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TMI Blog2000 (11) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 500 per month paid to the Directors Smt. J. Rama Muralidhar Rao and Smt. G. Laxmi has been disallowed, though it has been allowed in the previous years. 2. Rs. 6,500 Amount spent towards advertisements in Magazines and publicity for Which entire information was furnished with full details of payments has been wrongly disallowed assuming the amount to have been spent under the head donations and charity. 3. Rs. 24,155 Of deduction short allowed under section 32AB, of Income-tax Act, 1961, wrongly assuming dividends on chits subscribed by the company as income from other sources whereas factually it is 'Income from business' as one of the objects of your appellant is to make investments. 3. Ground No. I deals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The very fact that the Assessing Officer accepts it as entertainment expenses goes to prove that the impugned expenses was incurred for the purposes of the assessee's business. Learned CIT (Appeals) without assigning any reason, upheld the disallowance and that too by holding that no documentary evidence was produced to prove the services rendered by the two ladies. Nothing was asked by learned CIT (Appeals) from the assessee as a proof of the services having been rendered, as is clear from the plain reading of the learned CIT (Appeals)'s order. Moreover the Assessing Officer accepts that expenditure as entertainment expenditure, accepting thereby the expenditure incurred for the purposes of business of the assessee. Besides, the remuner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various associations and if it is so, the expenses are allowable to the assessee in terms of CBDT Circular Nos. 200 and 203, with this direction, this ground is disposed of. 8. In ground No. 3, the assessee has agitated the short deduction of Rs. 24,155 allowed under section 32AB. Assessee is in the business of financing and here purchase and deposited a sum of Rs. 87,000 with IDBI. It claimed deduction of Rs. 87,000 under section 32AB, which was scaled down to Rs. 62,845 by the Assessing Officer on the ground that the said deduction was allowable with reference to the income chargeable to tax under the head, 'business or profession'. According to the Assessing Officer, assessee derived dividend income from the chits amounting to Rs. 1,25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s below and have duly deliberated upon the point at issue. 11. Deduction under section 32AB is admissible to an assessee equal to 20 per cent of the 'Profits of eligible business' as computed in the accounts of the assessee audited in accordance with subsection (5) of section 32AB if, inter alia the following conditions are fulfilled. (1) total income of the assessee must include income chargeable to tax under the head "Profits and Gains of Business or Profession." (2) the assessee must have out of such income deposited the amount in an account maintained with the Development Bank. There were other conditions also. But since they are not relevant to the disposal of the present ground before us, we are not concerned with them. 12. We fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fulfilled the said section further mandates that the deduction shall be for a sum which is equal to 20 per cent of the profits of eligible business' and such profits are to be computed in the accounts of the assessee, as per the plain reading of the text of sub-clause (ii) to section 32AB. Sub-section (3) defines the 'profits of eligible business' to mean the profits computed in accordance with the requirements of Parts II and III of the Sixth Schedule to the Companies Act as increased by further adjustments enumerated therein but we are not concerned with them here. Profits of the business of an assessee for the purpose of deduction under section 32AB have to be computed as per the provisions of Parts II and III of Sixth Schedule to the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness given in section 32AB(3), assessee would be entitled to deduction under section 32AB with reference to such dividend income on chits also. Moreover, it cannot be ignored that assessee was engaged in the business of financing and hire purchase business, which necessarily involves the business of investment. Any assessee is at liberty to invest its funds in the manner it likes. In the instant case, it has made investment of the part of its funds into the chits and earned dividend income. Since it has got close proximity and inextricable link with the nature of business carried on by the assessee it has to be treated as income assessable under the head 'income from business or profession.' In any case and at any rate, as mentioned abov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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