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2016 (11) TMI 890 - KERALA HIGH COURTDisallowance of expenditure claimed on the use of cars and telephone - Held that:- 8 cars were maintained by the assessee as his personal fad. It was also found that the assessee has not maintained any log register or other materials to establish that all these 8 cars were used by the assessee exclusively for the purpose of carrying on his business. Insofar as the telephone bills, the expenses of which were also claimed by the assessee are concerned, the Assessing Officer has disallowed 50%. The 1st Appellate Authority has reduced it to 5% and the Tribunal has restored the order of the Assessing Officer. On this issue also, the Tribunal has held that the findings in respect of the disallowance of the car expenditure equally applied. Here also, the Tribunal has found that the assessee has not maintained proper data base to verify whether all the phones were used for the purpose of his business. The aforesaid conclusions of the Tribunal regarding the cars and the telephone bills show that these are factual conclusions and do not give rise to any question of law for the consideration of this court. Disallowance of salary paid to the assessee’s wife - Held that:- If the income earned by the wife of the assessee was on account of her technical or professional knowledge or experience, such income cannot be reckoned in computing the total income of the assessee. Reading of paragraph 6 of the assessment order shows that the very contention of the Authorized Representative of the assessee was “that the assessee had imparted secret formula of his medicine to her”. In other words, apart from imparting the secret formula to his wife, even the assessee did not have a case that the wife was earning her salary on account of her technical or professional knowledge or experience. In such a case, the payment made by the assessee to his wife would not qualify for the benefit of proviso to Section 64 (1)(ii). - Decided against the assessee Expenditure incurred for the Research and Development - Held that:- The expenditure in question was incurred during the previous assessment year and that the assessee who is following the mercantile system of accounting could not have claimed it during the assessment year in question. It was this finding which was ultimately sustained by the Tribunal. Since the assessee is admittedly following the mercantile system of accounting, the expenditure in question could have been claimed only in the year in which it was incurred. - Decided against the assessee Disallowance of advertisement expenditure - Held that:- Since the expenditure in question was incurred in connection with launching of the assessee's new product, respectfully following the dictum laid down by the decision of this court in Aluminium Industries Ltd. (1994 (11) TMI 63 - KERALA High Court ), we answer the 4th question of law raised in favour of the assessee and against the Revenue.
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