9911796707
TMI Blog1977 (2) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... ng from several years before at least as per the available evidence on record from the asst. yr. 1970-71. There is another account called Phool Chand Dhan Kumar. This account is the account of the partner Dhan Kumar to which the share of profit was being credited. There was always a credit balance in this account. The partner Dhan Kumar is entitled to interest under the terms of the arrangement on the credit balance. To provide interest what was being done was the debit balance in the account of Tara Chand was being set off against the credit balance appearing in the account of Phool Chand Dhan Kumar and on the balance only interest was being provided. In this year against credit balance of Rs. 82,618 in the account of Phool Chand Dhan Kumar the debit balance of Rs. 63,261 in the account of Tara Chand Jain was set off and on the balance of Rs. 19,357 interest of Rs. 1,883 was provided and credited to the account of Phool Chand Dhan Kumar. The ITO was of the opinion that the set off of the debit balance in the account of Tara Chand Jain was not correct. That represented the amounts drawn by the partner Dhan Kumar. The firm should have charged interest on the debit balance in that ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore think that the assessee is right in setting off the debit balance in one account against the credit balance in the other account and charging interest on the balance amount only and the Department is not justified in treating the debit balance separately and to charge interest thereon as if it is a loan advanced by the firm to the partner. The addition is therefore justified and we accordingly delete it. 5. The next objection taken by the assessee is to an addition of Rs. 10,946 as the income of the assessee which represented the collections made an account of Dharmada. The assessee had been collecting from his customers certain amounts by way of Dharmada and the amount so collected in the year amounted to Rs. 16,341 out of which Rs. 5,395 appears to have been spent and there was a credit balance of Rs. 10,946 in this a/c. The ITO was of the opinion that these Dharmada collections formed part of the Revenue receipts of the assessee and therefore taxable as income. The assessee relied upon the decision of the Allahabad High Court in the case of Bijli Cotton Mills Ltd.(1), and another case of Thakur Das Shyam Sunder (2). The ITO felt that these decisions do not apply to the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on vested in a trustee to spend the trust amount over charities will not alter the character of the deposit. A trust for charities without specifying any charities at all is valid. Accordingly even if some discretion was given to the petitioner to spend the amount deposited with it on a charity of its own choice, it does not mean that either no trust was created or the trust so created was invalid. Following with respect the Allahabad High Court decision. we hold that the authorities below are not justified in taxing this charity receipts as revenue receipts. We direct that those receipt should be excluded from the assessment. 8. The third objection taken in the grounds of appeal is to denial of deduction of a sum of Rs. 14,289 incurred by the assessee under the head rasoi expenses. The view of the Department is that these expenses were in the nature of entertainment expenditure and therefore they were not allowable as a deduction. The ITO also referred to certain entries in the cash book and pointed out that the vouchers for those expenses were not produced. It was therefore not possible to say whether such expenditure was really incurred or not. He also found that certain paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ahabad High Court in Brij Raman Das 3 and that of the Full Bench of the Kerala High Court in CIT vs. Vemiah Reddiar 4. He pointed out that the expenses must be disallowed as entertainment expenditure. 10. We are unable to subscribe to the view that the rasoi expenses incurred by the assessee can be regarded as entertainment expenditure. The rasoi expenses are so essential for the assessee to incur that there is no question of entertaining any constituent by incurring the expenditure. It is also pointed out that the staff members also participate in a big way in the rasoi maintained by the assessee. Each of the employee is provided one meal in the afternoon and given tea in the evening. The assessee was incurring the expenditure over a period of years. This expenditure became necessary because it has to meet the expenditure of the veoparies, who come to it with their goods and who stayed with them till the goods are disposed of. Recently the Andhra Pradesh High Court also had an occasion to consider this question. It held that the expenses incurred in such circumstances could not be said to be entertainment expenditure because on facts there was no entertainment. This decision is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had become the owner of it. The assessee cannot be permitted to take advantage of its own contention of not paying the amount to the Mandi Samiti and also not allowing the Department to treat it as income. 13. In our opinion the Department is not justified in treating this sum as income of the assessee. None of the facts pointed out by the learned counsel for the assessee was questioned. The facts on record show that these collections were made not in the year under appeal but in the year 1969. If at all it can be taken as income, it must be of that year but not for the year under appeal. Nothing happened in the year under appeal except a view taken by the ITO that this amount was taxable. The litigation is still going on. There was no cessation of liability in the sense that Mandi Samiti having given up its claim nor the matter has been finally decided against the assessee and strangely the amount was never allowed as a deduction in the past so that the provisions of s. 41(1) could be applied. In fact this amount could not be allowed as a deduction because the assessee never claimed it as deduction, it being a collection made by it. The treatment in the accounts also show that t ..... 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