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TMI Blog1990 (6) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... , the visit of auditors for purpose of audit and their stay in this place during the period of audit is also not in dispute. However, what is in dispute is whether this accommodation was maintained and run as a guest house by the company and besides being used as residence from the auditors during their visit for authority in his impugned order made under s. 143(3) on 25th March, 1985 while dealing with this issue has conjectured that, "the assessee must be incurring other expenditure also on the maintenance of the guest house like salary of staff, expenses on dinner, crockery, meals, refreshments etc." With this he not only disallowed the rent of Rs. 13,200 paid yearly but also added on estimate basis Rs. 30,000 calculated @ Rs. 2,500 per month. The learned Commissioner has supported these additions with further surmise that, "it could not be believed that the accommodation was hired for them throughout the year." After hearing both the sides, we find that no enquiry whatsoever has been made as to the use and maintenance of the guest house. In fact the learned counsel for the assessee made a grievance at the time of hearing that no opportunity whatsoever was given to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 500 paid as penalty under the Factories Act. After hearing both the sides and taking into consideration the ratio decided of two Supreme Court judgments in the cases of Mahalakshmi Sugar Mills Co. vs. CIT (1980) 16 CTR (SC) 198 (SC) : (1980) 123 ITR 429 (SC) and CIT V. Delhi Safe Deposit Co. Ltd. (1982) 26 CTR (SC) 411 : (1982) 133 ITR 756 (SC), alongwith the judgment of Allahabad High Court in the case of Nanhoomal Jyoti Prasad vs. CIT (1980) 123 ITR 269 (All), wherein we are of the opinion that the amount is expenditure laid out wholly and exclusively in running the business of the assessee and is admissible as such. This ground is, therefore, allowed. 5. Coming to ground No. 5 we find that there is a disallowance of Rs. 2,775 on account of advertisement expenditure. After perusal of the orders of the authorities below on this issue, we find that the expenditure is constituted of three items one of which is of Rs. 1,000 paid to Punjab Agricultural University. For the other amounts, no serious argument was submitted before us. However, as regards this sum, the claim of the assessee is that Punjab Agricultural University runs a course in MBA which is connected with the bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see that the employees of the assessee do take the customers out for entertainment or if they entertain them in the premises do be with them. It is natural that when such entertainment. However, either way, there being no evidence, it is a case of pure estimate. In our considered opinion 10per cent of this expenditure can be considered as releatable to the employees of the assessee. Thus what is to be done is that instead of what the assessing authority did, first 20per cent of the entire expenditure is to be taken out of consideration. Out of the balance that is left off, the total amount considered by the assessing authority i.e. Rs. 47,020, the balance has to be treated in accordance with the provisions of law regarding treatment to be given to entertainment expenses. We order accordingly. 8. We next come to ground No. 8. This relates to disallowance of Rs. 51,019 out of travelling expenses incurred by directors. At the time of hearing, the learned counsel for the assessee very fairly brought to our notice a judgment of the Special Bench of the Tribunal in Sundaram Finance Ltd. vs. IAC reported at (1984) 18 TTJ (Mad) (SB) 348, which is against the assessee. The learned Sr. De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we have arrived at after careful consideration of not only of the rival submissions but after looking into the record for the year under appeal and other relevant papers to which our attention was invited. The year under appeal is 1982-83. for the asst. yr. 1980-81, the Ito in the draft assessment order submitted to IAC under s. 144B had similarly disallowed the expenditure but under directions from the learned IAC before the completion of assessment the amount as deleted. For the asst. yr. 1981-82, no such addition was made. There is no dispute that facts and circumstances in those years and the year under appeal are in pari materia. The expenditure was incurred within the sanctioned amount by the Reserve Bank of India. It is also accepted that the persons who went abroad did so in the ordinary course of business of the assessee and in furtherance of such business. But while farming the assessment, the assessing authority has for this year departed from the earlier decisions arrived at after due consideration. In this departure, he, however, has not brought any evidence that would justify a departure but has merely dwelled upon the powers vested in him under r. 6D. According to hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s again not been found out when exactly Cotton Corp. Of India purchased the goods and what is the date of arrival of such goods in India. There is a claim that the Corporation wanted the assessee to take delivery of such arrival of goods on payment of their price. Since it is Corporation dealing with the assessee, which is a limited company, there must be correspondence between the two regarding the requirement of delivery to be taken by the assessee from the Corporation of the goods that arrived. However, there is no such correspondence, either produced or considered. But it is claimed that the said corporation sold those goods on refusal from the assessee to pick them up in the market. The mode of sale or the party to whom goods were sold is not or record. There is a claim of loss having been suffered in such a sale by the Corporation and the Corporation is said to have filed a suit for recovery in the Bombay High Court. The plaint by the Corporation before the Bombay HighCourt would indicate the reasons for claim. This has, however, not been examined. The suit is still pending before the Bombay High Court but the assessee made entries in its books of accounts in the accounting p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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