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TMI Blog1991 (6) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... d and it was not a case of the assessee having taken any permission from the Reserve Bank of India for business trip abroad nor did the assessee was able to justify their foreign travel as having been necessitated by business considerations. In this view of the matter he sustained the disallowance for the assessment year 1983-84. For similar reasons the Commissioner (Appeals) sustained the disallowance of Rs. 23,440 for the assessment year 1984-85 as it was part of the total expenditure incurred on foreign travel which had come up for his consideration in the assessment year 1983-84. 3. We have heard rival submissions. In the affidavit filed by the managing partner it has been stated that the object of the visit was to contact manufacturers of workshop machineries and garage equipments and to explore the possibilities of securing from such manufacturers indenting or agency rights is regard to their products and also to visit the manufacturers of automobiles spare parts in Germany and Italy and the Industrial Fair held in West Germany and such foreign travel was undertaken solely and exclusively for the purpose of the assessee firm. Apart from this affidavit, no other material is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 5,845 being the total of two payments, namely, Rs. 2,745 and Rs. 3,096 to the employees at Bombay branch. The former amount consisted of Rs. 1,755 being the salary and arrears of increment of Rs. 990 totalling Rs. 2,745. The latter amount consisted of monthly salary and wages in lieu of unavailed leave. As the payments we made in cash exceeding Rs. 2,500 it was disallowed under section 40A(3). The disallowance was sustained. 9. We have heard rival submissions. In our considered opinion, the payments are governed by the residuary clause of rule 6DD(j) of the Income-tax Rules as only salary, wages and unavailed leave salary were paid to the employees on their exit from the assessee's concern. In the circumstances in which the payment was made it can also be presumed that the leaving employees could have insisted on cash payment. Thus the disallowance is deleted. 10. The last point at issue in the assessee's appeal for the assessment year 1984-85 is about the disallowance of a sum of Rs. 48,217 being the interest paid to one Smt. Elsy Thomas on the ground that it was hit by section 40(b). The disallowance was sustained by the Commissioner (Appeals). 11. Shri P.J. Jacob, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s follows: (a) There is an intimate connection between the settlors of the trust, beneficiaries and the partners. This factor was analysed into four classifications: (i) Where the settlors and trustees are partners-Annexure C to the assessment order; (ii) where settlors are not partners but trustees are partners-Annexure D to the assessment order; (iii) Where settlors are partners but not trustees-Annexure D to the assessment order; (iv) Residuary category-Annexure F to the assessment order. (b) In the residuary category the niece of one of the partners and the daughter of another partner is the settlor and the daughter and son-in-law of one of the partners are the trustees. The beneficiaries are grand children of the managing partner and niece and in-laws of two other partners. 15. Thus she arrived at the conclusion that in most cases the settlors and trustees, are partners or the trustees are partners and in all cases the beneficiaries are close relatives of the partners. She noticed that the trusts are private discretionary trusts where in complete discretion and extensive powers were conferred on the trustees. On account of such intermingling and inter-twining of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made by the Assessing Officer was uncalled for and the ratio laid down in McDowell's case (1985) 154 ITR 148 will not apply to the facts of this case. In this context he referred to the observations in M.V. Valliappan v. ITO (1988) 170 ITR 238 (Mad.) at page 280 and also Craven (Inspector of Taxes) v. White (Stephen)(1990) 183 ITR 216 (HL) and the observations of Lord Templeton at page 220 thereof. 19. Having heard rival submissions and the materials on record, we reject the Revenue's contentions. All the trusts involved are those that have been created under the Indian Trusts Act, 1882. The creation of each of these trust is evidenced by a trust deed executed by the settlor or the trustees of the respective trusts. Some of these trusts were created on 1st November, 1971, some on 1st June, 1974, certain others on 28th May, 1973 and the remaining ones on 1st May, 1975. The beneficiaries of the trusts created on 1st November, 1971, 1st June, 1974 and 28th May, 1973 were the minor son and minor daughter of one of the brothers of the managing partner of the present firm of Popular Automobiles, in which the said brother is not a partner. The beneficiaries of the trusts created on 1s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets were distributed among their partners (which were the trusts). The trusts which were partners and received their shares in the assets of the firm and also the trusts which got their deposits back from the partnerships on their dissolution took the assets so obtained and deposited them in the assessee firm on 30th September, 1980. Page 23 of the paper book gives the details as to the date and source of deposits originally brought by the trust to the assessee firm. The photo copies of the assessment orders for the earlier years testify the fact that no such disallowance of interest had been made. From the evidence produced before us as found in the paper book we are satisfied that the amounts which the trusts have deposited in the assessee firm represent the payment that the respective trusts had received on the dissolution of the partnerships in which they were either represented as partners or have had their deposits. Obviously and incontestably, the deposits that the trusts so placed were earned and accumulated over a period of years prior to 30th September, 1980 on which date they were deposited in the assessee firm. The interest paid by the assessee on these deposits was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner (1980) 124 ITR 1 (SC) and Commissioner v. Associated Cement Co. Ltd. (1988) 172 ITR 257 (SC) at page 262, we hold that the expenditure incurred by the assessee was only revenue in nature. The Commissioner (Appeals) has rightly allowed the same. The Revenue 's ground is rejected. 22. The next point at dispute in the Revenue's appeal is against the deletion of disallowance of sales-tax paid beyond the accounting period. The previous year of the assessee ends on 30th April, 1983. The total payment is Rs. 63,190. The assessee has explained in its letter dated 24th January1986 addressed to the ITO that out of the sum of Rs. 63,190.40 except Rs. 5,840.40 all other sums were paid during the previous year relevant to the assessment year. Such sums represent additional sales-tax, i.e., sales-tax on sales-tax pertaining to its Coimbatore branch. Major payment related to the accounting period. Regarding the sum of Rs. 5,840.40 it was explained that it was a provision for sales-tax in respect of the collections of April which was paid subsequenly on 10th May, 1983 i.e., within the time allowed under the ST Act. However, the payments were disallowed under section 43B. The Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al submissions. In our considered view the decision of the Patna High Court in (1991) 91 CTR (Pat.) 19 supports the order of the Commissioner (Appeals). So long as the tax payments are not permanently withheld but are paid within the due date prescribed under the relevant Tax Laws or within the time permitted for the filing of the return under section 139(1) of the Income-tax Act such payments are not hit by section 43B of the Income-tax Act. Thus, we sustain the order of the Commissioner (Appeals) in having deleted the disallowance. 25. The next point in dispute is against the deletion of disallowance of interest paid to several trusts. The total amount of interest that was disallowed was Rs. 3,10,843. For the reasons stated in para 19 of this order, we sustain the order of the first appellate authority in having deleted the payment of interest. We adopt the same reasons. This ground is decided against the Revenue. 26. Another point at issue is about the eligibility of the assessee for investment allowance. The claim of the assessee for investment allowance on the machinery used for construction work was disallowed by the assessing authority for the reason that the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssified as a promotional activity. If these were to fall under promotional activity even the trade discount allowed to the customers can likewise be treated and such a conception of sales promotion activity is never known in the market. Thus, we sustain the order of the Commissioner (Appeals). The Revenue's ground is rejected. 29. The first point in the Revenue's appeal for the assessment year 1986-87 is about the eligibility of the assessee to have deduction of investment allowance of Rs. 4,440 on the machinery employed by the assessee in the course of its business. Similar issue had come up before us for assessment year 1985-86 and we have upheld the order of the first appellate authority for reasons stated, in para 26 of this order. For similar reasons, we reject the Department's ground of appeal. 30. The next point at issue is against the deletion of disallowance of interest payments made by the firm to several trusts. The amount involved is Rs. 2,90,554. Similar issue came up in the appeal for 1984-85 and 1985-86, and for reasons stated in para 19 of this order we uphold the order of the first appellate authority. The Revenue's contention is dismissed. 31. In the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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