1985 (1) TMI 100 - AT - Income Tax

Summary

Issues:
1. Deductibility of expenses incurred on foreign trip for business purposes, including expenses for accompanying spouse.
2. Allowance of triple shift depreciation for multiple units.

Analysis:

Issue 1:
The main issue in this case was whether the expenses incurred on a foreign trip for business purposes, which included expenses for the chairman's spouse, were deductible under section 37(1) of the Income-tax Act, 1961. The assessee, a company engaged in the manufacture and sale of tin containers, claimed the expenses as admissible under section 37(1). However, the Income Tax Officer (ITO) disallowed the claim, stating that the expenses for the spouse were not necessary or incidental to the business of the company. The Commissioner (Appeals) upheld the disallowance, noting the lack of evidence supporting the business purpose of the spouse's inclusion in the trip. The Appellate Tribunal agreed with the Commissioner, emphasizing that the expenses should have been incurred wholly and exclusively for business to qualify for deduction. It was observed that the spouse did not render any business assistance, and the mere permission from the board of directors was insufficient to establish the business nature of the expenses. Citing precedents, the Tribunal concluded that the expenses on the spouse were not allowable as business expenses.

Issue 2:
The second issue pertained to the assessee's claim for triple shift allowance for multiple units located at different places. The assessee argued that since one unit worked in triple shift for the whole year, the triple shift allowance should be granted for all units. However, the ITO allowed depreciation allowance separately for each unit based on their individual working shifts. The Commissioner (Appeals) upheld the ITO's decision, leading to the assessee appealing against the disallowance. The relevant provision in the Income-tax Rules allowed for extra shift depreciation allowance based on the number of days each unit worked in double or triple shifts. The Tribunal rejected the assessee's contention that triple shift allowance should apply to all units if one unit worked in triple shift, stating that the interpretation was unsupported. The Tribunal found the ITO's allowance to be in line with the provision, ultimately dismissing the appeal.

In conclusion, the Appellate Tribunal upheld the disallowance of expenses related to the chairman's spouse on the foreign trip, emphasizing the necessity for expenses to be wholly and exclusively for business purposes. Additionally, the Tribunal rejected the assessee's claim for triple shift allowance for all units based on the working pattern of a single unit, affirming the separate allowance for each unit as per the Income-tax Rules.