Decided on March 09,1994



N. K. AGRAWAL, J. M. : - (1.) THESE are cross-appeals for asst. yr. 1984-85. We shall first take up the assessees appeal. Ground No. 1 was withdrawn by the learned counsel at the time of hearing. Therefore, ground No. 1 is rejected as withdrawn.
(2.) Ground Nos. 2 and 3 relate to the disallowance of certain expenditure on the ground that they were spent on entertainment and advertisement. Both these grounds are being taken up together because the principal plea raised by the learned counsel is identical. The first disallowance is to the tune of Rs. 48,133, treating it as expenditure on entertainment and gifts. Out of the above expenditure, sum of Rs. 11,031 had been disallowed on the ground that certain gifts above Rs. 50 each had been given by the assessee and so it was not allowable under r. 6B of the IT Rules. The learned counsel has not pressed this ground with respect to the said amount of Rs. 11,031. The next two items also related to gifts but of different nature. Sum of Rs. 4,477 had been spent on gifts to VIPs and sum of Rs. 32,625 related to gifts in trade fair. The learned counsel has argued that certain gifts were given to foreign dignitaries during the International Trade Fair at New Delhi. He has, therefore, claimed that out of Rs. 48,133 sum of Rs. 37,102 must be allowed being the expenditure for the purpose of business. The main thrust of the argument of the learned counsel was, however, on a different ground. He has argued that the expenditure had been indeed incurred by the assessee-Corporation but it was reimbursed by the Punjab Govt. in subsequent years. He has invited our attention to the amount of Rs. 33,98,188 received by the assessee from the Punjab Govt. as the amount of reimbursement of exhibition expenses. This amount was received in next year and was shown as income at page 52 of the balance-sheet relating to the accounting year 1983-84, which was relevant to the asst. yr. 1985-86. The accounting period ended on 30th June, 1983 for the year under appeal. The second expenditure for which ground No. 3 has been raised related to the exhibition expenses amounting to Rs. 58,755 and anniversary expenses at Rs. 12,720. The third item related to the cost of samples at Rs. 7,063. These there expenditures were disallowed on the ground that they fell within the purview of s. 37(3A) of the Act. These three amounts are also claimed to have been reimbursed by the Punjab Govt. in next year. The learned counsel has argued that he would not go into the merits of the claim but would simply plead that the amount has been brought to tax in next year after having been reimbursed by the Punjab Govt. and, therefore, on that ground the expenditure should not be disallowed in this year. The learned Departmental Representative has, in reply, submitted that if the amounts were reimbursed by the Punjab Govt., these expenses, in that situation, were not in the nature of the assessees expenditure but that of the Govt. If the money was to be received from the State, it was not at all necessary nor warranted under law to bring law to bring it in the P&L account of the assessees business. The amount would have been debited to the account of the Punjab Govt., so that it could be claimed by the assessee from the Govt. The learned Departmental Representative has argued that the specific expenditures claimed to have been reimbursed have not been established by direct connecting evidence and, therefore, total sum of Rs. 33,98,188 said to have been reimbursed in next year, cannot be said to include the amounts in dispute here. The learned counsel has filed the details of the amounts received in next year but it appears that the specific amounts involved in grounds Nos. 2 and 3 here, do not find place in the list relating to reimbursed amounts, filed by the assessee.
(3.) KEEPING in view the difficulty in directly linking the expenditure with the reimbursement, the learned counsel was asked to find out as to how the amounts spent by the assessee and claimed to have been received by way of reimbursement, could be linked, the learned counsel expressed his inability, stating that the reimbursement was made by the Punjab Govt. in instalments and in different lump sum amounts. Therefore, he fairly conceded that the specific expenditures disallowed by the Revenue authorities cannot be shown by him as having been reimbursed in the same amounts. He has, however, vehemently argued that the amount of Rs. 33,98,188 did include the amounts in question here and, therefore, since the said amount has been shown as income in next year, the expenditure incurred in the year under appeal should be allowed as business expenditure.;

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