ORDER
C. Chowdhury, J.M.
The appeals have been filed by the revenue and the assessee respectively against the order passed by the Commissioner (Appeals) for the assessment year 1988-89.
2. First, we take up the revenues appeal.
3. Grounds No. 1 to 15 relate to the issue regarding disallowances of Rs. 1,15,98,236 on account of lease rent paid by the assessee. This issue is discussed by the assessing officer at p. 2 of his order. According to the assessee, it sold several machineries to 5 parties during the assessment years 1986-87 & 1987-88 and thereafter immediately the assets were taken on lease from those parties for which lease rent was paid which was claimed by the assessee as business expenditure. The assessing officer disallowed the lease rent on the ground that the sale of plant & machinery and taking them back on lease were not bona fide transaction. It is a colourable device which is covered by the decision of the Supreme Court in the case of McDowell & Co. Ltd. v. CTO (1985) 154 ITR 148 (SC). It is a device adopted by the assessee for reduction of tax liability. The rent paid by the assessee cannot be treated as expenditure for the purpose of business.
4. The assessee moved before the first appellate authority and by the impugned order, the Commissioner (Appeals) held that it is a business expenditure. Hence, he directed to allow deduction. It was further held that the transaction is a genuine transaction and not a colourable device. Hence, the decision of the McDowells case (supra) does not apply. Against the aforesaid finding, the revenue is in appeal before the Tribunal.
5. Shri D.K. Biswas, the learned Departmental Representative, supported the assessment order and submitted that the first appellate authority was not justified in allowing relief to the assessee. According to the learned Departmental Representative, there are several circumstances which led to the belief that the transaction is not a genuine transaction and the motive behind such transaction is only to reduce tax liability of the assessee. It was further submitted that the assessee sold the assets and again took those machineries on lease but there was no physical transfer of the assets when those were sold to 5 parties. The learned Departmental Representative further submitted that the W.D.V. of the assets was Rs. 56 lakhs and odd which was sold at Rs. 4 crores and odd. It cannot be said that with a view to getting financial support, the sale was made because the receipt was not utilized by the assessee in its business but the same was deposited in the Unit Trust of India. The assets were valued by the assessee itself and not by any authorised valuer. The assessee had shown inflated valuation of the assets. The learned Departmental Representative also challenged the findings given by the first appellate authority on this issue. It was submitted the case of Indian Airlines Corporation cannot be applied in the present case which was relied upon by the Commissioner (Appeals). The first appellant authority should have considered the fact that there was no physical delivery of the assets after the alleged sale made by the assessee. Therefore, it was nothing but a colourable device, as rightly held by the assessing officer.
6. On the other hand, the learned counsel on behalf of the assessee Mr. Mukherjee, has filed a written submission which is kept on record. The learned counsel has further submitted that the main ground on which the assessing officer disallowed the claim of the assessee is that the transaction is a colourable device for avoidance of tax. Hence, it is covered by McDowells case (supra). It was submitted that the facts in the McDowells case are distinguishable. In that case, the assessee was engaged in the business of manufacture and sale of liquor. By a special arrangement made with its customers, the assessee arranged to have the excise duty payable on removal of the goods from the distillery paid directly by the customers to the excise authorities. In other words, the assessee did not include the excise duty recoverable from the customers in the invoices raised by it. The assessee charged the sales-tax in the invoices at a percentage of only the net ex-factory sale price since the element of excise duty was not included in the sale bills. Accordingly, the amount of sales-tax recovered from the customers were much less than what should have been if the sales-tax was calculated at a percentage of the gross value of the sales, i.e., being inclusive of excise duty. In the process, the assessee was able to achieve a sale-price, which was more competitive than its rival in the trade and that too at the cost of depriving the revenue of its dues. It was in this context that the Honble Supreme Court had held that the excise duty should have been included in the sale-bill since it constituted turnover within the meaning of sales-tax laws and the practice adopted by the assessee in not including the excise duty in the sale-bill as a part of the turnover was without the sanctity of law and a mere colourable device adopted by the assessee to defraud the revenue by paying less sales-tax. The learned counsel has submitted that apparently the facts in the present case are distinguishable and in the present circumstances, the McDowells case (supra) cannot be applicable. The learned counsel placed reliance on the decision of the Supreme Court in the case of CIT v. Sun Engineering Works (P) Ltd (1992) 198 ITR 297 (SC) where it has been held that it is not proper to consider a word, a clause or a sentence of the judgment of the Supreme Court, divorced from its context, without considering the full exposition of law and the circumstances under which the judgment was rendered. In the McDowells case (supra), transaction was entered into by an assessee without sanction of law and in that context it was held by the Supreme Court as tax avoidance device. The learned counsel has also placed reliance on the decision of the Gujarat High Court in the case of Banyan & Berry v. CIT (1996) 222 ITR 831 (Guj) where it has been said that in the McDowells case (supra), the Supreme Court has not held every action or inaction on the part of the taxpayer which results in reduction of tax liability is to be viewed with suspicion and be treated as a device for avoidance of tax irrespective of legitimacy or genuineness of the Act. The learned counsel has also placed reliance on the decision of the Supreme Court in the case of CIT v. Arvind Narottam (1988) 173 ITR 479 (SC). Shri Mukherjee, the learned counsel for the assessee, placed reliance on the decision of the apex court in the case of Union of India v. Playworld Electronics (P) Ltd. (1990) 184 ITR 308 (SC) where it has been held that if a tax planning is legitimate within the framework of law, such planning cannot be struck down as a colourable device. Further reliance was placed on the decision of the Madras High Court in the case of M.V. Valliappan & Ors. v. ITO & Ors. (1988) 170 ITR 238 (Mad).
7. The learned counsel submitted that in the present case, pursuant to the agreement between the parties, the transactions were entered into. Copy of the agreement has been filed along with the paper book. It was further, submitted that contention of the learned Departmental Representative that no delivery of possession was effected is not correct. Our attention was drawn to p. 22 of the paper book containing evidence showing delivery of possession. The contention of the assessee is that for the purpose of delivery of possession, it is not always required to shift the property from where it is situated. The transactions were in between the parties who are not known to each other and they do not have any relationship. The sale price of the assets was determined on the basis of valuation made by a registered valuer. Copy of the valuation report has been filed at pp. 24 to 38 of the paper book. As per the valuation, the price was paid by the assessee through banking channel. The lease rent was determined on the basis of quotation given by M/s Grindlays Bank which is another independent body. Copy of the quotation has been filed at p. 39 of the paper book. It is also a fact that the lease rent was actually paid by the assessee and not denied by the assessing officer. The learned counsel has submitted that sale and lease back is now not a new theory for India. Even the public sector undertaking like Indian Airlines Corporation had entered into such transactions in view of the augment of their resources services (sic). Evidence was filed in this regard at per pp. 41 and 42 of the paper book. In a recent amendment made to section 43(1) of the Act, Explanation 4A was inserted by Finance (No. 2) Act of 1966 with effect from 1-10-1966. By the aforesaid Explanation it was provided that in the case of sale and lease back of an asset, actual cost of such asset in the hands of purchaser-cum-lessor thereof shall be deemed to be written down value of the same for the purpose of claiming depreciation. Therefore, sale and lease back has been accepted by the legislature and only because the asset was sold and taken back on lease, that cannot be a ground for treating the transaction as a device for tax planning. The learned counsel placed reliance on the decision of the Tribunal in the case of Indian Management Advisors and Leasing (P) Ltd. v. Dy. CIT (1994) 51 ITD 566 (Del) where the Tribunal has accepted the genuineness of sale and lease back. To substantiate the argument, the learned counsel has brought to our attention p. 44 of the paper book containing comparative computation of tax payable when lease back was not done and the tax was payable after the lease was effected. The aforesaid chart goes to show that the overall tax effect after taking the lease of the asset is more by Rs. 84,39,698. Therefore, it cannot be said that the transaction was entered into only with a view to avoiding the tax liability. The learned counsel has further submitted that it is not a case that the assets were sold at a lower price for the purpose of claiming loss. The assets were used ones. The original cost was Rs. 56.30 lakhs and W.D.V. was 13.5 lakhs and the asset were sold at Rs. 4.14 crores. It was submitted that sale price was repaid in three years as lease rental and 140 per cent of sale price of the asset was paid as lease rent in four years. Since a part of the sale proceeds was invested in U.T.I., from that it cannot be inferred that the money was not utilised for the purpose of business. The assessee is free to take decision to do its business best and whether the expenditure was incurred for the purpose of business has to be judged from the viewpoint of a businessman and not of the revenue. Reliance was placed on the decisions of the Supreme Court in CIT v. Dhanraj Girji Raja Narashingirji (1973) 91 ITR 544 (SC) and CIT v. Nainital Bank Ltd. (1966) 62 ITR 638 (SC), the decision of the Bombay High Court in F.E. Dinshaw Ltd. v. CIT (1959) 36 ITR 114 (Bom) and of the Madras High Court in CIT v. C.M Kunhammed (1974) 94 ITR 173 (Mad). Lastly, the learned counsel has placed reliance on two decisions of the Calcutta Bench of the Tribunal in the case of Karam Chand Thapar & Bros v. Dy. CIT (1998) 66 ITD 39 (Cal) and in the case of Dy. CIT v. India Foils Ltd. in ITA Nos. 1353 & 1354/Cal/1996 (Cal) where, in similar circumstances, relief was allowed to the assessee. Copies of the orders have been filed along with the paper book.
8. We have heard both the sides and perused the materials on record. The main reason for which the claim of deduction was disallowed was that the transaction is a device for which the decision of the Supreme Court in the case of McDowell & Co. Ltd. (supra) was applied. On perusal of the aforesaid decision of the Supreme Court, we find that in that case, the assessee did not include excise duty in the ex-factory prices resulting in collections of less sales-tax. In that context, the Supreme Court said that it was a colourable device adopted by the assessee to defraud the revenue by paying less sales-tax. The learned counsel placed reliance on various decisions of the Supreme Court, Gujarat High Court and other High Courts to show that a tax planning may be legitimate within the framework of law. Reliance can be placed on the decision of the Supreme Court in the case of Playworld Electronics (P) Ltd. (supra). In the present case, the assessee entered into a transaction with the parties to sell and lease back the assets. Lease agreement and sale were brought on record. After sale, the assets were taken delivery by the parties which were acknowledged by them copy of which has been filed at para 22 of the paper book. Therefore, the contention of the learned Departmental Representative that no delivery was effected is not correct. The sale price of the assets was determined by an independent valuer. Copy of the valuation report is available at per pp. 24 to 28 of the paper book. The parties are not related with the assessee. The lease rental was determined on the basis of quotation given by M/s Grindlays Bank copies of which are placed at per para 39 to 40 of the paper book No material was brought on record by the revenue that the sale and lease back did not take effect. The theory of sale and lease back has not been invented by the assessee. In fact, by virtue of the amendment brought in section 43(1), Explanation 4A was inserted by which sale and lease back has been accepted by the legislature. The learned counsel placed reliance on the decisions of the Delhi Bench of the Tribunal and also Calcutta Bench of the Tribunal wherein, in similar circumstances, relief was allowed to the assessee. Copies of the orders passed by the Tribunal are available with the paper book. This point can be viewed from another angle which is clear from the chart at p. 44 of the paper book where it has been computed by the assessee that the tax payable before the transaction was less than the tax payable after the lease back, There was excess tax payable due to lease back transaction of Rs. 84,39,698. Hence, it cannot be said that the transaction was entered into with a view to defraud the revenue. From the aforesaid circumstances, we are satisfied that the transactions were genuine and validly entered into which are supported by documents. There was no motive on the part of the assessee to defraud the revenue. The only object of such transaction was for augment of fund which was invested by the assessee in the Unit Trust of India. The first appellate authority has considered all these aspects in detail and rightly came to the conclusion that the decision of McDowells case (supra) has no application in the present circumstances of the case. We have gone through the impugned order passed by the first appellate authority and also perused documents copies of which have been filed along with the paper book by the assessee and we are satisfied that the impugned order passed by the first appellate authority does not require any interference. In the case of Narsingdas Surajmal Properties (P) Ltd. v. CIT (1981) 127 ITR 221 (Guj) the Jurisdictional High Court has held that the Tribunal was not justified in disallowing the rent paid by the assessee on the ground that the document was not registered. In the present case, we find that the transaction in fact, could not be doubted by the assessing officer but only on the presumption he applied the decision of McDowells case (supra). In view of the circumstances above, we hold that the first appellate authority was justified in holding that relief under section 37 is to be allowed in the present circumstances of the case. Accordingly, this ground of appeal is rejected.
9. Ground No. 16 is regarding addition of Rs. 67,98,402 on account of undervaluation of closing stock. After hearing both the sides, we find that the assessee changed the method of valuation of closing stock to cost or net realisable value whichever is lower. The first appellate authority allowed relief to the assessee following the order passed by the Tribunal in the case of the present assessee. Further, we find that similar issue came up for consideration before us in the case of Numdung Tea Co. (India) Ltd. in ITA Nos. 873/Gau/1991 & 509/Gau/1992 where we have upheld the finding recorded by the first appellate authority by which relief was allowed. Therefore, following the decisions of the Tribunal on this issue, we uphold the finding recorded by the first appellate authority.
10. Ground Nos. 17 and 18 are regarding disallowance of Rs. 8,89,551 paid to Hindustan Tea Co. and MD Enterprise of Guwahati. After hearing both the sides, we find that the issue was set aside by the first appellate authority for deciding the matter afresh. The learned counsel has relied on the decisions of the Supreme Court in the case of CIT v. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC), in the case of Jute Corporation of India Ltd. v. CIT (1991) 187 ITR 688 (SC) and in the case of National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC). However, we are not giving any finding with regard to the applicability of the aforesaid decisions on this issue since the matter has been restored to the assessing officer by the first appellate authority. Under the aforesaid circumstances, we are not inclined to interfere with the finding recorded by the first appellate authority.
11. Grounds Nos. 19 to 22 are in relation to allowability of 100 per cent depreciation on Vibro Fluid Bad Tea Dryer. According to the assessing officer, the claim of the assessee that Vibro Fluid Bad Tea Dryer is an equipment of energy-saving device is not correct. Therefore, the claim of 100 per cent depreciation was rejected. By the impugned order, the Commissioner (Appeals) allowed relief to the assessee following his order in the case of another assessee.
12. The learned Departmental Representative supported the assessment order. On the other hand, the learned counsel on behalf of the assessee has submitted that it is an energy-saving device and, therefore, 100 per cent depreciation is to be allowed. This issue has been settled by the Tribunal in favour of the assessee. Copy of the order passed in ITA No. 370/Cal/1996 in the case of Dy. CIT, Special Range-12, Calcutta v. Assam Brook Ltd. Copy of another decision of the Tribunal in the case of Mcleod Russell (I) Ltd. in ITA No. 679/Cal/1996 has also been filed.
13. After hearing both the sides and on perusal of the aforesaid decisions of the Tribunal, we are of the view that the first appellate authority was justified in allowing relief to the assessee since the issue is already covered by the aforesaid two decisions of the Tribunal. Accordingly, this ground of appeal is rejected.
14. Ground No. 23 is regarding disallowance of Rs. 74,621 on account of foreign travel expenditure. We find that this issue has been restored to the assessing officer by the first appellate authority for reconsideration. In view of the circumstances above, we are not inclined to interfere with the finding of the Commissioner (Appeals). This ground of appeal is rejected,
15. Next issue i.e., grounds Nos. 24 and 25, is regarding disallowance of Rs. 3,757 under section 43B of the Act. Having heard both the sides, we find that the first appellate authority allowed relief to the assessee after being satisfied that sales-tax was deposited within the due date as prescribed under section 43B of the Act. The assessee placed reliance on the decision of the Gauhati High Court in India Carbon Ltd. v. Inspecting Assistant Commissioner & Anr. (1993) 200 ITR 759 (Guj). Accordingly, we are not inclined to interfere with the finding recorded by the first appellate authority.
16. The last issue is regarding relief under section 80HHC of the Act. According to the assessing officer, the assessee had claimed deduction under section 80HHC in the revised return of Rs. 1,27,96,608. While computing the relief it was noticed that the export reserve set up under the second proviso to section 80HHC(1) of the Act for Rs. 73 lakhs. Accordingly, the assessing officer was of the view that deduction is allowable to that extent. The first appellate authority held that the assessee had created export incentive reserve of Rs. 73 lakhs and further general reserve of Rs. 1.69 lakhs by debiting the P&L a/c for the year ended 30-6-1987. Therefore, although the nomenclature has been changed but since there was compliance of all the conditions for the purpose of allowing deduction under section 80HHC of the Act, relief was allowed to the assessee. Against that finding, the revenue is in appeal.
17. The learned Departmental Representative has supported the assessment order and submitted that admittedly, the assessee created reserve of Rs. 73 lakhs only. Therefore, relief was rightly denied by the assessing officer. The learned counsel on behalf of the assessee has brought to our attention pp. 190 to 192 of the paper book to show that in the P&L a/c, the assessee has transferred Rs. 73 lakhs to export incentive reserve and a further sum of Rs. 169 lakhs to general reserve. According to the learned counsel, both the reserves should be considered as reserve created for the purpose of deduction under section 80HHC because nomenclature of the reserve is not relevant. Reliance was placed on the decision of the Supreme Court in the case of Kedarnath Jute Manufacturing Co. Ltd. v. CIT (1971) 82 ITR 363 (SC).
18. After hearing both the sides, we are of the view that, admittedly, the reserve was created by the assessee one in the name of export incentive reserve and the other as general reserve. The contention of the assessee appears to be correct that the statute has not prescribed any particular nomenclature for the purpose of creating reserve. The allowability of the claim made by the assessee should be considered on the basis of the materials available on record and for that purpose, the assessing officer should not be too much technical for the purpose of disallowing a relief which the assessee is otherwise entitled to. Considering the circumstances above, we are of the view that the relief allowed by the first appellate authority does not require any interference.
19. In the result, the revenues appeal is dismissed.
ITA No. 245/Gau/1993 (assessees appeal)
20. Grounds No. 1 and 2 are regarding disallowance of deduction of Rs. 1,50,000 on account of cost of maintenance and handling of agricultural produce for internal consumption. The assessee incurred expenditure of Rs. 3,30,868 for growing maintenance and handling of bamboo thatch, etc., which are grown in the tea estates. Similar practice was followed in other tea estates by growing bamboo thatch, etc. for the purpose of internal use i.e., roofing of labour quarters, supply of firewood to labour, etc. The deduction was claimed by the assessee before the assessing officer as revenue expenditure. However, he disallowed the claim. The Commissioner (Appeals) by the impugned order restricted the disallowance to Rs. 1,50,000 and the balance was allowed by him.
21. The learned counsel on behalf of the assessee has submitted that the details of such expenditure were filed before the assessing officer and the first appellate authority has wrongly made an estimated disallowance without any reason. The Commissioner (Appeals) in his order has accepted that the assessee had duly paid wages to the labourers as disclosed by the assessee. However, at the same time estimated disallowance was made of Rs. 1,50,000. The first appellate authority also referred to the certificate and other documentary evidence in this regard. Therefore, according to the learned counsel, the disallowance was not called for. Reliance was placed on the decision of the Supreme Court in the case of CIT v. Hantapara Tea Ltd. (1973) 89 ITR 258 (SC) and the decision of the Delhi High Court in the case of Addl. CIT v. Joy Engineering Works Ltd. (1978) 113 ITR 389 (Del). On the other hand, the learned Departmental Representative supported the assessment order.
22. After hearing both the sides, we find that the details of such expenditure were produced by the assessee before the assessing officer and also before the Commissioner (Appeals). The first appellate authority considered the fact that labour charges were duly paid and accounted for by the assessee. However, from his order we find that a combined certificate was considered by him and no other material was brought to our notice. However, considering the fact that the Commissioner (Appeals) also has accepted the expenditure as revenue expenditure we restrict the disallowance to Rs. 50,000 for the ends of justice. Hence, this ground is partly allowed.
23. Ground No. 3 is regarding disallowance of Rs. 87,78,563 under section 32AB of the Act.
24. The assessee claimed deduction under section 32AB of Rs. 1,13,99,440. According to the assessee, the computation was made in accordance with the provision of section 32AB(3) of the Act. However, the assessing officer disallowed the deduction of Rs. 87,78,563 by excluding the following items from profits of the eligible business :
1. Dividend income from Unit Trust of India, interest on inter-corporate deposits, deposits with NABARD etc.;
2. Interest on NSCs;
3. Vehicle requisition fee by government;
4. Share sub-division and consolidation fees; and
5. Rent received
According to the assessee, the aforesaid income do not form part of business income of the assessee. The disallowance has been made by the assessing officer vide Annexure B of his order. The finding was upheld by the Commissioner (Appeals).
25. The learned counsel on behalf of the assessee has submitted that deduction under section 32AB is according to the mode of computation prescribed under section 32AB(3). Under the said sub-section the profit of the eligible business is the profit of the business computed as per requirements of parts II and III of Sixth Schedule to the Companies, Act, 1956, subject to adjustments provided in the said sub-section. The learned counsel submitted that in view of the specific mode of computation being prescribed under the section, no adjustment beyond the prescribed adjustment under the section is permissible. It was further submitted that parts II and Ill to Schedule VI to the Companies Act does not make any distinction as being income chargeable under different heads of income under the Income Tax Act and in absence of any such demarcation, the deduction cannot be reduced as has been done by the assessing officer. Reference was made in this regard to section 33AB of the Income Tax Act which replaced section 32AB for tea companies from assessment year 1991-92. In the new section, the deduction is at 20 per cent of profits derived under the head “Profits and gains of business or profession”. The deduction under section 32AB is according to a completely different mode of computation as prescribed in sub-section (3) thereof. The learned counsel placed reliance in support of the contention on the decision of the Honble Tribunal, Calcutta, in Reckitt & Colman (India) Ltd.s case (ITA No. 1252/Cal.94). It was further submitted that it has been a consistent view of the Tribunal, Calcutta (as mentioned at para 15 of the aforesaid order) that for the purpose of deduction under section 32AB, non-business income is also to be included in profits of the eligible business. Subsequently, also, the Tribunal, Calcutta Bench, has held in Eastern Spinning Mills & Industries Ltd.s case (ITA No. 2511/Cal/1994) that non-business income is includible in profits of eligible business for computing deduction under section 32AB. Reliance was placed on the following decisions :
(i) CIT v. Apollo Tyres Ltd. (1999) 237 ITR 706 (Ker);
(ii) CIT v. Sudarsan Plywood (1995) 80 Taxman 326 (Guj); and
(iii) Tata Yodogawa Ltd. v. Dy. CIT (1998) 67 ITD 174 (Pat).
26. On the other hand, the learned Departmental Representative supported the orders passed by the authorities below.
27. Having heard both the sides and on perusal of the materials on record, we find that the assessee has placed reliance on two decisions of the Tribunal, Calcutta Bench, in its favour and also other decisions of different Benches of the Tribunal as above. From the orders passed by the authorities below, we are satisfied that the issue was not examined after considering those decisions of the Tribunal. In view of the above circumstances, we set aside the impugned order and restore the matter back to the assessing officer for considering afresh in accordance with law after giving opportunity of hearing to the assessee.
28. Ground No. 4 is regarding estimated deduction towards expenses incurred for earning agricultural income. After hearing both the sides and considering the smallness of amount involved, we are not inclined to interfere with the finding recorded by the Commissioner (Appeals).
29. Next issue is regarding disallowance of Rs. 1 lakh paid by the assessee to the Cricket Association of Bengal. Accordingly to the assessing officer, it is not an allowable expenditure. Hence, it was disallowed.
30. The learned counsel on behalf of the assessee has submitted that the expenditure was incurred against the charges for use of air-conditioned spectators box during cricket matches. Evidence was produced before the assessing officer copies of which are at per paras 3 to 15 of the paper book which contains the receipt and the agreement. The expenditure was incurred as a measure of staff welfare so that the employees of the assessee could attend cricket matches for their recreation. The learned counsel has submitted that this type of expenditure is allowable for commercial expediency as held by the Supreme Court in the case of Shahzada Nand & Sons v. CIT (1977) 108 ITR 358 (SC). According to the learned counsel, the expenditure is necessary for the purpose of its business and the term necessary is a wider term as explained by the Supreme Court in the case of Sassoon J. David & Co. (P) Ltd. v. CIT (1979) 118 ITR 261 (SC). On the other hand, the learned Departmental Representative supported the assessment order.
31. After hearing both the sides, we are of the view that for the purpose of allowability of expenditure under section 37 of the Act, there may not be a direct link between the expenditure incurred and the nature of business being carried on by the assessee. Even if the expenditure is remotely connected with the business or for the benefit of the employees of an assessee, it can be allowed as held by different High Courts. In the case of CIT v. Delhi Cloth and General Mills Co. Ltd. (1978) 115 ITR 659 (Del), the expenditure incurred for organising football tournament was treated as business expenditure. In the case of Mysore Kirloskar Ltd. v. CIT (1987) 166 ITR 836 (Kar) the expenditure incurred for running a school for the purpose of employees children was treated as business expenditure. Expenditure incurred for providing amenities like water supply was also treated as a business expenditure in the case of CIT v. Associated Cement Companies Ltd. (1974) 96 ITR 650 (Bom). In view of the circumstances above, we are of the view that the present expenditure incurred by the assessee as a measure of employees welfare is to be allowed under section 37 of the Act. Accordingly, this ground is allowed.
32. Next issue is regarding deduction under section 80HHC whether to be allowed before application of Rule 8 of the Income Tax Rules. After hearing both the sides, we find that similar ground has been restored to the assessing officer in the case of the sister concern, namely, Numdung Tea Co. (India) Ltd. in ITA Nos. 873/Gau/1991 & 509/Gau/1992 by the Tribunal. Therefore, following the said order, this issue is restored to the assessing officer for deciding afresh, as directed by the Tribunal in the above-mentioned order.
33. The last ground is regarding addition of Rs. 16,95,177 on account of cost of fencing. Having heard both the sides, we find that this issue has been restored by the Commissioner (Appeals) for considering afresh in accordance with law. Therefore, we are not inclined to interfere with the aforesaid finding of the Commissioner (Appeals). This ground of appeal is rejected.
34. In the result, the assessees appeal is partly allowed.