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Issues:
1. Allowability of expenses incurred for inauguration ceremony. 2. Allowability of expenses incurred for publication of intimation about change of telephone number. 3. Allowability of expenses incurred for repairs in rented premises. Analysis: Issue 1: Allowability of expenses incurred for inauguration ceremony The appeal in this case relates to the assessment year 1980-81 where the assessee, an orthopaedic surgeon, shifted his clinic to rented premises and incurred expenses for an inauguration ceremony. The Income Tax Officer (ITO) disallowed a portion of the expenses, stating it was excessive and lacked proof. The Appellate Assistant Commissioner (AAC) held the expenses as pre-business expenses and disallowed them. However, the Tribunal found that the expenses were wholly and exclusively for the purpose of the profession and allowable under section 37(1) of the Income Tax Act. The Tribunal noted that the profession commenced on the date of the inauguration ceremony, and the expenses were incurred in the course of carrying on the profession. Vouchers were provided as proof of the expenses, leading to the direction for the ITO to allow the deduction. Issue 2: Allowability of expenses incurred for publication of intimation Regarding the expenses incurred for the publication of an intimation about a change in telephone number due to the shifting of professional premises, the ITO disallowed the deduction, citing it as excessive and without proof. The AAC upheld the disallowance, considering it as pre-commencement expenditure. However, the Tribunal found that the expenses were incurred in the course of carrying on the profession and were allowable under section 37(1) of the Act. Consequently, the Tribunal directed the ITO to allow the deduction of the said amount. Issue 3: Allowability of expenses incurred for repairs in rented premises The assessee had incurred expenses for repairs in the rented premises to make it suitable for an orthopaedic hospital. The ITO disallowed the claim, stating it was excessive without specifying capital or revenue nature. The AAC confirmed the disallowance, considering it as pre-commencement expenses. The Tribunal, after reviewing the vouchers provided by the assessee, found that the expenses were incurred to facilitate the professional activity and did not result in any enduring benefit or acquisition of a new capital asset. Therefore, the expenses were held to be in the revenue field and allowable under section 37(1) of the Act. The Tribunal directed the ITO to allow the deduction of the said amount. In conclusion, the Tribunal allowed the appeal, directing the ITO to allow the deductions for all the contested expenses incurred by the assessee.
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