1989 (5) TMI 114 - AT - Income Tax

Summary

Issues:
1. Allowability of foreign tour expenses as revenue expenditure.
2. Priority of set-off of earlier years unabsorbed allowances.
3. Allowability of public relation expenses.

Detailed Analysis:

1. The primary issue in this case is the allowability of foreign tour expenses as revenue expenditure. The dispute arose when the CIT(A) sustained the addition of Rs. 54,210 on account of foreign tour expenses incurred by the Vice-Chairman of the assessee-company for discussions on foreign collaboration. The lower authorities disallowed the amount, considering it capital expenditure. However, the assessee contended that the expenses were genuine and incurred for the purpose of obtaining technical assistance to improve the quality of existing products, not for setting up a new line of business. The Tribunal analyzed the purpose of the foreign visit and concluded that no enduring benefit accrued to the assessee, thus allowing the expenditure as revenue in nature.

2. Another issue raised was the priority of set-off of earlier years unabsorbed allowances. The appellant claimed priority in a specific order for set-off of past years' unabsorbed allowances. However, the Tribunal referred to a previous decision in the assessee's case for a different assessment year, where the same contention was rejected. Following the precedent, the Tribunal rejected the appellant's grounds on this point.

3. Lastly, the question of the allowability of public relation expenses was addressed. The assessee claimed the entire amount of Rs. 71,574 incurred on entertainment under the head "public relations" as allowable. The ITO disallowed the expenditure based on a High Court decision. However, the CIT(A) directed the assessing officer to re-determine the allowable amount considering expenses incurred on employees. The Tribunal confirmed the CIT(A)'s decision based on similar treatment in subsequent years, allowing 20% of the expenses related to employee costs.

In conclusion, the Tribunal partially allowed the appeal, allowing the foreign tour expenses as revenue expenditure but upholding the decisions on the set-off of unabsorbed allowances and public relation expenses based on previous rulings and considerations of expenses related to employees.