9911796707
TMI Blog1981 (3) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Mrs. B.D Soorana 8,416.70 2. 25-2-1974 Tickets for Mr. M.L. Soorana Mrs. B.D. Soorana 10,444.00 . . . Rs. 18,860.70 The assessee, in support of the said expenditure when called upon by the ITO, produced in the course of the assessment proceedings, a letter of Reserve Bank of India, Exchange Control Department, Jaipur dt. 13th Feb., 1974 addressed to Shri Mannalal Soorana together with the exchange permit referred to therein, as also the letter with the enclosures dt. 16th March, 1974, addressed by Shri Mannalal Soorana to the Dy. Controller, Reserve Bank of India, Exchange Control Department, Jaipur detailing the expenditure incurred by him in the course of his aforesaid visit, and also two letters issued by the United Commercial Bank Johari, Bazar, Jaipur Main dt. 11th Jan., 1976 to bring out the export work undertaken by the said Shri Mannalal Soorana in the course of its aforesaid visit to U.S.A. It may be added that in the profit loss account filed with the return, the details of the aforesaid expenditure of Rs. 18,860.70 were given reading as under: Amount Rs. Date Narration 8,416 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upheld the said disallowance by observing as under: "Two visits abroad by Shri Mannalal Surana are involved in the claim. On the first visit a sum of Rs. 18,860 was incurred. Smt. B.D. Surana also accompanied Shri Mannalal Soorana and 1/2 of the expenditure related to her tour. The ITO has given a finding of fact that the tour was mainly undertaken for medical purposes. Though the assessee contended that during his stay abroad Shri Surana contacted various parties dealing in jewellery trade and afterwards exported goods to them, but necessary evidence was lacking in this connection. On similar facts, in the immediately preceding year, only 1/4th of the foreign tour expenses was considered as incurred for the purpose of export promotion and was allowed as such. It appears that no objection has been taken by the assessee against the disallowance of 3/4th of the expenditure in the last year. I, therefore, hold that the ITO was justified on the facts and in the circumstances of the case, in allowing only 1/4th of the foreign tour expenses of Shri Mannalal Soorana for business purposes. As regards the second visit, a sum of Rs. 19,240 was incurred. The facts mentioned by the ITO sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat had been stated already before the authorities below. The authorities below have found as a fact that the first trip was undertaken by Sri Surana mainly for the medical treatment of his wife. A part of the expenditure on the second trip was also in respect of the medical treatment of his daughter. These facts have not been controverted. In fact, these are supported by reports given to the Reserve Bank of India. Considering these and also the past history, the authorities below disallowed 3/4th of the expenditure of the first trip and 1/4th of the expenditure of the second trip. We feel that the disallowances were fair and reasonable and also proper." 6. The ITO, pursuant to the above disallowance in the foreign tour expenses prior to the completion of the assessment proceedings, initiated penalty proceedings against the assessee under s. 271(1)(c) of the Act, on the ground that the assessee had furnished inaccurate particulars of income for the year under consideration, inasmuch as that the expenses of the partner, Shri M.L. Soorana and his relatives amounting to Rs. 21,312 were claimed as business expenses of the firm, when they were not so spent. In reply dt. 23rd Oct., 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n take shelter under the plea that he was under a bona fide genuine belief that the expenditure was admissible. I agree with the ITO that there has been deliberate effort to furnished inaccurate particulars. Obviously the effort was to reduce tax liability. I am convinced that this is a fit case for the levy of the penalty." 8. Before the Tribunal, it is an undisputed fact that the income of the assessee, as finally assessed after giving effect to the order of the Tribunal in the quantum appeal of the assessee for the year under consideration has come to be determined at Rs. 1,28,698 and that the income returned by it for the year is Rs. 69,430. The difference between the income returned and the income finally assessed of about Rs. 59,300 is due to the disallowance of the following expenses sustained in the present case: Sl. No. Nature of expenditure disallowed Amount . . Rs. 1. Legal fees 4,630 2. Travelling expenses 3,617 3. Motor car expenses 410 4. Out of telephone expenses 1,000 5. Out of foreign tour expenses 21,312 6. Out of sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3/4th of the expenditure incurred on the first visit and 1/4th of the expenditure incurred on the second visit totalling in all Rs. 21,312 have been disallowed. We, however, find that the facts are somewhat different. The entries in the profit loss account when read in conjunction with the letters of Reserve Bank of India (Exchange Control Department, Jaipur) addressed to Sri Mannalal Soorana further show that at the time of the first visit of Mr. Mannalal Soorana to U.S.A., the entire $ 1000 were not released in favour of his wife, Mrs. B.D. Soorana, nor was that visit in connection with the treatment of his wife. The letter of the Reserve Bank of India dt. 13th Feb., 1974 r/w the permits for release of foreign exchange indicates two things. Firstly, it is clear therein that the said visit of Mr. Mannalal Soorana was for his and not his wife's medical treatment In U.S.A. and that Mrs. B.D. Soorana was to accompany him as an attendant. Secondly, these documents reveal that only $ 300 and not $ 1000 were released in favour of Mrs. B.D. Soorana and that the said foreign exchange were released to meet her expenses in USA as the attendant of Mr. Mannalal Soorana. The foreign exchange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Soorana in the year under consideration was allowable revenue expenditure. 10. We have given consideration to the above arguments. The correct facts regarding the said first foreign tour of Mr. M.L. Soorana in the year under consideration have been brought out above. The said visit was for medical treatment of Mr. Mannalal Soorana and not his wife. The wife was to accompany Mr. Mannalal Soorana as his attendant. It is also a fact that during the said visit, Mr. Mannalal Soorana, besides undergoing test, etc. for medical treatment did undertake business for the assessee-firm. 700 Dollar out of 1000 Dollar were released by the Reserve Bank of India for medical treatment of Mr. Mannalal Soorana. 300 Dollars were released in favour of Mrs. B.D. Soorana, who was accompanying Mr. Mannalal Soorana as an attendant. The case of the assessee is that the entire said expenditure was allowable revenue expenditure on the ground of commercial expediency. Though this plea of the assessee is controverted by the Deptl. Rep. there cannot be any manner of doubt that the plea of the assessee that the said expenditure was allowable revenue expenditure can easily be termed to be a bona fide belief, mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sence was essential in connection with the certain detailed medical test. That extended stay, according to Mr. Mannalal Soorana had not resulted in any extra foreign exchange released to him by his sharing the apartment with his daughter which was taken on a nominal rate. On these facts, we, after hearing both the ld. Counsel for the assessee, Mr. N.M. Ranka and the Deptl. Rep, are of the considered view that the assessee-firm was under the bona fide belief that the entire foreign tour expenses of the stay of Mr. Mannalal Soorana in New York on that visit will, be allowed. He went there for business purposes. The foreign exchange was released for his stay in New York for 8 days. During this period of stay of 8 days, he conducted the business of the assessee. His extended stay in New York had not resulted in any additional expenditure to the assessee firm. Mr. Mannalal Soorana was able to stay for the period of 15 and not 8 days, as initially allowed for the foreign exchange releases. It will not be correct to say that the assessee would not have held the bona fide belief that the entire expenditure will not be allowed. The disallowance to the extent of 1/4th of this second foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X
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