TMI Blog1996 (12) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... company executives during their official tour is not allowable as per section 37(4) read with section 37(5) of the Act ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal ought to have found that the expenditure on rent being allowable under section 30 of the Act is excluded from the purview of expenditure to be considered for allowance under section 37(1) of the Act and as such from the purview of section 37(4) of the Act ? In I. T. R. No. 88 of 1994 at the instance of the Revenue, the Tribunal has referred the following questions for opinion of this court : 1. Whether, on the facts and in the circumstances of the case and also for the reasons stated in the enclosure to the reference application, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plaques given by the foreign collaborator in the memory of the assessee's late managing director can be considered as having been incurred for commercial expediency and for the purpose of business since the plaques were exhibited only in the company's premises. As far as the maintenance of the guest house was concerned the Tribunal took the view that the amount spent on repair of the guest house has to be excluded in considering the amount disallowable under section 37(4) of the Act. Question No. 2 referred in I. T. R. No. 88 of 1994 is connected with the questions referred in I. T. R. No. 85 of 1994. Learned counsel for the assessee contended that the Tribunal has committed an error in disallowing its claim regarding the expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alled, maintained, hired, reserved or otherwise arranged by the assessee for the purpose of providing lodging or boarding and lodging to any person (including any employee or, where the assessee is a company, also any director of, or the holder of any other office in the company), on tour or visit to the place at which such accommodation is situated, is accommodation in the nature of a guest-house within the meaning of sub-section (4). A reading of sub-section (4) and more clarified by sub-section (5) would clearly show that any accommodation by whatever name called, maintained, hired, reserved or arranged by the assessee for providing boarding or lodging to any person on tour or visit to the place at which such accommodation is situat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent on such repairs has to be ascertained by the Income-tax Officer. Learned standing counsel for the Revenue submits that the above finding of the Tribunal is erroneous. We find merit in this contention. The very maintenance of a guest house in the nature of the one described in section 37(4) and (5) is hit by the provisions of section 37(4). Any expense incurred for repair of such guest house would not be allowable. An attempt was made by learned counsel for the assessee to contend that what has been interdicted under sub-section (4) is expenditure for maintenance of the guest house and, therefore, the expenditure for repair of the guest house would not come within the purview of sub-section (4). We have no hesitation to reject this conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have certainly offended the feelings of the foreign collaborators which might, in turn, adversely affect the smooth development of their further business relationship. Therefore, there was no option for the assessee but to take delivery of the gift in the best interest of promotion of its business. If that be so, we are of the view that the expenditure incurred by the assessee on this account would satisfy the test laid down by the Supreme Court in Indian Aluminium Co. Ltd. v. CIT [1972] 84 ITR 735. Payment of import duty to the extent of ₹ 52,248 by the assessee is an expenditure which was really incidental to the carrying on of the business of the assessee and, therefore, entitled to deduction. In the light of the above, in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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