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S. GOPALAKRISHNAN, ARSHIK HERBAL REMEDIES (INDIA) , Versus COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM

Disallowance 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 .....

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ow 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 Representativ .....

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e 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 .....

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ND P.V.ASHA, JJ. FOR THE APPELLANT : ADVS.SRI.ANIL D. NAIR, SMT.NIVEDITA A.KAMATH FOR THE RESPONDENT : SRI.JOSE JOSEPH, SC, FOR INCOME TAX JUDGMENT Antony Dominic, J. This appeal is filed by the assessee impugning the order passed by the Income Tax Appellate Tribunal, Cochin Bench, in I.T.A.No.624/2007 pertaining to the assessment year 2004-2005. 2. On facts, it is relevant to state that for the assessment year 2004-2005, the assessee had returned loss of ₹ 10,12,980/-. The Assessing Offic .....

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In the facts and circumstances of the case, ought not the Tribunal had allowed the expenditure claimed on the use of cars and telephone bills ad allowable expenditure under Section 37(1) of the Act? ii) In the facts and circumstances of the case ought not the Tribunal had held that the salary paid to the wife is an allowable deduction as contemplated under Section 64(i)(ii) of the Act? iii) In the facts and circumstances of the case ought not the Tribunal had held that the research and developme .....

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he submissions made at the Bar and on going through the orders impugned, we feel that the four questions of law framed in the appeal memorandum deserve to be considered. 5. Insofar as the first question regarding the expenditure claimed on the use of cars and telephone bills are concerned, reading of Annexure A assessment order shows that the assessee, who is the manufacturer of Anoop Hair Oil , on the basis of a secret formula developed by the assessee himself had entrusted the marketing of the .....

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ed by the Assessing Officer. 6. Reading of the order passed by the Tribunal shows that it has endorsed the conclusion of the Assessing Officer that the 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. 7. Insofar as the telephone bills, the expenses of which were also claimed by t .....

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ions 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. 8. Next issue is concerning the disallowance of the salary paid to the assessee s wife. The findings of the Assessing Officer in paragraph 6 of the assessment order is that the assessee had paid an amount of ₹ 81,000/- to his wife. This was sought to be justified by the assessee s Authorized Representative b .....

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appearing for the appellant challenged the finding of the Tribunal by relying on the provisions of Section 64(1) (ii) and the decision of the Andhra Pradesh High Court in Batta Kalyani v. Commissioner of Income Tax [154 ITR 59]. 10. Section 64(1)(ii) provide that in computing the total income of any individual, there shall be included all such income as arises directly or indirectly to the spouse of such individual by way of salary, commission, fees or any other form of remuneration whether in c .....

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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 techni .....

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such finding and, therefore, this judgment is of no assistance to the assessee. In the light of the above, the second question of law has to be answered against the assessee and in favour of the revenue. 13. Insofar as the third question regarding the expenditure incurred for the Research and Development is concerned, reading of paragraph 7 of the assessment order shows the same was disallowed by the Assessing Officer on the finding that even according to the Authorized Representative of the ass .....

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so has to be answered against the assessee and in favour of the Revenue. 14. The fourth question is regarding the advertisement expenses incurred by the assessee. Reading of the assessment order shows that during the assessment year in question, the assessee had incurred ₹ 29,25,000/- as advertisement expenses. This was disallowed on the basis that it is a capital expenditure. While the 1st Appellate Authority allowed the appeal of the assessee, the Tribunal has sustained the finding of th .....

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