Law: Income Tax Act, 1961

Section: 30,37(1),(4),(5)

(a) Income-tax-----Business expenditure---Guest house---Expenditure on, maintenance of guest house and on payment of rent for stay of company executives---Claim for deduction not allowable under general provisions of S.30---Expenditure referred to in S.37(4) is riot for "maintenance work" of guest house but on the very maintenance of a guest house meaning, for "keeping" guest house--¬Expenses incurred for repair comes within expenses for keeping guest house---Comes within the ambit of S.37(4)---Indian Income Tax Act, 1961, Ss.30 & 37(1), (4), (5). (b) Income-tax--- ----Business expenditure--Assessee doing business with foreign collaborator-¬Memento presented by foreign collaborator in memory of assessees late managing director---Essential for friendly relationship and business interest of assessee to take delivery of gift---Payment of import duty in respect of memento---Expenditure incidental to carrying on of business of assessee--¬Entitled to deduction---Indian Income Tax Act, 1961, S.37. For the assessment year 1984-85, the Assessing Officer disallowed the assessees claim for deduction in respect of expenses relating to the maintenance of its executive hostel amounting to Rs.80,752 under section 37(4) of the Income Tax Act, 1961. The Assessing Officer also disallowed an amount of Rs.52,248 claimed by the assessee being import duty paid in respect of a memento presented by the foreign collaborator in memory of the assessees late managing director. The Commissioner (Appeals) sustained the disallowance in respect of both the items. The Tribunal held that the import duty paid for clearing the memorial plaques given by the foreign collaborator was incurred for commercial expediency and for the purpose of business, since the plaques were exhibited only in the assessee-companys premises. The Tribunal also held that the amount spent on repair of the guest house had to be excluded in considering the amount disallowable under section 37(4) of the Act. On a reference: Held, (i) that a reading of subsection (4) and more clarified by subsection (5) would clearly show that any accommodation by whatever name called, maintained, hired, reserved or arranged by the…

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