{"id":199112,"date":"1993-04-06T00:00:00","date_gmt":"1993-04-05T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/prakash-cotton-mills-pvt-ltd-vs-commissioner-of-income-tax-on-6-april-1993"},"modified":"2016-08-30T09:26:57","modified_gmt":"2016-08-30T03:56:57","slug":"prakash-cotton-mills-pvt-ltd-vs-commissioner-of-income-tax-on-6-april-1993","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/prakash-cotton-mills-pvt-ltd-vs-commissioner-of-income-tax-on-6-april-1993","title":{"rendered":"Prakash Cotton Mills Pvt. Ltd vs Commissioner Of Income Tax … on 6 April, 1993"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Prakash Cotton Mills Pvt. Ltd vs Commissioner Of Income Tax … on 6 April, 1993<\/div>\n
Equivalent citations: 1993 AIR 2174, \t\t 1993 SCR (2) 983<\/div>\n
Author: V N.<\/div>\n
Bench: Venkatachala N. (J)<\/div>\n
           PETITIONER:\nPRAKASH COTTON MILLS PVT.  LTD.\n\n\tVs.\n\nRESPONDENT:\nCOMMISSIONER OF INCOME TAX (CENTRAL) BOMBAY\n\nDATE OF JUDGMENT06\/04\/1993\n\nBENCH:\nVENKATACHALA N. (J)\nBENCH:\nVENKATACHALA N. (J)\nJEEVAN REDDY, B.P. (J)\n\nCITATION:\n 1993 AIR 2174\t\t  1993 SCR  (2) 983\n 1993 SCC  (3) 452\t  JT 1993 (2)\t619\n 1993 SCALE  (2)425\n\n\nACT:\nIncome Tax Act, 1961--A.Y. 1966-67--Allowance under  section\n37(1)  of interest paid by assessee for delayed\t payment  of\nSales  Tax under Bombay Sales Tax Act and damages  paid\t for\ndelayed\t payment  of  contribution  under  Employees   State\nInsurance Act, 1947\nAllowance under section 37 (2) of entertainment expenditure.\n\n\n\nHEADNOTE:\nThe appellant paid Rs.19635 in the accounting year for\tA.Y.\n1966-67, on account of interest, under Bombay Sales Tax Act,\n1951, for delay in payment of sales tax, and for damages for\ndelayed\t payment  of  contribution  under  Employees   State\nInsurance  Act, 1947.  The assessee-appellant in the  return\nof  income,  claimed the amount as allowance  under  section\n37(1)  of I.T. Act.  The appellant, also claimed the  entire\nentertainment  expenses, amounting to Rs.3865  as  allowance\nunder  section 37(2) of the I.T. Act The Income-tax  Officer\ntreated\t the  payment  of Rs.19635  as\tpenal  interest\t and\ndisallowed it as allowance under section 37(1) of I.T.\tAct.\nOut  of\t the entertainment, expenses, amounting\t to  Rs.3865\nincurred  by  the  Directors of the  assessee  company,\t for\nentertainment  at  the\tDiners club and\t C.C.1,\t the  I.T.O.\nregarded Rs.1365 only as permissible deduction under section\n37(2) of I.T. Act, taking the view that the remaining sum of\nRs.2500\t was  attributable  to\tpersonal  expenses  of\t the\nDirectors   of\t the   assessee\t  company   and\t   therefore\nimpermissible deduction under section 37(2) of the I.T. Act.\nThe  Assessee  appellant did not succeed in  appeals  before\nthe  A.A.C.  and in the Income Tax  Tribunal.\tApplications\nunder  section 256 (1) of the I.T. Act before  the  Tribunal\nand under section 256 (2)     in  Bombay  High\tCourt\twere\nrejected.\nThe assessee filed appeal by special leave in Supreme Court.\nThis Court allowed the appeal partly and,\nHELD:  'Mat the authority concerned has to  allow  deduction\nunder section 37(1) of the I.T. Act, wherever the  concerned\nimpost is purely 983\n984\ncompensatory in nature.\t Wherever such impost is found to be\nof  a  composite  nature, that is  partly  compensatory\t and\npartly penal, the authorities are obligated to bifurcate the\ntwo  components\t of the impost and given  deduction  to\t the\ncomponent,  which is compensatory in nature and\t refuse\t the\ndeduction  for\tthe  component which  is  penal\t in  nature.\nTherefore, whenever any statutory impost paid by assessee by\nway  of\t damages  or penalty or\t interest  is  claimed,\t the\nassessing authority is required to examine the scheme of the\nprovisions of the relevant statute providing for payment  of\nsuch impost, notwithstanding the nomenclature of the  impost\nas given by the statute to find, whether it is\tcompensatory\nor  penal in nature.  Ibis Court agreed with the view  taken\nin earlier decisions by this Court and by the Andhra Pradesh\nHigh Court, which settle the law as to when any amount\tpaid\nas  interest  damages  or  penalty  could  be  regarded\t  as\ncompensatory  (reparatory) as would entitle the assessee  to\nclaim allowance under section 37 (1) of I.T. Act This  Court\nconcluded that the question whether the impost is in essence\ncompensatory  or  is by way of penalty, has  to\t be  decided\nhaving\tregard to the relevant provisions of the  law  under\nwhich it is imposed, the reasons given in the order imposing\nand  quantifying  the damages or  penalty.   The  imposition\nthough\t called\t a  penalty  may  be  composite\t in   nature\ncomprising  penalty  as\t well as  compensation\tfor  delayed\npayment.  The nomenclature of the levy as interest,  damages\nor penalty is not conclusive.\n[991-B, 990-H, 991-A]\nMahalakshmi  Sugar Mills Co. v. Commissioner of\t Income\t Tax\nDelhi,<\/a>\t[1980] 123 I.T.R. 429 S.C.; Commissioner  of  Income\nTax v. Hyderabad Allwyn Metal Works Ltd., (1988) 172 ITR 113\n(H.CA.P.) and Organo Chemical Industries v. Union of  India,\nA.I.R.<\/a> 1979 S.C. 1803.\nThis  Court, remitted the matter of the Tribunal  concerned,\nso  far\t as it related to deduction under section  37(1)  of\nI.T.  Act, regarding impost of interest for delayed  payment\nof sales tax and impost of damages for delayed\tcontribution\nunder Employees State  Insurance Act, as the I.T.O. and\t the\nappellate  authority had refused the allowance\twithout\t any\nexamination  of the schemes of the provisions of the  Bombay\nSales Tax Act and the Provident Fund Act. [991-D]\nThis Court further held that the question as to what portion\nof   expenses,\t claimed,   is\t deductible    entertainment\nexpenditure, has to be\n985\ndecided by the fact finding authorities, while assessing the\nrelevant  materials placed before them.\t No question of\t law\narises,\t particularly when the fact finding authorities\t had\nrecorded  concurrent findings on consideration\tof  relevant\nmaterial.   Hence  the\tquestion  was  decided\tagainst\t the\nassessee  appellant [992-B]\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL  APPELLATE  JURISDICTION\t:  Civil  Appeal  No.\t1279
\n(NT)\/1977.\n<\/p>\n
From  the Judgment and Order dated 17.6.1976 of\t the  Bombay
\nHigh Court in I.T. Application No.63 of 1976.
\nMrs. A.K Verma, Mrs. S.V. Pathak (For J.B. Dadachanji & Co.)
\nfor the Appellant.\n<\/p>\n
P.S.  Poti  Ms.\t A Subhashini (NP) and\tR.  Satish  for\t the
\nRespondent.\n<\/p>\n
The Judgment of the Court was delivered by
\nVENKATACHALA,  J. Two questions are raised for our  decision
\nin  this appeal.  First, whether the appellant was  entitled
\nto claim as allowance under Section 37(1) of the  Income-tax
\nAct, 1961 (the I.T. Act) the interest paid by it for delayed
\npayment\t of sales tax under the Bombay Sales Tax  Act,\t1951
\n(the BST Act) and the damages paid by it for delayed payment
\nof  contribution under Employees’ State Insurance Act,\t1947
\n(the ESI Act.) Second, whether the appellant was entitled to
\nclaim  as allowance under Section 37(2) of the I.T. Act\t the
\nentire expenses incurred by it as entertainment expenses.
\nThe  appellant is a company carrying on the business in\t the
\nmanufacture  of textile goods.\tIt is the assessee.  In\t the
\nincome-tax  return of the assessee for the  Assessment\tYear
\n1966-67\t (the previous accounting year being from 1st  July,
\n1964  to 30th June, 1965), the interest and, the damages  of
\nRs. 19,635 paid by if for delayed payment of sales tax under
\nthe  BST Act and for delayed payment of\t contribution  under
\nthe  ESI Act, was claimed as revenue expenditure,  allowable
\nunder  Section\t37(1) of the I.T. Act.\tSo also the  sum  of
\nRs3,865 paid by it for entertainment expenses was claimed as
\nrevenue\t expenditure, allowable under Section 37(2)  of\t the
\nI.T. Act.  The I.T.O., in his assessment order made on\tthat
\nreturn, treated the said item of expenditure of Rs.19,635 as
\npenal  interest\t and  disallowed  it.  As  to  the  item  of
\nexpenditure of Rs.3,865, he disallowed Rs.2,500 treating  it
\nas exclusive expenditure incurred on its Directors.  Appeals
\npreferred before
\n986<\/span>
\nthe A.A.C. and the Income-tax Appellate Tribunal  (Tribunal)
\nquestioning  the disallowance of claims of the appellant  by
\nthe  I.T.O.,  did  not succeed.\t  Application  made  by\t the
\nassessee  under\t Section 256(1) of the I.T. Act\t before\t the
\nTribunal  to raise the questions covering the  said  matters
\nand  get them referred for decision by the High Court,\talso
\ndid  not  meet with success.  Again,  the  application\tmade
\nthereafter by the assessee under Section 256(2) of the\tI.T.
\nAct  before the Bombay High Court to obtain a  reference  on
\nthe questions relating to the said matters for its decision,
\nwas rejected.  Hence, the assessee has filed this appeal  by
\nspecial leave, questioning the aforesaid orders made by\t the
\nauthorities  and  the High Court.  Reference  sought  to  be
\nobtained  from the Tribunal for decision by the High  Court,
\nwas on the following questions:-\n<\/p>\n
\t      1. Whether the sum of Rs.19,635 debited in the
\n\t      interest\taccount paid by way of interest\t for
\n\t      delayed  payment of sales tax  and  Employees’
\n\t      State Insurance contribution could be said  to
\n\t      have not been incurred, wholly and exclusively
\n\t      for the purpose of business?\n<\/p><\/blockquote>\n
\t      2.   Whether   an\t the  facts   and   in\t the
\n\t      circumstances   of  the  case,  the   sum\t  of
\n\t      Rs.19,635\t  claimed   by\tthe   assessee\t was
\n\t      an .allowable expenditure under the Income-tax
\n\t      Act, 1961?\n<\/p><\/blockquote>\n
\t      3.   Whether   on\t the  facts   and   in\t the
\n\t      circumstances,  the Tribunal was justified  in
\n\t      holding that the disallowance’ of Rs.2,500 out
\n\t      of  expenditure  incurred by the\tassessee  at
\n\t      Diners  Club  and C.C.I. could  be  disallowed
\n\t      even though the said expenditure was less than
\n\t      the expenditure allowable under Section  37(2)
\n\t\t\t    of the I.T. Act?\n<\/p><\/blockquote>\n
\t      4. Whether there was any evidence or  material
\n\t      before   the   Tribunal  to  hold\t  that\t the
\n\t      expenditure  to  the  extent  of\tRs.2,500  at
\n\t      Diners Club and C.C.I. was not laid wholly and
\n\t      exclusively  for the purposes of\tbusiness  of
\n\t      the assessee-company’.?\n<\/p><\/blockquote>\n
Questions  1 & 2 are covered by First Question indicated  at
\nthe outset.  So also, questions 3 & 4 are covered by  Second
\nQuestion  indicated  at the outset.  Indeed,  after  hearing
\ncounsel\t for the parties we were inclined to think that\t the
\nsaid questions ought to be remitted to the High Court for
\n987<\/span>
\nits  opinion  under  Section 256 of the I.T.  Act.   In\t the
\nnormal course, we would have done so and left the  questions
\nto  be answered by the High Court.  But, regard being  given
\nto the fact that the questions relate to a 25 year old\tcase
\nof the Assessment Year 1966-67 and the fact that they  could
\nbe  considered by us on the facts found in the order of\t the
\nTribunal  we consider it most appropriate to deal  with\t the
\nquestion’s  ourselves  and  answer  them.   Such  course  is
\nresorted  to by us not merely because of the  said  peculiar
\nfacts  and circumstances of this case, but also\t because  of
\nour inclination to remit the First Question with our  answer
\nthereon for a final decision by the Tribunal.
\nFirst Question:\n<\/p>\n
Section\t 37(1)\tof  the\t I.T.  Act  corresponds\t to  Section
\n10(2)(XV) of Predecessor Indian Income-Tax Act of 1922\t(the
\nI.T. Act of 1922), is
\nundisputed.\n<\/p>\n
In  Mahalakshmi Sugar Mills Co. v. Commissioner\t of  Income-
\ntax, Delhi, (1980) 123 ITR 429, this Court had to decide the
\nquestion whether the interest paid by the appellant-assessee
\ntherein\t under Section 3(3) of the U.P. Sugarcane Cess\tAct,
\n1956  for delayed payment of cess payable thereunder was  an
\nallowable  expenditure under Section 10(2)(XV) of  the\tI.T.
\nAct  of\t 1922.\t For  deciding\tthat  question,\t this  Court
\nexamined  the provisions of Sugarcane Cess Act,\t 1956  which
\nprovided  for  taking of several kinds of action  against  a
\nperson\twho defaulted in payment of the cess  imposed  under
\nthat Act.  Section 4 was found to make the defaulter  liable
\nto imprisonment or fine or both.  Section 3(5) was found  to
\nmake the defaulter liable for payment of penalty, an  amount
\nwhich  far exceeded the amount of cess.\t Then, Section\t3(3)
\nwas  found  to\tmake the defaulter  liable  for\t payment  of
\ninterest  at 6 per cent per annum from the date\t of  default
\ntill  the date of payment.  On an analytical examination  of
\nthe said provisions, this Court took the view that  interest
\npaid under Section 3(3) by the defaulter for delayed payment
\nof the cess could not be described as a penalty imposed upon
\nhim for infringement of the law but ought to be regarded  as
\nan amount of compensation paid by him to the Government\t for
\ndelayed\t payment  of the cess levied against him  under\t the
\nAct.   In that view of the matter, this Court held that\t the
\ninterest  paid by the appellant assessee on delayed  payment
\nof cess was an allowable expenditure under Section 10(2)(XV)
\nof the I.T. Act of 1922.\n<\/p>\n
988<\/span><\/p>\n
In  Commissioner of Income.  Tax v. Hyderabad  Allwyn  Metal
\nWorks  Limited, (1988) 172 ITR 113, a Division Bench of\t the
\nAndhra\tPradesh High Court had to decide two questions;\t (i)
\nwhether\t the  damages paid by the  respondent-asseswe  under
\nSection\t  14B\tof  the\t Employees’  Provident\t Funds\t and
\nMiscellaneous\tProvisions  Act,  1952,\t was  an   allowable
\ndeduction  under Section 37(1) of I.T. Act and (ii)  whether
\nthe interest paid under the BST Act, for delayed payment  of
\nsales  tax  thereunder,\t was an\t allowable  deduction  under
\nSection\t 37(1) of the I.T. Act.\t For deciding question\t(i),
\nthe Division Bench, referred to the view of A.P. Sen, J.  of
\nthis Court found in a passage of his concurring judgment  in
\nOrgano\tChemical  Industries v. Union of India AIR<\/a>  1979  SC
\n1803,  on the expression ‘damages’ occurring in Section\t 14B
\nof Central Act of 1952, which read thus:-\n<\/p>\n
\t      “The expression ‘damages’ occurring in section
\n\t      14B is, in substance, a penalty imposed on the
\n\t      employer\tfor  the  breach  of  the  statutory
\n\t      obligation.   The\t object\t of  imposition\t  of
\n\t      penalty under s. 14B is not merely ‘to provide
\n\t      compensation  for\t the  employees’.   We\t are
\n\t      clearly of the opinion that the imposition  of
\n\t      damages under s.14B serves both the  purposes.
\n\t      It  is meant to penalise defaulting  employers
\n\t      as  also to provide reparation for the  amount
\n\t      of loss suffered by the employees.  It is\t not
\n\t      only a warning to employers in general not  to
\n\t      commit a breach of the statutory\trequirements
\n\t      of section 6, but at the same time it is meant
\n\t      to  provide  compensation or  redress  to\t the
\n\t      beneficiaries,   i.e.,   to   recompense\t the
\n\t      employees\t for  the loss. sustained  by  them.<\/p><\/blockquote>\n
\t      There  is nothing in the section to show\tthat
\n\t      the damages must bear relationship to the loss
\n\t      which is caused to the beneficiaries under the
\n\t      Scheme.  The word ‘damages’ in section 14B  is
\n\t      related to the word ‘default’.  The words used
\n\t      in section 14B are ‘default in the payment  of
\n\t      contribution’   and,   therefore,\t  the\tword
\n\t      ,default’\t must be construed in the  light  of
\n\t      para.38 of the Scheme which provides that\t the
\n\t      payment of contribution has got to be made  by
\n\t      the   15th   of  the  following\tmonth\tand,
\n\t      therefore,  the word ‘default’ in section\t 14B
\n\t      must mean ‘failure in performance’ or ‘failure
\n\t      to act’.\tAt the same time, the imposition  of
\n\t      damages  under  section  14B  is\tto   provide
\n\t      reparation for the amount of loss suffered
\n989<\/span>
\nby the employees.”\n<\/p>\n
The  Division Bench, having regard to the said view  of\t the
\nexpression  damages  occurring in section 14B  of  Provident
\nFund  Act,  found that such damages paid  by  the  concerned
\nassessee-respondent  could  not\t have been  treated  by\t the
\nTribunal  as  purely  compensatory.   While  recording\tsuch
\nfinding, the real distinction that exists between an  impost
\nwhich  is compensatory and an impost which is a penalty,  is
\npointed out, thus:-\n<\/p>\n
\t      “The  question whether any such impost  is  in
\n\t      essence  compensatory or is by way of  penalty
\n\t      will  have to be decided having regard to\t the
\n\t      relevant provisions of the law under which  it
\n\t      is  imposed and the circumstances under  which
\n\t      it has been imposed.  The mere nomenclature as
\n\t      interest,\t penalty or damages in the  Act\t may
\n\t      not conclusive for the purpose of allowing  it
\n\t      as  a  deduction\tunder  the  Income-tax\tAct.<\/p><\/blockquote>\n
\t      Similarly, the circumstance that a fixed\trate
\n\t      of  interest  has to be paid also may  not  be
\n\t      conclusive.   Section 14B of the Act  provides
\n\t      for  levy of damages for delayed payment as  a
\n\t      percentage   of  the  amount  due\t up   to   a
\n\t      prescribed  maximum.  Such a determination  is
\n\t      to be done by the appropriate authority  after
\n\t      giving an opportunity to the employer.   Thus,
\n\t      the  levy will be by a speaking order  of\t the
\n\t\t\t    authority  fixing quantum of damages.  As  hel
\nd
\n\t      by   the\tSupreme\t Court,\t the   said   amount
\n\t      comprises\t both  an element of penal  levy  as
\n\t      well as compensatory payment.  It will be\t for
\n\t      the  authority  under the\t Income-tax  Act  to
\n\t      decide with reference to the provisions of the
\n\t      Employees’ Provident Funds Act and the reasons
\n\t      given  in the order imposing  and\t quantifying
\n\t      the  damages  to\tdetermine  what\t  proportion
\n\t      should be treated as penal and what proportion
\n\t      as  compensatory.\t The entire sum can  neither
\n\t      be  considered  as mere penalty  nor  as\tmere
\n\t      interest.”\n<\/p>\n
Then,  dealing with question (ii) relating to interest\tpaid
\nby the concerned respondent assessee under the BST Act which
\nthe  Tribunal  had treated as an allowable  deduction  under
\nSection 37(1) of the I.T. Act, the Division Bench considered
\nthe relevant provisions of the BST Act bearing
\n990<\/span>
\non the question and held, thus:-\n<\/p>\n
‘From  a  reading  of the aforesaid  provision\tand  in\t the
\nbackground  of\tthe  various sections  mentioned  above,  it
\ncannot\tbe  said that the levy under section  36(3),  though
\ncalled a penalty, is merely compensatory or in the shape  of
\ninterest for delayed payment or penal in character.  The Act
\ndoes  not provide for automatic payment of interest  due  to
\ndelay in payment.  The levy under sub-section (3) of section
\n36 is to be made after giving notice to the dealer and after
\nrecording  reasons  for it where the tax has not  been\tpaid
\nwithin\tthe time contemplated for payment by the  Act.\t The
\nCommissioner  has also the power to remit the whole  or\t any
\npart  of the interest calculated in the manner mentioned  in
\nit  which can be only on relevant grounds.  Sub-section\t (5)
\nof  Section  36, which is extracted  above,  indicates\tthat
\nafter  the  levy  of  this  amount  under  sub-section\t(3),
\nimmunity  is  granted from prosecution on  the\tsame  facts.
\nThese indicate that the imposition, though called a penalty,
\nis  a  composite  one  comprising  both\t a  penalty  and   a
\ncompensation for delayed payment.  The Tribunal,  therefore,
\nwas  not  right\t in treating the entire\t payment  as  merely
\ninterest  for delayed payment.\tAs already  indicated  while
\ndiscussing question No.(1), the nomenclature of the levy  as
\ninterest, damages or penalty may not be conclusive.”
\nThe  decision  of  this Court, in  Mahalakshmi\tSugar  Mills
\nCompany\t (supra) and the decision of the Division  Bench  of
\nthe Andhra Pradesh High Court in Hyderabad AIN” Metal  Works
\nLtd.  (supra)  with the views of which we  are\tin  complete
\nagreement,  are, in our opinion, decisions which settle\t the
\nlaw on the question as to when an amount paid by an assessee
\nas  interest  or  damages  or  penalty\tcould  regarded\t  as
\ncompensatory  (reparatory)  in character  as  would  entitle
\n‘such assessee to claim it as an allowable expenditure under
\nSection\t 37(1)\tof the I.T. Act.   Therefore,  whenever\t any
\nstatutory  impost paid by an assessee by way of\t damages  or
\npenalty or interest, is claimed as an allowable\t expenditure
\nunder section 37(1) of the I.T. Act, the assessing authority
\nis  required to examine the Scheme of the provisions of\t the
\nrelevant statute providing for payment of
\n991<\/span>
\nsuch  impost notwithstanding the nomenclature of the  impost
\nas given by the statute, to find whether it is\tcompensatory
\nor  penal, in nature.  The authority has to allow  deduction
\nunder  Section\t37(1)  of  the\tI.T.  Act,  whereever\tsuch
\nexamination  reveals  the  concerned  impost  to  be  purely
\ncompensatory  in nature.  Whereever such impost is found  to
\nbe  of a composite nature, that is, partly  of\tcompensatory
\nnature\tand  partly  of penal nature,  the  authorities\t are
\nobligated to bifurcate the two components of the impost\t and
\ngive  deduction to that component which is  compensatory  in
\nnature and refuse to give deduction to that component  which
\nis penal in nature.\n<\/p>\n
The facts of the case under our consideration disclose\tthat
\nthe  I.T.O.  and the Appellate authorities have\t refused  to
\nallow the claims made by the assessee under Section 37(1) of
\nthe  I.T. Act, without any examination of the Scheme of\t the
\nprovisions  of the BST Act, to find whet her impost  of\t the
\ninterest  paid by the assessee for delayed payment of  sales
\ntax  was  compensatory\tin nature as would  entitle  it\t for
\ndeduction under Section 37(1) of the I.T. Act.\tThe same  is
\nthe  position as regards the impost of damages paid  by\t the
\nassessee under the Provident Fund Act for delayed payment of
\ncontribution thereunder.  Hence, we consider it necessary to
\nremit  the question to the concerned Tribunal  for  deciding
\nthe assessee’s claims for deduction of interest and  damages
\nunder  Section\t37(1) of the I.T. Act.\t First\tQuestion  is
\nanswered accordingly.\n<\/p>\n
Second Question:\n<\/p>\n
Miscellaneous expenses claimed by the assessee as deductible
\nexpenditure  allowable under Section 37(2) of the  I.T.\t Act
\nrelated\t to a sum of Rs.3,865 incurred by the  Directors  of
\nthe  assessee-company for entertainment at the\tDiners\tClub
\nand C.C.I., The I.T.O. regarded a sum of Rs.1,365 out of the
\nsaid sum of Rs.3,865 as permissible deduction under  Section
\n37(2)  of the I.T. Act, while he regarded the remaining\t sum
\nof  Rs.2,500 as impermissible deduction under Section  37(2)
\nof  the\t I.T.  Act  taking  the\t view  that  the  same\t was
\nattributable  to personal expenses of the Directors  of\t the
\nassessee-company.  The A.A.C. in dealing with the said claim
\nfor  deduction\tin the appeal of the assessee  filed  before
\nhim,   held  the  entire  expenses  claimed  as\t  deductible
\nexpenditure under Section 37(2) of the I.T. Act could not be
\nregarded  as  having been laid out or  expended\t wholly\t and
\nexclusively for the purpose of the business of the assessee.
\nHe, therefore,
\n992<\/span>
\nrefused\t to interfere with the order of the I.T.O.  made  in
\nthat  regard.  The Tribunal which considered the  matter  in
\nthe  appeal of the assessee before it, affirmed the view  of
\nthe  A.A.C.  in\t the  matter.  As to  what  portion  of\t the
\nmiscellaneous\t expenses   claimed,   is    a\t  deductible
\nentertainment expenses of the assessee being a matter to  be
\ndecided by the fact finding authorities while assessing\t the
\nrelevant  materials placed before them, no question  of\t law
\ncould  arise  in that regard, particularly,  when  the\tfact
\nfinding\t authorities have recorded their concurrent  finding
\non  consideration  of  the relevant  material.\t Hence,\t the
\nquestion  under\t consideration\tis devoid of  merit  and  is
\nanswered against the assessee.\n<\/p>\n
In  the\t result, we allow that appeal partly and  remit\t the
\ncase  relating to appellant-assessee’s claim  for  deduction
\nunder  Section 37(1) of the Income-tax Act, 1961 to  Income-
\ntax  Appellate\tTribunal, Bombay for being, decided  in\t the
\nlight  of  our answer to the First Question and\t decide\t the
\nappeal of the assessee, accordingly.  No costs.
\nI.S.G.\n<\/p>\n
\t\t\t       Appeal allowed partly.\n<\/p>\n
993<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Prakash Cotton Mills Pvt. Ltd vs Commissioner Of Income Tax … on 6 April, 1993 Equivalent citations: 1993 AIR 2174, 1993 SCR (2) 983 Author: V N. Bench: Venkatachala N. (J) PETITIONER: PRAKASH COTTON MILLS PVT. LTD. Vs. RESPONDENT: COMMISSIONER OF INCOME TAX (CENTRAL) BOMBAY DATE OF JUDGMENT06\/04\/1993 BENCH: VENKATACHALA N. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-199112","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nPrakash Cotton Mills Pvt. 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