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TMI Blog2006 (9) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... I.T.A. No. 967/Chandi/96, for the assessment year 1993-94, raising the following substantial questions of law : "(i) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding expenses of Rs.1,55,795/- spent on silver vessels, carpets, silver ornaments and other gift items for distribution to the dealers as business expenditure? (ii)Whether on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the disallowance of interest of Rs.2,43,000/- on the ground that there is no direct nexus between the borrowings and interest free advances made to certain parties? (iii) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .M.M. Limited v. Commissioner of Income-Tax, (1998) 231 ITR 726 and Avon Cycles Private Limited v. Commissioner of Income-Tax, (1999) 238 ITR 85, relied upon an order passed by it in the case of the assessee for the assessment year 1992-93 and held that expenditure incurred on distribution of gift articles to various dealers was for business consideration as it does promote goodwill among the dealers for the assessee. 5. After hearing the counsel for the parties and also going through the orders passed by the authorities, we are of the view that distribution of gift articles to dealers would certainly fall within the ambit of expenditure for business consideration. The dealers selling the product of a manufacturer are certainly it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rector for non-business purposes. In addition to this, it was found that certain other amounts were also advanced to various other Directors without any interest for non-business purposes. Interest thereon was also disallowed. 7. In appeal before the CIT (A), the assessee failed. The Tribunal accepted the appeal of the assessee by relying upon its earlier order of the assessment year 1992-93. 8. We have already dealt with an identical issue in the case of Commissioner of Income Tax, Ludhiana v. Abhishek Industries Ltd., Ludhiana, I.T.A. No.110 of 2005, decided on 4.8.2006, wherein it is held that where the assessee is found to have advanced certain sums to sister concerns for non-business purposes and on the other hand is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. The term "profits of the business" has been defined in Explanation (baa) to Section 80HHC of the Act, which reads as under : "(baa) "profits of the business" means the profits of the business as computed under the head "Profits and gains of business or profession" as reduced by - (1) ninety per cent of any sum referred to in clause (iiia), (iiib) and (iiic) of section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India." 13. As far as question of addition of the amount of interest of the kind received by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m business or profession, there is no reason for reducing the same out of the income from business or profession for the purpose of calculation of deduction under Section 80HHC of the Act, as after including the same in the income from business or profession, the reduction, as envisaged under that provision, would be carried out. This is clear even from what the Tribunal has directed. Accordingly, we do not find any merit in this contention of the Revenue and hold that once the income is assessed as income from business or profession, the same has to be taken as such for the purpose of calculation of profits of the business in terms of clause (baa) of Section 80HHC of the Act after reducing therefrom 90% of the amount, so referred in the cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-Tax-I, Ludhiana v. M/s Vardhman Polytex Ltd., Ludhiana , decided on 22.5.2006, has already decided the issue in favour of the revenue and against the assessee. Following the same, we uphold the order passed by the Tribunal and reject the ground of appeal on that account. 18. As far as question of claims received and discount receipts is concerned, the claim of the assessee is that a sum of Rs. 2,57,011/- was received from the Insurance Company on account of claim for damage to the car and Rs.33,677/- were on account of discount received in respect of purchase of chemical from M/s Canning Mitra Phoenix. In our view, the amount of insurance claim and discount receipt received by the assessee during the year in question on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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