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TMI Blog2010 (9) TMI 849X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the circumstances of the case, the finding of the ITAT as well as CIT(A) that a business decision of the assessee could not be challenged by the Assessing Officer, is a perverse finding particularly in view of the fact that no prudent businessman will keep machinery idle and pay huge lease rentals as well as maintenance/ servicing charges, without any benefit? 3. The assessee is engaged in the business of extraction and sale of iron ore. For the assessment year 1989-90, the assessee filed a return of its income, declaring a loss of Rs.1,39,89,493/-. The Assessing Officer, after disallowing several items of expenditure and/or deductions, assessed the total business loss of the assessee to be Rs.65,102/- only. The Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of iron ore from the mines. It appears that during the relevant previous year, the assessee did not use 3 out of 4 dozers taken on lease and only one dozer was put to actual use of extraction of iron ore. The Assessing Officer held that no prudent businessman would take on lease 4 dozers when only one could be put to actual use. Accordingly, the Assessing Officer held that the rent paid for 3 dozers was not a prudent business expenditure incurred by the assessee and he, therefore, disallowed the proportionate rent attributable to the 3 dozers which were not used during the year. It may be noted that it is not the case of the Revenue that the lessor- New Century Leasing and Investment Ltd., and the assessee are related to each other or tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the businessman and not of the Revenue. In that case, the question was regarding whether the remuneration paid to an employee was a deductible expenditure and the Supreme Court held that an employer in fixing the remuneration of his employees is entitled to consider the extent of his business, the nature of the duties to be performed, and the special aptitude of the employee, future prospects of extension of the business and host of other related circumstances. (underlined supplied). The test to be applied in considering is whether any expenditure claimed as an allowance/deduction in computing the business profit, all the expenses which are considered as necessary and expedient by the businessman are required to be allowed. Test of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure was incurred by the assessee could be allowed as a deduction under Section 10(2)(xv) of the Income-Tax Act, 1922, the High Court accepted the conclusion reached by the Tribunal that the expenditure was incurred for the purpose of the business carried out by the assessee, but at the same time, asked the Tribunal to re-examine the exact amount expended by the assessee in connection with the criminal litigation. In an appeal, the Supreme Court held that it was not open to the department to prescribe what expenditure the assessee should incur and in what circumstances he should incur that expenditure. Every businessman knows his interest best. 7. In the present case, it is not disputed that the dozers were required for the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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