S.C. Tiwari, A.M. - (1.) THIS appeal has been filed by the assessee on 8th Jan., 2001 against the order of the learned CIT(A)-IV, New Delhi, dt. 3rd Oct., 2000 in the case of the assessee in relation to assessment order under Section 143(3) for asst. yr. 1995-96.
(2.) First ground in this appeal is directed against disallowance of trip expenses amounting to Rs. 69,448. Facts of the case leading to this appeal briefly are that the assessee claimed expenditure of Rs. 41,595 on account of tour to Mussorie in relation to Delhi office and Rs. 27,853 on account of tour to Kodaikanal from Chennai office. Both the learned AO and the learned CIT(A) have disallowed the expenditure on the ground that this was the trip for personal pleasure of the partner of the firm and their family members. During the course of hearing before us, the learned Authorised Representative of the assessee brought our attention to the documents furnished at pp. 1 to 21 of the paper book. As per these papers, these trips were made by the employees of the assessee mostly and they were also accompanied by the partner of the firm. The assessee argued that this trip was organized for providing recreation to the members of the staff with a view to enhance the rapport between the partners of the firm and other employees. The learned Authorised Representative of the assessee certified that the same documents had been furnished before the learned AO as well as the learned CIT(A) also. On consideration of the matter, we hold that the participation of the partner in this trip, which was in the nature of picnic, is for business purposes with a view to promote business interests of the partnership firm. No part of this expenditure can be treated as personal expenditure of the partner. We, therefore, direct that the assessee be allowed deduction of the sum of Rs. 69,448 as claimed by the assessee. The ground of appeal No. 2 is directed against disallowance of Rs. 1,47,465 by way of cost of time-share and of Rs. 2,01,135 by way of advance membership incurred with a view to acquire time-share in a holiday resort. The learned AO disallowed assessee's claim of deduction on the ground that the expenditure was for the personal purposes of the partners and in any case, as the assessee acquired a long-term advantage, the expenditure was expenditure of capital nature. Thus, according to the learned AO, the expenditure is not allowable under the provisions of Section 37(1) of the Act. The learned AO has further argued that even if it were revenue expenditure, the assessee's claim is hit by the provisions of Section 37(4) r/w Section 37(5). Under those provisions, the expenditure incurred on maintenance of residential accommodation other than a holiday home maintained for exclusive use by the assessee's employees are not allowable as deduction. On assessee's appeal, the learned CIT(A) has concurred with the view taken by the AO. Still aggrieved, the assessee is in appeal before us.
(3.) DURING the course of hearing before us, the learned Authorised Representative of the assessee argued that the expenditure was incurred with a view to acquire a facility for the employees of the assessees to have their own accommodation for the purpose of pleasure trip at a holiday resort. The expenditure was in the nature of staff welfare and, therefore, qualified to be expenditure incurred wholly and exclusively for the purpose of business of the assessee-company. The learned Authorised Representative argued that by this expenditure, the assessee did not acquire any physical asset and only right of stay for a specified period was acquired. Hence, the expenditure could not be considered as capital expenditure. The learned Authorised Representative further argued that the expenditure was not in the nature of expenditure on guest-house maintained by the assessee. By this expenditure, the assessee did not maintain any premises at all. Therefore, provisions of Section 37(4) did not apply.;