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TMI Blog1981 (4) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... One question has been referred to us at the instance of the assessee-company, while the other has been referred to us at the instance of the revenue. The question referred to us at the instance of the assessee-company is as under: " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in confirming the disallowance of travelling expenses of Rs. 19,300 incurred by the assessee in relation to the assessee's director, Shri Gautam Sarabhai, for the foreign tour undertaken by him for the purpose of Calico Mills, the managed company of the assesseecompany ? The question which is referred to us at the instance of the Revenue is as under " Whether, on the facts and in the circumstances of the case, un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merica to enter into collaboration agreement on suitable terms of payment. The foreign tour was undertaken after obtaining foreign exchange for incurring foreign tour expenses from the Reserve Bank of India. The expenditure which was incurred by Gautam Sarabhai in this tour came to Rs. 19,300. This expenditure was incurred in the year of account relevant to the assessment year 1966-67. The assessee-company claimed a deduction of this expenditure of Rs. 19,300 as revenue expenditure in the course of the income-tax assessment proceedings for the assessment year 1966-67. The ITO disallowed the claim mainly on the ground that the expenditure was of a capital nature inasmuch as the purpose of the visit of Gautam Sarabhai to the United States of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... What is important to bear in mind is the object for which the assessee had incurred these expenses. Obviously, the object was to increase its own income by expanding the existing business or starting the new business of the managed company.. From the facts found by the Tribunal, it is difficult to hold that the foreign tour expenses of Gautam Sarabhai incurred by the assessee-company are of capital nature. The view which we are taking finds support from the judgment of the Bombay High Court in Tata Sons Ltd. v. CIT [1950] 18 ITR 460. That was a case in which the assessee, a limited company, held the managing agency of another company. Under the managing agency agreement, the assessee was to be paid a commission at a certain rate which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their employees in order to increase the efficiency in the working of the company. An increased efficiency of that company would incidentally result in higher and better profits, and the assessee-company would be as much interested in the working of the managed company being more efficient as the managed company itself. Whatever tended to increase the profits of the managed company would also tend to increase the income and profits of the assessee-company. Therefore, it was observed it could not be suggested that the assessee-company had an indirect or ulterior motive in making the above payment. The only motive by which it was actuated was a purely, commercial and pecuniary one and that was to see that more profits were made by the manage ..... X X X X Extracts X X X X X X X X Extracts X X X X
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