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TMI Blog1988 (7) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the inauguration of its factory at Renukoot on January 7, 1963. The Income-tax Officer treated the total amount of Rs. 34,030 (Rs. 22,878 + Rs. 11,152) as entertainment expenses. He, therefore, allowed Rs. 10,000 as permissible deduction under section 37 of the Act and disallowed the balance of Rs. 24,030. Before the Appellate Assistant Commissioner, it was submitted on behalf of the assessee that Rs. 22,878 represented the excess expenditure incurred by the assessee over the recoveries made by it from its customers, clients and other visitors who visited Renukoot. It was further submitted that the Income-tax Officer was not justified in treating the aforesaid expenses as entertainment expenses. Agreeing with the submissions made on behalf of the assessee, the Appellate Assistant Commissioner deleted Rs. 24,030 from the total income of the assessee. Before the Tribunal, learned representative for the Department submitted that since the aforesaid expenditure of Rs. 22,878 was incurred by the assessee for the maintenance of a guest house at Renukoot, the Income-tax Officer was justified in disallowing the same. As regards the expenditure of Rs. 11,162, it was submitted that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 1961 Act or entertainment expenses. In this view of the matter, we have no hesitation in upholding the order of the Appellate Assistant Commissioner in respect of the assessee's claim for deduction of Rs. 22,878. As regards the expenditure of Rs. 11,162, we entirely agree with the submissions made on behalf of the assessee that the same was incurred for the purpose of carrying on the business of the assessee. We, therefore, uphold the order of the Appellate Assistant Commissioner on this point." At the hearing, our attention has been drawn to the decision of this court in the case of CIT v. Orient Paper Mills Ltd. [1988] 171 ITR 181. In that case, in its return for the assessment year 1971-72, the assessee claimed deduction of Rs. 46,798 incurred on tea, tiffin and refreshments at a conference of the salesmen and distributing agents of the assessee at its mill. The Income-tax Officer held that 75 per cent. of the said expenditure was in the nature of entertainment and disallowed an amount of Rs. 34,100 out of the said Rs. 46,798 under section 37(2). In the said assessment year, the assessee, at its mill premises, provided boarding and lodging facilities to its employees an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The modern trend is to get a factory or a branch inaugurated by the Prime Minister or a Minister or V.I.P., as the case may be. It is the real nature and quality of the payment which would prove decisive. Any payment made in the course of and for the purpose of carrying on business or trading activity would be revenue expenditure. The expenditure in connection with the inauguration is intimately connected with the business of the assessee. It can be compared with the expenditure that may be incurred in opening new branch of a going concern. It does not pertain to the commencement of new business. By this expenditure, advertisement is made to the public regarding the factory of the assessee and it is made for the purpose of extending the existing business. By that process, no new asset is required. In our view, the Tribunal was justified in allowing this expenditure as revenue expenditure. For the reasons aforesaid, we answer the second question also in the affirmative and in favour of the assessee. For the assessment year 1966-67, the assessee claimed development rebate in respect of weather radar equipment owned by it. This equipment was purchased by the assessee. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be said that the assessee was not wholly using the radar equipment for the purpose of its business. In this view of the matter, we uphold the order of the Appellate Assistant Commissioner on this point." On the aforesaid facts, the following question of law has been referred to this court : "Whether, on the facts and in the circumstances of this case, the Tribunal was right in holding that the assessee would be entitled to claim development rebate under section 33 of the Income-tax Act, 1961, in respect of weather radar equipment owned by it ?" At the hearing, Mr. Bagchi, appearing for the Commissioner, has drawn our attention to the decision of the Andhra Pradesh High Court in the case of CIT v. Vinod Bhargava [1988] 169 ITR 549. In that case, the assessee was carrying on the business of manufacturing and selling of optical lenses, prisms, etc. He leased out the entire plant and machinery to private limited company on an annual rent of Rs. 48,000 with effect from February 1, 1972. However, he retained and continued his trading business. The assessee claimed development rebate in respect of the said machinery. The claim was negatived by the Income-tax Officer on the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the same asset when the assessee does not require it, cannot deny the assessee the benefit of development rebate. It is true that under section 33(1) of the Act, development rebate in respect of plant and machinery can be allowed only where such machinery or plant has been wholly used for the purpose of the business carried on by the assessee. The word "wholly" in the context in which it has been used means that the asset in its entirety must be used for the purpose of the business. So long as an asset is used by the assessee for the purpose of the business carried on by the assessee, even though such asset is allowed to be used by others, that cannot disentitle the assessee from claiming development rebate. The finding of the Tribunal is that the radar equipment in respect whereof development rebate has been claimed has been used by the assessee for the purpose of its business to the extent possible. As the assessee could spare the user of the radar equipment to certain other companies, it had entered into a pooling arrangement whereby it hired out the radar equipment to other companies for some consideration. We have considered the rival contentions. In the context and se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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