2009 (9) TMI 509 - HC - Income Tax

Business Expenditure- The Assessing Officer disallowed (i) foreign tour expenses on the ground that there was no evidence of nexus of the said expenses with the business. The Assessing Officer further disallowed (ii) expenses attributable to personal use of car, (iii) commission paid to the managing director and executives and (iv) payments towards legal and professional charges. The Commissioner of Income-tax (Appeals) partly upheld the claim of the assessee, which view was affirmed by the Tribunal. Held that- (i) the purpose of visit was to meet the foreign suppliers of raw materials, discuss technical methods with colleagues working in sister concern on product development and marketing is business expenditure. (ii) the expenses on account of use of car were not personal but for business purpose. The Tribunal followed its orders for the earlier assessment years in the case of the assessee. The appeal against that order was dismissed by this court. (iii) That the Tribunal had held the commission paid to the managing director and executives was permissible deduction as was held by the Tribunal for the earlier years in the case of the assessee. The appeal against that order was dismissed by this court. (iv) that with regard to disallowance of Rs. 70,000 made by the assessing Officer out of legal and professional charges, the Tribunal had held that the expense were incurred for business purposes. The order of the Tribunal could not be held perverse.

Summary

Issues:
1. Disallowance of foreign tour expenses
2. Disallowance of expenses attributable to personal use of car
3. Disallowance of commission paid to managing director and executives
4. Disallowance of legal and professional charges

Analysis:

1. Disallowed Foreign Tour Expenses:
During the assessment year, the Assessing Officer disallowed foreign tour expenses due to lack of evidence of business nexus. However, the Commissioner of Income-tax (Appeals) partly upheld the claim, which was affirmed by the Tribunal. The Tribunal found sufficient evidence showing the tour was related to the business, with tour reports, ticket copies, and factual expenditure proof. The Tribunal's decision was based on previous years' orders for the assessee, and the court found no substantial question of law as the findings were not perverse.

2. Personal Use of Car Expenses:
The Tribunal ruled that the expenses for the use of the car were for business purposes, not personal. This decision was consistent with earlier assessments for the assessee. The court noted that a similar question raised in a different case was dismissed, further supporting the Tribunal's decision. As the issue was factual and not perverse, no substantial question of law was found.

3. Commission Paid to Managing Director and Executives:
The Tribunal allowed the deduction for commission paid to the managing director and executives, following its decision in earlier years for the assessee. This view was also upheld in a separate case by the court, further reinforcing the Tribunal's decision. Since the finding was not deemed perverse, no substantial legal question arose.

4. Legal and Professional Charges Disallowance:
The Tribunal upheld the expenses incurred for legal and professional charges as being for business purposes. The court did not find any substantial question of law regarding this issue. The Commissioner of Income-tax (Appeals) and the Tribunal's findings were considered valid and not perverse, leading to the dismissal of the appeal.

In conclusion, the court dismissed the appeal by the Revenue as the issues raised did not present substantial questions of law, and the findings of the Commissioner of Income-tax (Appeals) and the Tribunal were upheld based on factual evidence and consistent decisions from previous cases.