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TMI Blog1993 (2) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... urtax liability in arriving at its total income because such claim had not been made before either the Income-tax Officer or the Appellate Assistant Commissioner for the assessment years 1970-71, 1971-72 and 1972-73 ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that the assessee had acted belatedly in raising the additional ground regarding the deductibility of surtax liability for the assessment years 1970-71, 1971-72 and 1972-73 ? 4. Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that the leave travel expense of Rs. 8,514 incurred by the assessee in respect of Mr. Richardson and his family was not wholly and exclusively incurred for the purposes of the assessee's business for the assessment year 1972-73 ? 5. Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that rule 6D(2) of the Income-tax Rules was also applicable in respect of travel in India by foreigners whose headquarters was not in India for the assessment year 1972-73 ?" The following question is also referred to us at the instance of the Revenue : "Whether, on the facts and in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would expire on July 31, 1971, and under clause 6(1)(d), Mr. Richardson would be entitled to travelling expenditure for himself and his family only after that date. However, Mr. Richardson went on leave on May 3, 1971, before the completion of two years of service. The Appellate Assistant Commissioner held that since the payment was thus made in contravention of the terms of the agreement, it would not be allowed as a business expenditure." "Before us in appeal, learned counsel for the assessee stated that, under clause 6(1)(a) of the agreement, Mr. Richardson was entitled to four months' leave with full salary after completing two years' service and, under clause 6(1)(c), he was entitled to travel expenses for himself and his family from Bombay to U. K., if he was availing of his entitled leave in U. K. on the completion of two years' service. Counsel submitted that since he had completed his job, he went on leave earlier for two months and 27 days and the travel expenses in this connection were voluntarily incurred by the assessee for commercial expediency. Counsel argued that the expenditure incurred in such circumstances was admissible. The learned Departmental representativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the relevant previous year is the calendar year ended on December 31, 1971. The assessee had incurred expenditure on five persons who visited India and stayed in hotels. The expenditure incurred by the assessee and that disallowed by the Income-tax Officer under section 37(1) as well as under section 37(3) read with rule 6D of the Income-tax Rules, 1962, is tabulated as under: --------------------------------------------------------------------------------------------------------------------------------------------------- Disallowed by the Income-tax Officer ------------------------------------------------------------------ Under section 37(1) Under rule 6D Name Rs. Rs. Rs. --------------------------------------------------------------------------------------------------------------------------------------------------- 1. S. Neck Ticket 4,755 Hotel 17,912 15,382 5,747 2. Lilley Ticket 19,062 19,062 -- Hotel 3,107 3,107 1,787 3. Astrinos Hotel 655 655 -- 4. Dufour Hotel 2,276 2,276 1,676 5. Hill No details No details 2,113 available available -------------- 11,323 ------------------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules, learned counsel for the assessee vehemently argued that, since the foreigners had not travelled within India but had only stayed in hotels in Bombay, the provisions of rule 6D(2) would not be attracted. In this connection, he emphasised that, in order to invoke the provisions of rule 6D(2), the headquarters of an employee or other persons should be within India and not outside India. According to him, since the headquarters of these gentlemen were outside India, there was no question of applying the provisions of rule 6D(2). He further submitted that, in order to attract the provisions of rule 6D(2), expenditure mentioned in both the clauses (a) and (b) should have been incurred. However, since, in the instant case, no expenditure in respect of travel by rail, road, waterway or air, has been incurred within India, the provisions of the said rule would not be applicable. In support of his submissions, he referred to the decisions in the cases of CIT v. Official Liquidator, Palai Central Bank Ltd. [1984] 150 ITR 539 (SC) ; Evans Fraser and Co. Ltd. v. CIT [1982] 137 ITR 493 (Bom) and K P. Varghese v. ITO [1981] 131 ITR 597 (SC). According to him, even though in the reported c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions made on behalf of the assessee, then the provisions of rule 6D(2) would not be applicable in most of the cases. He, therefore, submitted that the interpretation of the provisions of rule 6D(2) in the manner it was argued on behalf of the assessee should not be approved. We have considered the submissions made by the parties. It would be necessary to refer to the relevant provisions of the Act and the rule made thereunder. The same read as under : "Section 37.(1) Any expenditure .... laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head 'Profits and gains of business or profession'. . . . (3) Notwithstanding anything contained in sub-section (1), any expenditure incurred by an assessee after the 31st day of March, 1964, .... in connection with travelling by an employee or any other person (including hotel expenses or allowances paid in connection with such travelling) shall be allowed only to the extent, and subject to such conditions, if any, as may be prescribed. Rule 6D.(2) The allowance in respect of expenditure incurred by an assessee in connection with trave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e foreigners would be hit by these provisions as, in our opinion, in order to attract these provisions, it is not necessary that the assessee should incur both types of expenditure mentioned in clauses (a) and (b) of rule 6D(2). Again, it is pertinent to note that under subsection (3) of section 37 of the Act, the Income-tax Officer is required to make disallowance of certain expenditure incurred on travelling (including hotel expenses or allowances paid in connection with such travelling), subject to the limits and conditions which may be prescribed. Rule 6D(2) only prescribes the limits to which the expenditure will be allowed. Therefore, there is no substance in the submissions made on behalf of the assessee that just because the word "aggregate" is used in rule 6D(2), the expenditure of both the types mentioned in clauses (a) and (b) have to be incurred by the assessee. If the submissions made on behalf of the assessee were to be accepted, then an absurd situation would arise in the case of an employee or a person who goes to Delhi or Calcutta by air in the morning and returns the same evening. In such a case, the assessee would not get any deduction as there was no expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication or bearing in deciding the issue with which we are concerned in the present reference. One has to interpret the provisions of a statute in the context in which it is found and it would not be advisable to travel beyond what is stated in the statute with a view to finding out how the same should be interpreted. We are making these observations as, in the reported decisions, the courts were concerned with sections and provisions which are entirely different and their applicability in the context of a particular fact-situation. Much of public time could be saved if due and proper care is taken in citing reported decisions in support of the submissions made. We have given our decision on the arguments advanced on behalf of the assessee. However, it is pertinent to note that the issue raised in the question is very much limited. In order to appreciate this aspect of the matter, we again refer to the question which reads as under: "Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that rule 6D(2) of the Income-tax Rules was also applicable in respect of travel in India by foreigners whose headquarters were not in India, for the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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