High Court Of Allahabad
CIT vs. Jagaran Prakashan (P) Ltd.
Section 37(3A), 37(3B)
Asst. Year 1985-86
Sushil Harkauli & Ajai Kumar Singh, JJ.
IT Ref. No. 93 of 1994
2nd May, 2007
Counsel appeared : Piyush Agrawal, for the Respondent
JUDGMENT
By the court :
We have heard learned counsel for both sides. The following question has been referred in this case :
“1. Whether, on the facts and circumstances of the case, the Tribunal is correct in law in holding that the expenditure on hiring of cars does not come within the purview of s. 37(3B) of the IT Act, 1961, for the purposes of 10 per cent disallowances ?”
2. It appears that under s. 37 business expenditure which is sought to be deducted from the profits and gains of business or profession has been confined under certain cases under sub-s. (3A) and sub-s. (3B) r/w Expln. (c). Apparently, these provisions which had been inserted and have now been deleted were for the purposes of stopping extravagant expenditure on advertisement, publicity, sales promotion, running and maintenance of aircraft, running and maintenance of motor cars and payment made to hotels. Under sub-s. (3A) of s. 37, if expenditure on the above items exceeded rupees one hundred thousand, the entire excess would not be permitted to be deducted and only upto a maximum of 80 per cent of the excess above rupees one hundred thousand would be allowed to be deducted by the assessee from the profits and gains of business or profession.
3. Under Expln. (c) expenditure of running and maintenance of motor cars would include expenditure incurred on hire charges for engaging cars plied for hire.
4. The assessee in the present case is a newspaper publisher. They sought deduction of expenditure on taxi hire charges for taxes engaged for delivering the newspapers. The Tribunal has held that this expenditure would not be hit by sub-s. (3A) inasmuch as it is an expenditure necessarily incidental to the business.
5. We are unable to agree. Expenditure unnecessary to the business obviously cannot be allowed to be deducted. However, if expenditure is necessary to business and has been incurred, its deduction is sought to be limited by the statute to the full extent up to rupees one hundred thousand and to 80 per cent of the amount of exceeding rupees one hundred thousand.
6. If the vehicles which were hired by the assessee has been goods vehicles and not passenger vehicles, the Tribunal’s order could have been sustained. However, if the assessee has chosen to hire not goods vehicles but passenger vehicles for alleged transportation or distribution of goods or newspapers, the expenditure would fall within the bar of s. 37(3B).
7. We are unable to accept a baseless suggestion from the side of the assessee made for the first time in this reference that the vehicles were not passenger vehicles but goods vehicles, because the word “Taxi” denotes only passenger vehicles and not goods vehicles. In the circumstances, we answer the question referred in favour of the Department and against the assessee. Reference disposed of.
[Citation : 296 ITR 627]
