AI Structured Summary
Not yet generated for this judgment
Judgment
Notice was issued in this case limited to the following two questions:-
a) Expenditure on food and gifts amounting of Rs. 5,76,249.
b) Service charges to the extent of Rs. 41,80,949.
The assessee had claimed the aforesaid expenses as business expenses. The Assessing Officer disallowed these expresses. CIT Appeal, however,
reverse the order of the Assessing Officer and allowed those expenses. This order has been confirmed by the ITAT in appeal filed by the revenue.
In so far as expenses incurred in food and gift, we find that finding of fact is recorded by the Learned CIT that provisions for ordinary courtesy
by providing food and beverages, etc. and giving occasional gifts is part of the business promotion. The assessee is doing the business of
manufacturing of Meters and Electrical components. The inspection of meter is carried out by the representative of the Customers. During the
course of inspection,-when these representatives visit the premises of the Assessee, they are giving aforesaid courtesy by way of providing food,
beverages etc., and occasionally gifts as well. From the aforesaid amount which is incurred with regard to the food and gifts, it is clear that it in the
ordinary course of business. Therefore we are of the opinion that these expenses are rightly allowed as the business expenditure.
In so far as the payment of Rs. 41,80,949 concerned, the assessee had entered into contract with certain persons utilizing their liaison services.
The CIT appeal found as that fact in the case of Government supplies, even though the orders are placed through open tenders, still services of
agents are duly required for various purposes like obtaining pre-information for tenders, collecting information about competitors, arranging of
inspections, collecting of dispatch/goods receipts, release of payments, collection of statutory forms and for completion of various other formalities.
These agents also provide information regarding the conditions prevailing in the market as well as strength and workings of the competitors. The
payment of service charges hiring those liaison through commission agents may be necessary in augmenting the business activity. The Assessee had
also furnished documentary evidence in support of the payment in the forum of bills agreement with these agents and no discrepancy was found
therein by the Assessing Officer. In these circumstances we are of the opinion that no question of law arisen. Dismissed.