1982 (9) TMI 98 - AT - Income Tax

Summary

Issues:
1. Claim for car expenses and depreciation.
2. Claim for sales promotion expenses.
3. Claim under s. 35B.

Issue 1: Claim for car expenses and depreciation.
The appeal filed by the assessee for the assessment year 1978-79 related to the claim of Rs. 6,052 as car expenses. The ITO disallowed one-third of the claim due to non-business use of the car. The CIT (A) upheld this disallowance. The assessee requested the disallowance to be restricted to one-fourth of the claim, which was accepted by the Tribunal. The Tribunal directed the ITO to disallow one-fourth of the claim, considering the size of the expenditure claimed.

Issue 2: Claim for sales promotion expenses.
The assessee claimed various expenses, including payments to the Cricket Club of India and hotels, totaling Rs. 16,691. The ITO disallowed Rs. 7,173 as entertainment expenditure under section 37(2A) of the IT Act, 1961. The CIT (A) confirmed this disallowance. The Tribunal found insufficient evidence to support the claim, as details like names of hotels, guests, and occasions were not provided. The Tribunal upheld the disallowance of Rs. 7,173, considering the lack of clarity on the business purpose of the expenditure.

Issue 3: Claim under s. 35B.
The assessee claimed weighted deduction under section 35B for foreign tour expenses of its Managing Director, undertaken to explore export market prospects. The ITO and CIT (A) rejected the claim, stating lack of evidence for export-related activities during the tour. The Tribunal observed that the assessee was not engaged in export business and failed to prove the tour's purpose was for export exploration. The Tribunal noted the absence of concrete export orders resulting from the tour and upheld the rejection of the claim for weighted deduction under section 35B. The Tribunal emphasized the need for clear evidence of export-related activities to support such claims.

In conclusion, the Tribunal partially allowed the appeal, restricting the disallowances for car expenses and depreciation while upholding the disallowance of sales promotion expenses and the claim under section 35B due to insufficient evidence supporting the business purpose of the expenditures.