1993 (4) TMI 97 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of disallowance of Rs. 78,435 made by the Assessing Officer on account of payment of club bills by the assessee-company for its executives.
2. Direction to allow development allowance of Rs. 2,40,271 upon furnishing certificates from the Tea Board.
3. Cross objection regarding the payment of club bills of Tollygunge Club of 5 executives of the assessee-company.

Detailed Analysis:

1. Deletion of Disallowance of Rs. 78,435 on Account of Payment of Club Bills:

The Revenue contended that the Appellate Commissioner erred in deleting the disallowance of Rs. 78,435 made by the Assessing Officer concerning the club bills of the assessee-company's executives. The Departmental Representative argued that club bills cannot be considered as an expenditure laid out wholly and exclusively for the purpose of business, as no benefit was derived by the assessee-company from such expenditure. The assessee's counsel countered that the club memberships were essential for social interaction and technical information exchange, which was critical given the remote location of the tea estates. However, the Tribunal noted that the membership of a club is a personal privilege and does not necessarily result in the promotion of business. The onus is on the assessee to provide cogent evidence that the club membership has promoted its business or resulted in extra taxable income. The Tribunal found the assessee's evidence insufficient and reversed the Appellate Commissioner's decision, upholding the Assessing Officer's disallowance of Rs. 78,435.

2. Direction to Allow Development Allowance of Rs. 2,40,271 Upon Furnishing Certificates from the Tea Board:

The Revenue argued that the Appellate Commissioner was wrong in directing the Assessing Officer to accept certificates from the Tea Board after the filing of the return, as per rule 8A(d). The assessee's counsel contended that the rule is directory and not mandatory, and the certificates were received after filing the return, making compliance impossible. The Tribunal examined the Kerala High Court's decision in CIT v. Malayalam Plantations Ltd., which held that non-filing of the certificate along with the return does not forfeit the claim for development allowance. The Tribunal agreed with this view, stating that the rules should not scuttle the benefit available under the law, especially when the delay was beyond the assessee's control. Therefore, the Tribunal affirmed the Appellate Commissioner's direction to process the claim under section 33A upon receiving the certificates from the Tea Board.

3. Cross Objection Regarding Payment of Club Bills of Tollygunge Club:

The assessee filed a cross objection regarding the payment of club bills of Tollygunge Club amounting to Rs. 19,355 for 5 executives. For the reasons stated in the primary issue regarding club bills, the Tribunal dismissed the objection, upholding the disallowance.

Conclusion:

The Tribunal partly allowed the appeal filed by the department, reversing the Appellate Commissioner's decision on the disallowance of Rs. 78,435 for club bills. However, it upheld the direction to process the development allowance claim upon receiving the Tea Board certificates. The cross objection filed by the assessee regarding the Tollygunge Club bills was dismissed.