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TMI Blog2010 (4) TMI 1065X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of section 37(4) read with section 37(5) of the Income-tax Act? (3) Whether on the facts and in the circumstances of the case, the ld. ITAT was legally justified in confirming the order of ld. CIT(A) deleting the addition amounting to 1,32,757 being 50 per cent expenses on account of travelling expenditure and further restricting the disallowance to 1/3rd of total expenditure of 2,65,615 without any supporting material on record? (4) Whether on the facts and in the circumstances of the case, the ld. ITAT was legally justified in confirming the ld. CIT(A)'s order allowing the claim of the company that it could claim deduction under sections 80HH and 80-I on two profit making units M/s. Xerographic undertaking and M/s. Toner, Developer, and Photo Receptor Unit and ignoring third unit M/s. Service Trading and other which had suffered losses yet constituted a unit for the business of the assessee as a whole, in totality and without appreciating the provisions of sections 80AB and 80B(5) of the Income-tax Act? (5) Whether on the facts and in the circumstances of the case, the ld. ITAT was legally justified in confirming the order of the CIT(A) deleting the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Learned counsel for both the sides fairly admitted that question Nos. (2), (6) and (7) are covered by the decision of this Court in the case of the assessee itself in CIT v. Modi Xerox Ltd. [IT Appeal No. 225 of 1999, decided on 14-5-2009]. 5. So far as question No. (1) is concerned, the brief facts of the case are that during the relevant accounting period, the assessee paid the amount of 33,38,696 to M/s. Modi Rubber Ltd. details of which are as under: (1) Rent 22,10,869 (2) AGM Expenses 64,894 (3) Telephone and Telex 4,96,211 (4) Electricity and Water 3,33,585 (5) Misc. expenses 2,33,136 Total 33,38,696 6. The Assessing Officer on ad hoc basis, disallowed deduction of 9,52,000 (though mentioned as 10 lakhs in the ast. order). Out of this expenditure and disallowed sum of 23,86,696 under section 40A(2)(b) of the Act alleging that the same sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and was assessed at the same rate of tax. The reimbursement made by the assessee to M/s. MRL had been accounted for and offered for tax by the receiving company. It was submitted that section 40A(2) of the Act has been introduced to check evasion of income as explained by CBDT in circular dated 6-7-1968. The reimbursement by the assessee to M/s. MRL is on cost basis and did not contain any element of profit. Therefore, the provision of section 40A(2) of the Act have no application in the facts of this case. The Tribunal has recorded the following finding:- 3. We have heard the rival parties and have perused the material placed on record and are of the opinion that what the assessee has actually paid as the amount of actual expenditure incurred by M/s. MRL. The rent paid is as per lease deed payable by M/s. MRL besides the expenditure on account of AGM expenses, telephone/telex, electricity, water expenses are as actually incurred by M/s. MRL. The Assessing Officer has failed to prove that by any comparable case or comparison by market rate as to how the amount paid by the assessee is excessive or unreasonable. It is not clear as to how has he allowed the deduction of the expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as question No. (2) is concerned, this Court in ITA No. 225 of 1999, decided on 14-5-2009, held that the Tribunal was not justified in allowing the claim of deduction on account of the rent paid by the assessee to the M/s. Modipur Hotels (P.) Ltd., and transit house as it contravened the provisions of section 37(4) read with section 37(5) of the Act. 11. Respectfully, following the aforesaid decision of this Court, question No. (2) is answered in favour of the revenue and against the assessee. The order of the Tribunal is, accordingly, set aside to this extent. 12. So far as question No. (3) is concerned, we have perused the order of the Tribunal. The finding of the Tribunal is finding of fact and based on material on record. The order of the Tribunal is, accordingly, upheld. 13. Question No. 4 is covered by the decision of this Court of the date in Income-tax Appeal No. 30 of 2001 in the case of assessee itself wherein the view taken by the Tribunal has been upheld. Following the said decision, the order of the Tribunal is upheld. 14. So far question No. (5) is concerned, the Tribunal held as follows: We have considered the rival submissions. The assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :- Coming to the question as to whether the payment made by the assessee towards the membership of the club is an allowable deduction, we find that the expenditure was incurred in order to procure business. Whether the assessee was successful in getting any business or not is not the question. The intention has to be seen as the amount was spent towards advancement of business. It is a business expenditure and, therefore, has rightly been allowed as it is not specifically covered by any statutory provision wherein it has to be disallowed. 18. Respectfully, following the view taken by this Court, as stated above, the question is answered in favour of the assessee and against the revenue. The order of the Tribunal is accordingly upheld in this regard. 19. So far as question No. (7) is concerned, this Court in Modi Xerox Ltd.'s case (supra), has held as follows:- We are of the considered opinion that the Tribunal was justified in allowing the assessee's claim partly towards the finance charges and partly as lease charges. We may mention here that there is no dispute that the money had not passed from the lessor/purchaser to the assessee-company and that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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