 55 (Guj),....
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....at the time of setting up of the business was on the ground of commercial expediency and in order to facilitate the carrying on of the business of the assessee. In our opinion, the ratio of the decision in the case of Kuber Singh is also not applicable to the facts of the case. No nexus has been established by the assessee between the expenditure incurred and the commercial expediency. On the other hand, we notice that the decision of the Bombay High Court reported in 103 ITR 321 is a direct authority on the allowability or otherwise of inaugural expenses. The Bombay High Court has held that the expenses on inauguration are not admissible as a deduction under s. 37 of the Act. Following this decision we are of the opinion that these expenses have rightly been disallowed by the authorities below. No interference is, therefore, called for. 6. In the second ground of appeal it has been submitted that the authorities below have erred in allowing 80J claim of Rs. 25,525 only instead of Rs. 6,15,478 claimed by the assessee by not treating the borrowed money and debts as capital employed on business. While rejecting the claim of the assessee that borrowed capital is not to form part an....
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....for a part of the year, deduction under s. 80J of the Act should be allowed for the whole year. However, the language of the section is quite clear on this point. According to s. 80J(1) of the Act deduction is admissible at the rate of 7 1/2 per cent per annum which means that if the business has been carried on for a part of the year, then only a proportionate deduction can be allowed". 10. The assessee is aggrieved against the above finding of the CIT(A). Relying on the decision of the Madras High Court in the case of CIT, Tamil Nadu I, vs. Simpson and Co. (1980) 122 ITR 283 (Mad) it is submitted before us that the CIT(A) was not justified in allowing deduction under s. 80J proportionate to the number of months worked. The Madras High Court in the above case has held that the words "six per cent per annum" ordinarily apply to calculation of interest and in similar context, but the words "per annum" could be inappropriate in a taxing statute levying tax on the income earned during the previous year which is not necessarily a period of 12 months though it would ordinarily be a period of 12 months. The words "per annum" in s. 84 of the IT Act (analogous to s. 80J) have been added....
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.... on these expenses". 12. Before us it has been submitted on behalf of the assessee that the engineers of the company were sent abroad for the purpose of getting the training for installation of machinery and, therefore, the authorities below were not justified in not allowing the capitalisation of the same for the purpose of allowing depreciation on machinery. It is submitted that it is wrong to say that no evidence was produced before the ITO in respect of the contention that the engineers of the company were sent abroad for the purpose of getting training in installation of the machinery. All the vouches and bills were shown to the ITO for all travelling expenses. Before us a copy of letter dt. 12th Feb., 1975 has been filed alongwith the copy of the bill entitled as "Details of Staff Training Expenses (Engineers)" as on 15th March, 1976. In the letter dt. 12th Feb., 1975 from Cherry Burnell Co. to Sunil Synchem, Calcutta, the assessee has placed reliance on the following paragraph: " We urge you at this time to make the necessary arrangements to have your plant manager and plant engineer come to Geder Rapide for training so that when the equipment does arrive in India your....