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Issues:
1. Disallowance of expenses incurred on the foreign tour of a director. 2. Disallowance of expenses related to a property agreement with a director's spouse. Analysis: Issue 1: Disallowance of expenses on foreign tour The case involved disallowance of expenses incurred by an assessee company on the foreign tour of a director, Mrs. Vinita Mehta. The Income Tax Officer (ITO) disallowed the expenses, considering them as a gift to Mrs. Mehta. The Appellate Tribunal found that the expenses were not gifts but business-related. The Tribunal noted that Mrs. Mehta was a director, and her husband, also a director, had incurred expenses treated as business-related. The Tribunal concluded that the disallowed amount did not represent a gift, and provisions of the Gift Tax Act were not applicable. Issue 2: Disallowance of property agreement expenses The second issue involved disallowance of expenses related to an agreement with Mrs. Lalita Iyer, the spouse of a general manager. The company had entered into an agreement to lease and purchase a property for residential purposes. Upon the retirement of the general manager, the company canceled the agreement and decided not to claim the expenses. The Department argued that this action amounted to a taxable gift. However, the Tribunal held that the cancellation of the agreement and not claiming the expenses were bona fide acts for business purposes. The Tribunal emphasized that the decision was based on commercial expediency and to facilitate business operations, thus not constituting a taxable gift under the Gift Tax Act. In conclusion, the Tribunal allowed the appeal, ruling in favor of the assessee company in both issues. The judgments were based on the finding that the actions taken by the company were not gifts but legitimate business decisions, exempt from gift tax under the relevant provisions of the Gift Tax Act.
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