Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2013 (10) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (10) TMI 839 - HC - Income TaxAllowability of commission expense paid to sister concern for its licence for importing furnace oil - Held that:- Sister concern since had a licence for importing the furnace oil, the assessee diverted its contractual obligation for averting the payment of damages, nothing comes on the record to explain as to how the sum termed as "commission" for performing the contract obligation was needed to be paid to the sister concern. Reliance has been placed upon the judgment in the case of Prakash Cotton Mills v. CIT [1993 (4) TMI 3 - SUPREME Court] - In the said case, the assessee had paid statutory due imposed by way of damages or penalty or interest and claimed it as an allowable expenditure under section 37 (1) of the Act. The Supreme Court held that the authority has to allow deduction under Section 37 (1) wherever such examination reveals that the concern impost to be purely compensatory in nature. However, such imports, wherever is found to be of composite in nature, that is partly of compensatory and partly of penal nature, the authority has to bifurcate the two components of the impost and give deduction of that component which is compensatory in nature and refuse to give deduction of that component which is penal in nature – In the present case, appellant has failed to show as to how this amount of commission is compensatory in nature, which would entitle the appellant to avail the benefit of this decision – Decided against the Assessee. Allowance of expenditure amounting ₹ 1,65,172/- for sending mangoes to one Narayan V. Thosar through Air Wings – Held that:- Reliance has been placed upon the judgment in the case of Sayaji Iron & Engineering Company v. CIT, reported in [2001 (7) TMI 70 - GUJARAT High Court], wherein it had permitted expenditure in maintenance of vehicles used by the Directors for personal purposes. The Directors’ remuneration includes any expenditure incurred in providing benefit free of charges. The Court reversed the decision of the Tribunal on the ground that the Directors of the assessee company, who are entitled to use the vehicles for their personal use in accordance with the terms and conditions on which they were appointed and the perquisites given to the directors formed part of their remuneration under the Explanation to section 198 of the Companies Act, 1956 for the purpose of determining their remuneration under section 309 of that Act. It further held that once such remuneration was fixed as provided under section 309, it was not possible to state that the assessee incurred the expenditure for the personal use of the Directors. Since it was as per the terms and conditions of service, it must be held as a business expenditure – In the present case, no ground comes forth, nor there is any rationale for such huge business promotion expenditure incurred for supplying mangoes to a particular person, this authority will not come to the rescue of the assessee – Decided against the Assessee.
|