TMI Blog1969 (8) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... nters' Conference at Amsterdam, the assessee, Krishna Rao, at that place saw the connected exhibition of printing equipment and machinery and also sought acquaintance with the techniques of the use of this machinery. Besides what he did at Amsterdam, Sri Krishna Rao also visited the United Kingdom, Germany, Italy and Switzerland. In the United Kingdom, he stayed at London for 10 days. In Germany, Italy and Switzerland, he stayed for 5 days each. He claimed the expenditure which he had incurred for this foreign tour of Rs 7,160 as an allowable deduction under section 10(2)(xv) of the Income-tax Act. He contended that the tour was actuated by business considerations and contended that the trip had helped him to get acquainted with various developments in printing equipment and techniques. At the exhibition, in fact, he ordered some machinery and also learnt the different types of printing jobs that could be done with Heidelberg machinery. In the United Kingdom, he visited certain mono and linotype factories as he was using a similar machinery in his business. He also examined some old printing machinery there. In the other countries also, which he visited, he spent the time in stud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses in Germany, Italy and Switzerland were disallowed as personal expenditure. Thus on the whole Rs. 2,000 were disallowed and deduction to the extent of Rs. 5,160 was permitted. Against the said decision of the Appellate Assistant Commissioner dated July 31, 1963, the department preferred an appeal to the Tribunal. Before the Tribunal, it must be noted that the findings which the Appellate Assistant Commissioner had given on facts were not challenged. Two contentions were raised before the Tribunal. It was firstly argued that the expenditure must be said to be in the nature of capital expenditure in view of the findings of the Appellate Assistant Commissioner that the prestige and goodwill of the assessee's business had acquired definite advantages on account of these visits ; and, secondly, the expenditure was not wholly and exclusively laid out for the purposes of the assessee's business. It was, however, conceded before the Tribunal that if the association which sent Sri Krishna Rao as their representative had incurred the expenditure, the association could have claimed that deduction as a proper one. It was, however, contended that Sri Krishna Rao cannot claim such ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not be an allowance of the nature described in clauses (i) to (xiv) of section 10(2) ; secondly, it should not be in the nature of capital expenditure ; and, thirdly, it should not be in the nature of personal expenses of the assessee. Apart from these three negative injunctions, the fourth positive requirement of the section is that the expenditure should have been laid out or expended wholly and exclusively for the purpose of the assessee's business, profession or vocation. Section 10(2)(xv), therefore, does not permit deduction of an expenditure, if it is found that the expenditure is in the nature of a capital expenditure. It is no doubt true that the Appellate Assistant Commissioner has observed that because of Sri Krishna Rao's attending the conference as a delegate certain goodwill and prestige value which would be in the interest of his business must necessarily emerge because the conference pertains to the like business. We do not, however, think that because of any such observation made by the Appellate Assistant Commissioner, the expenditure incurred on the foreign tour can be characterised as a capital expenditure. By attending the conference, he might have ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Bombay High Court in R. C. No. 14 of 1951, dated August 31, 1951, where Chagla C.J., who wrote the opinion, said : " The result of the expenditure is not the bringing into existence of a new asset, but the expenditure is calculated to increase the profits of the company. And everything that is calculated to increase the profits of a business is not necessarily capital expenditure. " We are, therefore, clearly of the view that merely because of the above said observation made by the Appellate Assistant Commissioner, the expenditure incurred by Sri Krishna Rao on his foreign tour cannot be said to be an expenditure of a capital character and does not therefore come within the negative aspect of clause (xv) of section 10(2) of the Income-tax Act. It was then contended by Sri Anantha Babu that the expenditure incurred cannot be said to have been incurred for the assessee's business. Merely because he attended the conference, it cannot be said that the expenditure incurred is on business. Now the term " business " is capable of both narrow as well as wide interpretation. The courts, however, have always been inclined to construe this word not in its narrow sense. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business it was contended that by merely attending a conference the assessee cannot be said to have gained anything which he could profitably make use of for advancing his business. We do not find that the argument can be accepted. It assumes that by attending a conference no person can learn anything from the discussions which are usually held in such conferences. It would be incorrect to assume that a person is not educatable through the media of conference. No mirror is dull or rusty that it cannot reflect nor there is any stone out of which a statue cannot be carved. Likewise, there is hardly any person who, by attending the conference in his own subject, cannot be said to have been benefited. In conferences of this character, particularly in the international conferences, usually, the delegates not only see the things for themselves but compare notes and hear the research papers read out in such conferences. In such circumstances, how could it be argued that Sri Krishna Rao, who is the karta of a joint family and who has been managing the printing business since quite a time, may not have got anything as a result of attending the international conference or seeing the exhibi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of achieving his main object. In view of this finding we are not prepared to accept the contention that the amount which the assessee spent on his foreign tour was not actually spent on business in which he is interested. We do not, therefore, experience any difficulty in rejecting this contention. It was then argued that the assesssee did not go to Amsterdam to attend the conference in his individual capacity but went there as a representative of the printers' association and therefore any expenditure incurred by him would be deemed to have been incurred for the purpose of the association and not for his business. In support of this contention, reliance was placed on the following observations of Subba Rao J. in Commissioner of Income-tax v. Malayalam Plantations Ltd. : " The purpose shall be for the purpose of the business, that is to say, the expenditure incurred shall be for the carrying on of the business and the assessee shall incur it in his capacity as a person carrying on the business. It cannot include sums spent by the assessee as agent of a third party, whether the origin of the agency is voluntary or statutory ; in that event, he pays the amount on behalf of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extent. The true test in our view is to find out whether the businessman, when he expended the money, was acting reasonably in the interests of his own business uninfluenced by any irrelevant or extraneous considerations. Therefore, in deciding whether a given expenditure was incurred wholly and exclusively for business, what has to be seen is with what object the assessee had incurred that expenditure. If essentially or substantially he was actuated by a motive in attending the conference to improve the condition of his business, but incidentally intended to serve the association, then it can safely be held that the assessee had incurred the expenditure wholly and exclusively for his business. After going abroad if he had incurred some expenditure on his person or for the purpose of sight-seeing, that expenditure, assuming that it cannot be computed towards the expenditure incurred on business even then the expenditure which the assessee has incurred in going from India to Amsterdam and returning from that place to India and which forms the major portion of the deductions claimed cannot be said not to have been incurred wholly and exclusively for the purpose of the business. The t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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