High Court Of Bombay
CIT vs. Bhor Industries (P) Ltd.
Section 37(1)
V.C. Daga & A.S. Aguiar, JJ.
IT Ref. No. 36 of 1994
19th August, 2005
Counsel Appeared
A.N. Katangale & D.A. Dubey, for the Revenue
JUDGMENT
V.C. Daga, J. :
By this reference under s. 256(1) of the IT Act, the Tribunal has referred the following question of law for the opinion of this Court :
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing assessee’s claim in respect of foreign travel expenses of Smt. L.R. Patel, who accompanied her husband Shri R.M. Patel, the director of the assessee-company ?”
Facts :
2. The factual matrix reveals that Shri R.M. Patel, one of the directors of the assessee-company had undertaken foreign travel which was partly for the purposes of purchasing machinery and partly for export promotion. The AO disallowed the whole expenditure. The learned CIT(A) held that 1/5th of the expenditure on the travel of the director was attributable to the purchase of the machinery and the balance was attributable to export promotion. He, accordingly, allowed 4/5th of the total expenditure as of revenue nature and the balance 1/5th was held to be as capital. The Tribunal found that the machinery sought to be purchased was for a new project which was yet to come up. The learned CIT(A)’s order did not show that the assessee had contended before him that the machinery was proposed to be purchased in connection with the existing line of business. On this finding of fact, the Tribunal held that no case had been made for its interference insofar as disallowance of 1/5th of the expenditure on the travel of Shri R.M. Patel was concerned.
3. Shri R.M. Patel, during the course of his foreign travel, was accompanied by his wife Smt. L.R. Patel. It was claimed on behalf of the assessee that the foreign journey by the wife accompanying her husband on business tour, was also for the purposes of assessee’s business. The Tribunal upheld this contention and held that the expenditure on travel of Smt. Patel on the foreign tour should be treated at par with that of her husband. Accordingly, Tribunal allowed 4/5th expenditure incurred on the foreign tour of Smt. Patel treating it as revenue expenditure.
4. The question of law referred for opinion indicated in the opening part of this order, has arisen on the facts enumerated hereinabove. Rival contentions :
5. Learned counsel appearing for the Revenue contends that the finding of fact has been recorded by the CIT(A), wherein categorical finding has been recorded holding that the expenditure on travel of Smt. Patel was liable to be disallowed in toto because the appellant-assessee could not establish any business purpose behind her foreign travel.
6. Learned counsel for the Revenue also contends that in view of above finding of fact recorded by the first appellate authority, Tribunal was not justified in allowing the 4/5th expenditure incurred on foreign tour of Smt. Patel treating it as of revenue expenditure. He, thus, submits that the above question referred at the instance of the Revenue should be answered in favour of the Revenue. 6.1 Per contra, learned counsel appearing for the respondent-assessee, contends that this Court in CIT vs. Alfa Laval (I) Ltd. (IT Ref. No. 56 of 1990, dt. 15th July, 2005) [reported at (2006) 200 CTR (Bom) 240—Ed.], has allowed the similar type of expenditure holding that to be of revenue nature. He, thus, submits that the findings recorded by the Tribunal are in accordance with law as such question referred to should be answered in favour of the assessee. Consideration : 6.2 Having heard the rival parties, it is not in dispute that the CIT(A) has recorded a categorical finding that the expenditure on the travel of Mrs. Patel was not for the business purposes. The Tribunal could not have reversed its finding without holding the finding to be erroneous with further finding that the expenditure on foreign tour of Mrs. Patel was incurred for the purposes of business of the assessee-company. It is no doubt true that this Court has allowed similar type of expenditure in the case of Alfa Laval (I) Ltd. (supra). However, in that case, the Tribunal had recorded a clear-cut finding of fact that the expenditure incurred on the foreign tour of the wife of the president of the assessee- company was for the purposes of business. In view of this categorical finding of fact recorded by the authorities below, this Court had treated the expenditure on foreign travel of the wife of the company’s president as of revenue nature. In the case on hand, there is categorical adverse finding recorded by the CIT(A) that no business purpose was involved in the foreign tour of Mrs. Patel. Consequently, expenditure incurred was rightly disallowed, in toto, by the CIT(A). The finding of fact recorded by the CIT(A) was never set aside by the Tribunal. If foreign tour was not for the purposes of business, then it cannot be an allowable expenditure.
7. In the above view of the matter, the above question referred is answered in negative, i.e., in favour of Revenue and against the assessee.
8. Reference, accordingly, stands disposed of with no order as to costs.
[Citation : 284 ITR 319]
