TMI Blog1993 (12) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... rder to facilitate negotiations at top levels with foreign corporations and the fact that the Reserve Bank authorities on reconsideration had sanctioned the requisite foreign exchange indicated that the tour was undertaken by her wholly and exclusively for business purposes and, therefore, the said claim was allowable in view of the provisions of section 37(1) of the Act. 15. Before rendering opinion on question No. 1 referred to us, it is to be noted that the assessee has advanced a claim for deduction of expenditure incurred by it on the wife of Shri Gautam Sarabhai accompanying him on a foreign tour, under section 37(1) of the Act. It is well-settled that where an assessee seeks to deduct from his business profits certain items, the onus of proving that such deductions are permissible falls on him. The burden of proving losses in business or a claim to any allowance or deduction or to any exemption is on the assessee especially when the claims are based on facts which are within the special know ledge of the assessee. Having noted the above position of law, on an analysis of section 37(1) of the Act, it becomes evident that the following conditions should concur in order tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the finding of fact is perverse or based on no material and whether the assessee-company has succeeded in satisfying as to the purpose for which the amount was spent and the commercial necessity of expending it. The assessee, in this case, has failed to lead any evidence to show as to how the visit by Smt. Kamalini Sarabhai was necessary in order to facilitate negotiations at the top level with foreign corporations. The assessee has not produced any evidence as to the qualifications of Smt. Kamalini or her business experience which would have facilitated negotiations at the top level with foreign corporations. The assessee has not produced any evidence regarding the nature of negotiations that allegedly took place at the top level with foreign corporations with which the assessee-company had business relations, Admittedly, Smt. Kamalini Sarabhai was not one of the directors or executives of the assessee-company nor is it brought on the record of the case that she had special aptitude for the business of the assessee. The assessee-company had even failed to produce the tour programme of Smt. Kamalini Sarabhai in order to substantiate its claim that her presence was necessary i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue authorities, the latter must examine the same and must make up its mind as to whether the expenditure was necessitated or justified by commercial expediency. In the case of CIT v. Malayalam Plantations Ltd. [1964] 53 ITR 140, the Supreme Court interpreted the expression "for the purpose of business" and has held as under : " The aforesaid discussion leads to the following result : The expression 'for the purpose of the business' is wider in scope than the expression 'for the purpose of earning profits'. Its range is wide : it may take in not only the day to day running of a business but also the rationalisation of its administration and modernisation of its machinery ; it may include measures for the preservation of the business and for the protection of its assets and property from expropriation, coercive process or assertion of hostile title ; it may also comprehend payment of statutory dues and taxes imposed as a pre-condition to commence or for carrying on of a business ; it may comprehend many other acts incidental to the carrying on of a business. However wide the meaning of the expression may be, its limits are implicit in it. The purpose shall be for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to allow the expenses incurred for rendering such company, however necessary and enjoyable it may be from the point of view of the personal needs of those executives. " In the abovequoted decision, it is ruled by this court that it would not be permissible for the Income-tax Officer to allow the expenses incurred for rendering such company, however, necessary and enjoyable it may be from the point of view of the personal needs of the executives. 18. Coming to the facts of the present case, we find that the assessee has not led any evidence as to in which manner the visit by Smt. Kamalini was necessary for facilitating negotiations at the top level with foreign corporations. Applying the relevant tests to the facts of the present case, we find that the expense in question has not been incurred with the sole object of furthering the trade or business of the assessee-company, unalloyed or unmixed with any other consideration. Considering the nature of the business of the assessee-company and the manner in which it is conducted, it is difficult to hold that the visit of Smt. Kamalini Sarabhai to the U. S. A. was necessary in order to facilitate negotiations at the top level with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any and for the purpose of the business of the company and, therefore, in view of the conclusion reached in the case of Smt. Kamalini Sarabhai in that case, the expenditure incurred by the assessee-company on the foreign tour of Smt. Kamalini was allowable under section 37(1) of the Act. So far as this submission is concerned, we note that the said decision has no application to the question referred to this court. Even if it is assumed that Smt. Kamalini had undertaken the tour at the instance of the company, that would not indicate that the expenditure was incurred by the assessee-company. The question whether the assessee-company had incurred expenditure on the foreign tour of Smt. Kamalini Sarabhai wholly and exclusively for the purpose of the business of the assessee never fell for consideration of the court in the said decision and in fact that question is not decided by the said decision. As noted earlier, nothing has been produced on the record of the case by the assessee-company to indicate that the foreign tour of Smt. Kamalini Sarabhai was wholly and exclusively for the purpose of the assessee-company. In the circumstances, the finding recorded in the said decision is of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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