TMI Blog2007 (6) TMI 314X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of its President Mrs. Veena Modi. When asked to furnish details and justification to hold that the expenses are incurred wholly and exclusively for the purpose of business, the assessee stated that Mrs. Veena Modi visited following places : 1.Bombay-Dubai-Bombay (11th April to 15th April) 2.Delhi-London-New York-London-Delhi (19th April to 26th April) 3.Delhi-Hongkong-Tokyo-Hongkong-Delhi (5th May to 12th May) 4.Delhi-London-Paris-Zurich-London-New York-London-Delhi (9th June to open) 5.Delhi-Hongkong-Sydney-Hongkong-Bombay-Delhi (13th September to 19th September) 6.Delhi-London-Delhi (27th September to 8th October) 7.Delhi-London-New York-London-Delhi (12th November to 19th November) 8.Delhi-London-Brussels-London-Delhi (12th December to 22nd December) 9.Delhi-London-Hanover-London-Delhi (25th March to 27th March) The assessee also stated that Mrs. Veena Modi had been visiting these countries to have meetings in connection with exploring the certain business activities of the assessee-company. The Assessing Officer concluded that the assessee-company has shown income from profit and gains of business of Rs. 8,79,338 during the assessment year 1998-99. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... management consultancy. ( f )To discuss business of participating in and providing venture capital funds or any other funds for seed capital, risk capital foundation. ( g )to discuss modalities of acting as franchisee for rendering stock broking services in India. All these activities are incidental to the assessee s business of merchant banking, financing etc. The foreign trips were made with the purpose of exploring and finding new/better avenues for carrying on of business activities of the appellant for the furtherance of the business interest of the appellant to meet potential customers, to from strategic alliances and to learn about new instruments/concepts in the overseas capital market. Learned CIT(A), after considering the submissions and the evidence placed before him concluded thus : "I have gone through the contents of the assessment order carefully and considered the submissions of the ld. AR of the appellant. In the case of CIT v. Panipat Woollen General Mills Co. Ltd. ( supra ) Supreme Court has decided two propositions for allowability of deduction under section 37(1) of the Act i.e., the expenditure should be laid out or expended wholly and exclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and circumstances of the case I am of the opinion that foreign visits by Mrs. Veena Modi were not for the purposes of the business and amount was not expended wholly and exclusively for the purposes of business and therefore, it is not allowable as deduction under section 37(1) of the Act. The addition made by the Assessing Officer is confirmed." The assessee is in further appeal before us. 2.1 Learned counsel for assessee Shri Ajay Vohra submitted that Mrs. Veena Modi is an employee of appellant company discharging the function as Chairman. The remuneration payable to her has been held to be allowable. The local travelling expenses incurred in connection with her travel are also allowed. This proves that Mrs. Modi is required to travel extensively in connection with existing or prospective business of the appellant company. She is also one of the renowned entrepreneur who was awarded Udyog Ratan Award, Mahila Shiromani Award, Woman of year 2000 Award by Government organizations. The visit of Mrs.Veena Modi for the purpose of business is established by confirmation letter from following persons : 1.First Bank Mortgage Inc., Connecticut, USA 2.Sai International, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have heard rival submission. Hon ble Supreme Court in the case of CIT v. Panipat Woollen General Mills Co. Ltd. [1976] 103 ITR 66 held that in order to fall within section 10(2)( xv ) of Indian Income-tax Act, 1922 (analogous to the provisions of section 37(1) of the Income-tax Act, 1961) the deduction claimed must be expenditure which was laid out or expended wholly and exclusively for the purpose of business. This will naturally depend upon the facts of each case. Hon ble Delhi High Court in the case of Siddho Mal Sons v. ITO [1980] 122 ITR 839 held that the word "wholly" refers to the motive, object and purpose of the expenditure and gives jurisdiction to the taxing authorities to examine these matters. Ordinarily, it is for assessee to decide whether any expenditure should be incurred in the course of its business. Such expenditure may be incurred voluntarily and without any necessity and if it has incurred for promoting the business to earn profits, the same can be claimed as deductible under section 37(1) of the Act. Hon ble Supreme Court in the case of CIT v. Delhi Safe Deposit Co. Ltd. [1982] 133 ITR 756 held that the true test of an expenditure laid o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
