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TMI Blog1973 (8) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... m two persons, R. Krishnaswamy and K. Palaniswamy. The purchases from the above two persons were at the rate of Rs. 980 and Rs. 871 per pothi for Cambodia and Karunguni, respectively. the above rates represent the ceiling prices fixed for Cambodia and Karurnguni cotton. But the rates at which Karunguni and Cambodia were purchased from some other persons were much less. The assessee had also paid for the cotton purchased from some others at the ceiling rates and such purchases amounted to Rs. 1,57,208. On an enquiry by the Income-tax Officer as to how the ceiling rates had been paid for the cotton purchased from the above two persons, the assessee stated that the cotton purchased from the above two persons really belonged to V. L. Balakrishn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed the finding of the Income-tax Officer that there was inflation in the price of cotton purchased from the said two persons, R. Krishnaswamy and K. Palaniswamy, name-lenders for V. L. Balakrishnan. He, however, disagreed with the Income-tax Officer as regards the other defects pointed out by him. He, therefore, held that the addition of Rs. 75 000 is not justified and that an addition of Rs. 40,000 would meet the requirements of the case. The assessee appealed to the Appellate Tribunal, contending that the company having paid for the cotton purchased from the above two persons at the ceiling rate, no addition to the income could be justified on the ground that the assessee has concealed the income by showing a larger outlay, even i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e first instance contended that both the Income-tax Officer and the Appellate Assistant Commissioner proceeded on the basis that the assessee has inflated the purchase price of cotton to show a larger outlay than the actuals and that, in the face of their orders, the Tribunal is not justified in holding that the ceiling price has actually been paid by the company in respect of the purchases of cotton made from V. L. Balakrishnan. It has also been pointed out by the learned counsel that the Tribunal proceeds on the basis that the revenue had conceded that the full amount of the ceiling price had been paid for the entire purchase of cotton made from V. L. Balakrishnan while, in fact, there was no such concession by the revenue. But, a close s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Officer It is, therefore, quite evident that the purchases from the above two persons are always at higher rates, viz., at the ceiling rates as the cotton, really belonged to Sri V. L. Balalkrishnan, director-in-charge of the assessee-company, and as the profit arisen out of the above transactions must have gone to the person benefit of the managing agents. Based on the said finding, it is urged on behalf of the revenue that once the transactions of purchase of cotton are found to have been effected partly to benefit the director, V. L. Balakrishnan, it is open to the Income-tax Officer to disallow such portion of the price as is found to have gone for the benefit of the director and that the disputed sum of Rs. 40,000 sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Rs. 80 were actually paid to the director in excess for Karunguni and Cambodia respectively With a view to benefit him and to treat the said alleged excess price paid as the actual benefit received by the director as a result of the purchase transactions, and disallow the same under section 10(2)(xv) on the ground that the said sum did not represent the actual expenditure incurred by the company wholly and exclusively for its business. It is not in dispute in this case that the purchase of cotton was in fact made and the Tribunal also finds that the payment in full at the ceiling rate had been made by the assessee. In such circumstances, we are of the view that the Income-tax Officer cannot disallow a portion of the sale price actuall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his jurisdiction to find out whether a portion of the expenditure has really been incurred wholly and exclusively for the business while applying the provisions of section 10(2)(xv). Reference is made by the learned counsel for the revenue to the decision in Bengal Enamel Works Ltd. v. Commissioner of Income-tax. But we are of the view that the said decision will not enable the revenue to cut up the expenditure really expended for the purpose of the business and find out whether a portion of the expenditure so cut up was entitled to the benefit of section 10(2)(xv). But, as a matter of fact, the Supreme Court in the said decision points out : " But the taxing authority may disallow an expenditure claimed on the ground that he payment is n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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