TaxTMI 
TaxTMI 
2011 (3) TMI 151
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the same is disallowable under Rule 6B of the Income-tax Rules and that it is clearly covered by section 37(2) of the Income-tax Act, 1961. 2. Whether on the facts and in the circumstances of the case the ld. Tribunal has erred in law in confirming the deletion of disallowance of Rs. 3,04,89,602 on account of depreciation of new aircraft when it was not put to use in contravention to provisions of section 32 of the Income-tax Act, 1961. 3. Whether on the facts and in the circumstances of the case the ld. Tribunal has erred in law by erroneously re-computing deduction under section 80HHD of the Income-tax Act, 1961, at Rs. 77,62,17,303 in contravention to provisions laid down in section 80HHD of the Income-tax Act, 1961, by not including "receivables" in its computation although receipt includes receivable as per mercantile system of accounting." 3. The facts giving rise to filing of this appeal may be summed up thus : (a) In the return submitted by the assessee, an amount of Rs. 1,54,875 was claimed as deduction under Rule 6B as per Tax Audit Report. The aforesaid amount represented the cost of gift/presentation items to various patrons....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... On an appeal by Revenue, the Tribunal accepted the aforesaid finding of the CIT(A). (e) The assessee also claimed benefit of section 80HHD of the Act according to which an Indian company engaged in the business of hotel should be allowed in computing the total income, a deduction of a sum equal to two components, the first of which is 50 per cent of the profits derived by the assessee from services provided to foreign tourists. According to sub-section (3) of the said section, profits derived from services provided to foreign tourists should be the amount which bears to the profit of the business as computed under the head 'profits and gains of business or profession'. The same proportion as the receipts specified in sub-section (2) as reduced by any payment referred to in sub-section (2A) made by the assessee bears to the total receipts of the business carried on by the assessee. While computing the amount of deduction under this section, the Assessing Officer took into consideration the figure of date turnover of the assessee's business as per the audited final account being Rs. 3,95,62,34,559 in the denominator in place of the total receipts of business carried on....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... nature of entertainment expenditure not being expenditure incurred out of an allowance of the nature referred to in clause (i) incurred for the purposes of the business or profession of the assessee by any employee or other person; (iii) expenditure on provision of hospitality of every kind by the assessee to any person, whether by way of provision of food or beverages or in any other manner whatsoever and whether or not such provision is made by reason of any express or implied contract or custom or usage of trade, but does not include expenditure on food or beverages provided by the assessee to his employees in office, factory or other place of their work. (2B) Notwithstanding anything contained in sub-section (1), no allowance shall be made in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political party. (3) Notwithstanding anything contained in sub-section (1), any expenditure incurred by an assessee after the 31st day of March, 1964, on advertisement or on maintenance of any residential accommodation including any accommodation in the nature of a guest house or in connection with....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... which payment has been made in a sum exceeding Rs. 10,000 shall not be allowed as a deduction in computing the total income unless such payment is made by a crossed cheque drawn on a bank or by a crossed bank draft: Provided that where an allowance has been made in the assessment for any year in respect of any liability incurred by the assessee for expenditure on advertisement exceeding Rs. 10,000 and subsequently during any previous year the assessee makes payment in respect thereof otherwise than in accordance with the provisions of the clause, the allowance originally made shall be deemed to have been wrongly made and the Assessing Officer may recompute the total income of the assessee for the previous year in which such liability was incurred and make the necessary amendment; and the provisions of section 154 shall, so far as may be, apply thereto, the period of four years specified in sub-section (7) of that section being reckoned from the end of the assessment year next following the previous year in which the payment was so made. Explanation : For the purposes of this rule, ‑ (i) "relative" shall have the meaning assigned to it in clause (41) of sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the same must be held to be business expenditure as the same is neither in the nature of private expenses nor is a capital expenditure and at the same time, such expenses does not come any of the exceptions provided in section 37 of the Act. For instance, if an assessee, who runs a hotel business, decides to offer to its boarders on a festive occasion a special complimentary item at the breakfast (in the form of a complimentary dish) and for that reason does not charge any additional amount of money to the one fixed for offering breakfast, the additional sum spent for serving the complimentary dish/item to its guests should be deducted as business expenditure although such amount is spent for providing hospitality to its guests. Even we can give the example of the cases of competition in the market among the hotel owners where one of them decides to improve the quality of hospitality similarly offered by his competitors in the field by offering additional items of hospitality for the purpose of attracting more guests. In such a case apparently, he is spending additional sum for business expenditure by conceding less profit with an eye to earning higher future profit by attracting ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the said business with a plan for manufacturing different types of articles but for want of demand from its customers for manufacture of a particular type of articles in a particular assessment year, if any particular machinery which is utilized for manufacture of that particular type of article is not actually used, the assessee should nevertheless be entitled to the benefit of depreciation notwithstanding the fact that such particular machinery was not at all used for the simple reason that the assessee made it ready for use but could not use for no fault on his part and over which he had no control. In the case before us, it has been established that the said aircraft was purchased for the business in the latter half of the assessment year and thus, the assessee became the owner and it was actually delivered to the assessee and landed at the New Delhi Airport Authority and the same was also made ready for use by insuring the same by the concerned insurance company. Thus, the assessee has proved that it was made ready for the use of business. In such a case, the authority below rightly granted depreciation at the rate of 50 per cent for the part use of the said aircraft in accord....