9911796707
TMI Blog1981 (3) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... or expenses 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 8,416.70 19-2-1974 Bedesh yatra Shri Mannalalji Soorana Smt. Bhanwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isit 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 show that the daughter of Shri Mannalal Soorana accompanied him on his visit for medical treatment. She was admitted in the hospital at Albany ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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., 1978, the stand taken by the assessee-firm was that it had not concealed any part of its income nor it had suppressed its profits. The above expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 shop expenses 3,325 7. Weighted deduction not allowed under s. 35B 24,756 . . 62,737 . Add : Depreciation difference 1,000 . . 63,737 . Less : Profit on sale of car excess shown 4,040 . About 59,700 According to the ld. counsel for the assessee Mr. Rank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 to the extent of $ 700 was released in favour of Mr. Mannalal Soorana to meet the expenditure in connection with his medical treatment in U.S.A. These being the facts pertaining to the first visit, the stand of the ld. counsel for the assessee, Mr. N.M. Ranka is that the assessee, in view of the ratio of the decision of the Bombay High Court in Mehboob Production Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company 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, more so in view of the ratio of the Bombay High Court in Mehboob Production Pvt. Ltd. Mr. Mannalal Soorana is the managing partner of the assessee-firm. He seems to be the driving force in conducting the business of the assessee. Naturally, the assessee-firm is interested in the complete fitness so that his services are wholly and entirely available to it in the conduct o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. 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 tour of Sri Mannalal Soorana, it appears, has been ordered by the tax authorities and the Tribunal as the case proceeded on the assumed facts that the visit of Mannalal Soorana to U.S.A. was for medical treatment of his daughter, which facts are not entirely correct, as has been brought out above. We, therefore, on the facts and in the circumstances of the case, agree wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
