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TMI Blog1990 (10) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... hough the assessee did not accept this claim for quite some time ultimately it had to concede to the claim made by M/s Upper India Trading Co. in the accounting year relevant to the asst. yr. 1984-85. On these facts the Assessing Officer held that payment of Rs. 10,151 made to M/s Siaram Bros. as commission at 3 per cent on sales made directly to M/s Upper India Trading Co., was made without redressing any services. This amount was, accordingly, disallowed. On appeal, the CIT(A) held that the disputed liability amounting to Rs. 10,161 had been settled in the succeeding year and, therefore, allowability of that expenditure could be considered only in that year. With this observation the CIT(A) deleted the addition of Rs.10,161. 2. Shri Subhash Kumar, learned Senior Departmental Representative submitted before us that the Assessing Officer had disallowed the amount of Rs. 10,151 paid as commission to M/s Siaram Bros. on purchases made by Upper India Trading Co. directly form the assessee company. It was submitted that so far as the sales made to M/s Upper India Trading Co. amounting to Rs. 3,38,351 were concerned, no services were rendered by M/s Siaram Bros. to the assessee compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d distributors, the Assessing Officer, in our opinion, was fully justified in disallowing the claim in respect of Rs. 10,151 paid as commission to M/s Siaram Bors. on sales made directly to M/s Upper India Trading Co. in this view of the matter, we set aside the order of the CIT(A) on the point and restore that of the Assessing Officer. 5. The next ground relates to the amount of Rs. 5,885 paid as commission to S.R. Bearing Centre,Bombay. The Payment of commission of Rs. 5,885 to M/s S.R. Bearing Centre,Bombaywas disallowed by the ITO on the ground that services of a commission agent were not required for doing business with a Govt. Department. Before the CIT(A) it was submitted on behalf of the assessee that there was a lot of competition for getting business from the Govt. and some liaison work was necessarily required to be done. The CIT(A) accepted the assessee's contention and allowed the assessee's claim. The addition of Rs. 5,885 was accordingly deleted. 6. We have heard the learned authorised representatives of the parties. The ITO has not disputed the payment of Rs.5,885 to M/s S.R. Bearing Centre,Bombay. Even in respect of dealings with the Govt. Departments it become ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... klal Industries Ltd. (1986) 17 ITD 515 (Ahd). We have considered the submissions made on behalf of the parties. The ITO disallowed the claim of Rs. 45,955 on the ground that names of the persons to whom presents were made were not known. He has made the disallowance on the ground that the expenditure was incurred on advertisement. Before us no material has been placed which could go to indicate that the expenditure of Rs. 45,955 was incurred on advertisement. So, the question of disallowing any part of the expenditure under r. 6B does not arise. 11. As has been pointed out by the CIT(A), similar claim was allowed by the IAC under s. 144B for the asst. yr. 1981-82. Considering the fact that the assessee's turnover was over Rs. 2.5 crores, there was, in our opinion, no justification in making the disallowance of Rs. 45,955 being the expenditure incurred on making customary gift and presents on the occasion of Diwali, New Year, etc. The expenditure was incurred for the purpose of business and was rightly allowed by the CIT(A). 12. The next ground assails the order of the CIT(A) deleting the disallowance of Rs. 3,27,671. Under the Sales Promotion Scheme copies whereof are at pages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. vs. IAC (1984) 7 ITD 324 (Hyd) and ITO vs. Sandeep Wines (1984) 20 TTJ (Hyd) 281 : (1984) 8 ITD 799 (Hyd). 16. We have considered the rival submissions as also the facts on record. Copies of the scheme where under gifts of auto clocks and Philips Clock radio were given to dealers and distributors are at pages 35 and 39 of the paper book. No doubt, these gifts were intended to be made to customers to increase sales of Ambassador 9 O' clock set, one piece of auto clock was given as gift, for purchase of every 50 sets of Ambassador 9 O' clock, a customer became entitled to one Philips clock radio by way of gift. 17.In Sandeep Wine the assessee firm had a sales promotion scheme under which it gave articles of varying quality and cost to parties who attained certain predetermined levels of turnover or off takes of the assessee's product. It was held by the Tribunal that what the assessee had practised was neither advertisement nor discount. It was not really a case of gift as it was a discount in different form for bulk purchases. It was held that expenditure incurred on gift of articles could not be treated as advertisement expenses under s. 37(3) or r. 6B. In the case of Mop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Finally Mills Ltd. expenditure was incurred by a company carrying on business of manufacturing and selling textiles goods in registering for the first time its trade marks. It was held that it was allowable as a revenue expenditure. this authority, in our opinion, fully covers the issue in favour of the assessee. In the instant case, the expenditure has been incurred by the assessee to protect its designs. Respectfully following the decision of the Supreme Court in the case of Finally Mills Ltd. we confirm the order of the CIT(A) on the point. 21. Ground No.6 relates to an expenditure of Rs.10,700 paid to M/s Mantech Consultants for conducting O M studies. The ITO has noted that this expenditure was incurred to bring more professionalised approach in the management which constituted an enduring benefit to the company. The expenditure was, therefore, disallowed. The CIT(A) was of the view that this expenditure was incurred for improving office efficiency and was, therefore, a revenue expenditure. The claim was accordingly allowed. We have heard the learned authorised representatives of the parties. In view of the finding of the CIT(A) that the expenditure of Rs.10,700 was incur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) will have to consider whether such expenses relate to any of the activities listed under s. 35B(1). We accordingly set aside the impugned order of the CIT on the point under consideration with a direction that he shall consider and decide the issue afresh in accordance with law and the observations made above after giving an opportunity of hearing to the parties. 24. The next two grounds dispute the order of the CIT(A) allowing the expenses of Rs. 48,315 and Rs. 5,000. An amount of Rs. 48,315 was spent on soil spreading and levelling of land. This expenditure was incurred for developing and unkeep of the lawn at the factory site. The assessee also paid a sum of Rs. 5,000 for landscaping at the factory site. Both these expenses were disallowed by the ITO on the ground that hey resulted in enduring benefit to the assessee. On appeal the CIT(A) held that the expenditure was of a revenue nature. The disallowance was accordingly deleted. Learned Senior Departmental representative submitted before us that the expenditure incurred on developing the area so that it could be used as a parking space was a capital expenditure since it brought an enduring advantage to the assessee inasmuc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K.K. Thirani. He accordingly directed the ITO to apply the said limit. 27. We have heard the learned authorised representative of the parties. The issue is now squarely covered against the assessee by the decision of the Delhi High Court in the case of Continental Construction Ltd. vs. CIT (1990) 85 CTR (Del) 116 : (1990) 185 ITR 178 (Del). In this case it has been held that in the case of an employee director provision of s. 40A(5) is applicable. Similar view has been expressed by the Full Bench of the Kerala High Court in CIT vs. Forbes, Ewart Figgis (P) Ltd. (1981) 24 CTR (Ker) 87 (FB) : (1982) 138 ITR 1 (Ker (FB) which has been followed in Harrisons Malayalam Ltd. vs. CIT (1990) 183 ITR 585 (Ker.) in the instant case Delhi High Court is also the jurisdictional High Court and, therefore, respectfully following the decision in the case of Continental Construction Ltd. we hold that in the case of Sri Thirani provisions of s. 40A(5) would be applicable for the purpose of computing the disallowance out of perquisites given to him. We accordingly set aside the order of the CIT(A) on the issue and restore that of the ITO. 28. Ground No. 11 assails the order of the CIT(A) direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnicians. Under the head 'travelling' the assessee incurred an expenditure of Rs. 75,893. This expenditure also includes expenses incurred for providing lodging and boarding of foreign technicians during their stay inIndia. It was stated before the ITO that the foreign technicians visitedIndiafor rendering technical services under the technical collaboration agreement and providing accommodation for their stay inIndiawas the responsibility of the company. According to the assessee, r. 6D did not apply in this case and that it applied to employees or any other person withinIndiaoutside the headquarters. The ITO did not accept the contention advanced on behalf of the assessee. He noted that as per chart given by the assessee the disallowance would come to Rs. 54,342. The ITO accordingly disallowed this amount and the same was added to the total income of the assessee. On appeal, the CIT(A) following his order for the immediately preceding assessment year allowed lodging expenses of Rs. 41,910 subject to verification by the Assessing Officer. 32. We have considered the submissions made on behalf of the parties. As has already been pointed out above, the ITO made the disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have heard the learned authorised representatives of the parties. As has already been pointed out above, the ITO refused to allow depreciation on motor cars solely on the ground that during the accounting year they were not registered in the name of the assessee. The assessee having paid full purchase price during the year became the owner of the motor cars. It is not the case of the Assessing Officer that the motors were not put to use during the relevant accounting year. Since the assessee became the owner of the motor cars during the relevant accounting year, depreciation could not have been refused solely on the ground that the motor cars were not registered in the name of the assessee. In taking this view, we are supported by the decision of the Tribunal in the case of Deluxe Co-operative Transport Society Ltd. vs. ITO. We, therefore, uphold the order of the CIT(A) on the point. 35. Grounds No. 14 and 15 assail the order of the CIT(A) allowing depreciation and investment allowance on machineries purchased on24th June, 1982. Under the head 'plant and machinery' the assessee showed addition of machinery worth rs 15,35,666 during the year. From the details the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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