TaxTMI 
TaxTMI 
2011 (12) TMI 62
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....it breakers, isolators, etc. The assessee filed its return of income for the assessment year 1996-97 with the relevant previous year ending 31st March, 1996, on 26.12.1997, declaring an income of Rs.3,09,57,430/- and the same was processed on 18.08.1998 and subsequently revised on 24.09.1998. The assessee claimed deduction of a sum of Rs.1,18,219/-, which represented the foreign travel expenses incurred for the Chairman's wife, who accompanied the Chairman in his foreign trip. The Assessing Officer, while completing the assessment, disallowed the Chairman wife's foreign tour expenses, holding that the expenditure on the air travel of the Chairman's wife was not incurred for the purpose of the business of the assessee. This finding of the Assessing Officer was confirmed by the Commissioner of Income Tax (Appeals); but on appeal by the assessee, the Income Tax Appellate Tribunal has allowed the claim of the assessee in this regard. That apart, the assessee has made a claim for depreciation on assets for a sum of Rs.1,84,52,500/-. 4. With regard to the depreciation of assets, it was the case of the assessee that they have entered into a lease transaction and the assessee has i....
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....ng of the Assessing Officer was also confirmed by the Commissioner of Income Tax (Appeals) by order dated 04.08.2003. 5. Aggrieved over the same, the assessee filed an appeal before the Income Tax Appellate Tribunal and the Revenue filed an appeal challenging the confirmation of disallowance of expenditure incurred on the foreign travel of the Chairman's wife and by a common order dated 02.02.2007, the Appellate Tribunal has dismissed the claim of the Revenue and allowed the claim of the assessee by assigning the following reasons; "10. In view of these facts, we find that neither the C.I.T.(Appeals) nor the Assessing Officer has appreciated the facts regarding the existence of the assets. Even the Assessing Officer has not brought out that who has denied the invoices on account of M/s.Ashish Engineering works. It seems that the assessee has produced complete details before the Assessing Officer at the time of assessment and the same was not confronted neither to the Ashish Engineering Works nor to the Prakash Industries. The Assessing Officer without examining these details has decided the issue against the Assessee and the same was confirmed by the C.I.T.(Appeals)....
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....ness but also a personal or a private purpose and if the expenditure does not exclusively serve the purposes of business, then, it does not qualify for allowance under S.37(1). Viewed thus, the expenditure in this case had a twin purpose and did not qualify for allowance". 9. In D.B.MADAN .vs. COMMISSIONER OF INCOME TAX ((2003) 179 CTR (MAD) 487, a Division Bench of this Court has held as follows: "8. We have carefully considered the submissions of the learned counsel for the assessee and the learned counsel for the Revenue. This Court in T.S.Hajee Moosa's case (153 ITR 422) has upheld the disallowance of expenditure on two grounds; (i) it was purely a personal expenditure; and (ii) there was a dual object in incurring the expenditure on the foreign tour of the assessee's wife. In so far as the disallowance of expenditure on the ground that it was the personal expenditure of the assessee is concerned, the following observation of the Court is relevant:- "....The state of health of a person is not in any way related to the business activities carried on by him. A good businessman may be bad in health and a good and healthy person may be no good at all in busi....
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....e or assist him and not for any business purposes, albeit there was also another object, namely, the furtherance or the promotion of the business of the assessee by the partner taking his wife along with him. Even in such a case, it would only be a dual purpose in respect of which the expenditure had been incurred. On a consideration of the principles laid down in the aforesaid decisions, it is difficult to support the conclusion that the expenditure in question was wholly and exclusively laid out for business purposes". In our view, the decision of this Court in T.S.Hajee Moosa's case (153 ITR 422) would squarely apply to the facts of the case. 10. A reading of the aforesaid judgments would show that if the expenditure incurred for the foreign travel of the Chairman's wife is not only for the purpose of business but also the private purpose, then the expenditure does not exclusively serve the purpose of the business, it does not qualify for allowance under S.37(1) of the Income Tax Act. Therefore, unless it is established by the assessee that the travelling of the Chairman's wife was only for the business purpose by producing tangible evidence, the assessee is not ....
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....does not bind the Income-tax Officer to hold that the payment was made exclusively and wholly for the purpose of the assessee's business. Although there might be such an agreement in existence and the payments might have been made, it is still open to the Income-tax Officer to consider the relevant facts and determine for himself whether the commission said to have been paid to the selling agents or any part thereof is properly deductible under section 37 of the Act". 12. The learned counsel for the appellant further relied on the decision of the Hon'ble Apex Court in COMMISSIONER OF INCOME TAX .vs. JAIN (S.P.) ((1973) 087 ITR 0370 in support of his contention that the Tribunal has failed to take into account relevant material and acting on inadmissible material and basing conclusion on conjectures and surmises, it has arrived at a finding, which is bad. Countering the said submission, the learned senior counsel for the respondent submitted that the assessee has effected payments by way of cheques to the account of the manufacturer M/s.Ashish Engineering Works, New Delhi for the supply of assets, namely, flameless furnaces to the lessee. The source pricing and obtaining del....