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TMI Blog1981 (12) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... is exercised by the assessee by actually filing an appeal against the order of the Commissioner (Appeals), the assessee losses the right to file a cross objection because the statute does not provide for two appeals against one appellate order. It was contended that this becomes very clear from a simple reading of sub-ss. (1) to (4) of section 253 of the Income-tax Act. 3. It was further contended that accordingly to r. 22 of the Income-tax (Appellate Tribunal) Rules, 1963, a memorandum of cross-objections filed under sub-s. (4) of section 253 has to be registered and numbered as an appeal and all the rules, so far as may be, apply to such appeals. Therefore, it was clear that the assessee was not entitled to file appeals as well as the cross-objection against the same order of the Commissioner (Appeals). In view of this, the cross-objections of the assessee may be dismissed as null and void. 4. Opposing these submissions, the learned counsel for the assessee, Shri D.K. Gupta, Advocate, contended that the contentions submitted on behalf of the Revenue are wholly erroneous and misconceived. He pointed out that section 253(1) of the Act does not speak of part of the order whereas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) an order passed by a Commissioner under section 263 or under section 272A or under section 285A or an order passed by him under section 154 amending his order under section 263. (2) The Commissioner may, if he objects to any order passed by AAC or, as the case may be, a Commissioner (Appeals) under section 154 or section 250, direct the ITO to appeal to the Appellate Tribunal against the order. (3) Every appeal under sub-s. (1) of sub-s. (2) shall be filed within sixty days of the date on which the order sought to be appealed against is communicated to the assessee or to the Commissioner, as the case may be. (4) The ITO or the assessee, as the case may be, on receipt of notice that an appeal against the order of the Appellate Assistant Commissioner or, as the case may be, the Commissioner (Appeals) has been preferred under sub-s. (1) or sub-s. (2) by the other party, may, notwithstanding that he may not have appealed against such order or any part thereof, within thirty days of the receipt of the notice, file a memorandum of cross-objections, verified in the prescribed manner, against any part of the order of the Appellate Assist. Commissioner or, as the case may be, the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e an appeal against the order of the AAC or the Commr. (Appeals), it is not necessary that the appeal may be filed against all the issues decided by the appellate authority. If the appellate authority has decided certain issues partly in favour of the assessee and partly in favour of the Revenue, the assessee may think it wiser not to agitate those issues which had been decided in partly in his favour. However, sub-s. (4) very clearly provides that in case the Revenue files an appeal, which in the context can be either against the order of the appellate authority on the issues entirely decided against it or partly decided against it and partly against the assessee. If such an appeal is filed by the Revenue and the assessee gets a notice thereof, as provided in sub-s. (4) of section 253, there is nothing in the statute debarring the assessee from filing cross- objection. If the assessee had already exercised an option of filing an appeal against the issues decided against the interest of the assessee, that would not serve an estoppel from filing cross-objections against the appeals filed by the Revenue. 8. Rule 47 of the Income-tax Rules, 1962 provides for form of appeal and memor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s decided against him. The objection raised by the revenue is, therefore, untenable and is rejected. 11. Before we close the issue of preliminary objection, we would like to record that even if it may be said that on the objection raised by the Revenue, two views are possible, the view which is favourable to the assessee has to be accepted because the Hon'ble Supreme Court has laid down in the case of CIT v. Kulu Valley Transport Co. (1970) 77 ITR 518 (SC), that while construing the provisions of a taxing statute the view which favours the assessee must be adopted. However, this we are merely placing on record to indicate that even if there may be two views, the one that favours the subject has to be adopted. We have no doubt in our mind that on the relevant provisions of law, even two views are not possible and the only reasonable view is that cross-objection is a right that accrues to the opposing party on receipt of a notice that an appeal has been filed by the other. 12. Now we take up for disposal on merits the cross-appeals and the cross-objections. We have heard the parties. We have also taken into consideration the orders passed in the case of the assessee for the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplying the test of commercial expediency for determining whether an expenditure was wholly and exclusively laid out for the purpose of the business, reasonableness of the expenditure has to be adjudged, as pointed out by the Supreme Court in the case of CIT v. Walchand Co. (P.) Ltd. (1967) 65 ITR 381(SC), from the point of view of the businessman and not of the Revenue. This proposition of law was further reiterated by the Supreme Court in the case of J.K. Woollen Manufacturers v. CIT, cited as (1969) 72 ITR 612 (SC). In this case, the Hon'ble Court further observed that it is, of course, open to the Appellate Tribunal to come to a conclusion either that the alleged payment is not real or that it is not incurred by the assessee in the character of a trader or it is not laid out wholly and exclusively for the purposes of the business of the assessee and to disallow it. 15. Applying these principles to the facts of the case before us, we find that in disallowing only a part of the remuneration to the directors for the year under appeal, the Revenue has in fact accepted the position that the directors are acting as employees of the assessee and that they are rendering services fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d counsel for the assessee. The assessee was keeping in contact with various distributors and dealers with whom the assessee had to come in contact in the furtherance of the business of the assessee. The expenditure laid out by the assessee is thus wholly and exclusively for the purpose of the business of the assessee and from the items of expenditure which are on record of the ITO, it cannot be said that it is in the nature of entertainment. Therefore, for each of the assessment years under appeal, the amounts sustained by the Commissioner (Appeals), in our opinion, are not justified. These are deleted. The assessee gets relief of Rs. 3,834, Rs. 2,528 and Rs. 4,340 respectively for the assessment years 1977-78 to 1979-80. 17. The next issue that is common in all these appeals is the disallowance on account of sales promotion expenses. Insofar as this issue is concerned, the claim of the assessee for the three assessment years under appeal respectively was Rs. 29,749, Rs. 6,248 and Rs. 17,872. The ITO disallowed respectively Rs. 2,354, Rs. 5,098 and Rs. 1,707 for the assessment years 1977-78 to 1979-80. The Commissioner (Appeals) has confirmed these disallowance. 18. We find th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tives of the directors) at 2 per cent per month. He considered it as excessive. According to him, the maximum rate on which interest could be allowed was 18 per cent. He allowed at the rate of 18 per cent and disallowed the balance of 6 per cent . However, he worked out the disallowance under two sections, i.e. section 40A(8) and section 40(c)(i) of the Income-tax Act, 1961. For the assessment year 1977-78, the total disallowance to this point was worked out as under: "out of total interest Rs. 55,672 debited to P L A/c. under section 40(c)(i) at the rate of 1/4th disallowed. 13,918 Less statutory disallowance under section 40A(8) at the rate of 15 per cent 8,350 Net disallowance under section 40(c)(i) 5,668 Add statutory disallowance under section 40A(8) at the rate of 15 per cent 8,350 Total disallowance 13,918 For the assessment year 1978-79 the total disallowance was worked out at Rs. 21,584. For the assessment year 1979-80, the disallowance under this head of interest was Rs. 28,350. 21. When the matter came up in appeal before the Commissioner (Appeals), he applied the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pretation of a statute and it means that when there is a conflict between a general provision and a special provision operating in the same field, the special provision mush be given effect to and the general enactment can only apply in respect of provisions not covering the special or particular provision. The Hon'ble Tribunal in its judgment has clearly applied this principle because they accepted a contention raised on behalf of the assessee that in view of the specific provision of section 40A(8), no further disallowance could be made either under section 40(c) or under section 40A(2) of the Income-tax Act, Since the learned Commr. really followed the judgment of the Tribunal, we do not see any justification for interference in his order at the instance of the revenue in the manner required. Therefore, for all the years under appeal, the appeals of the revenue have to be dismissed. 24. This leaves us with the cross-objections filed by the assessee. These cross-objections challenge the sustention of the interest by the learned Commr. following the judgment of the Tribunal for the assessment year 1976-77 in the case of the assessee. Since following the judgment of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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