KELVINATOR OF INDIA LTD Vs. INSPECTING ASSISTANT COMMISSIONER
LAWS(IT)-1989-3-4
INCOME TAX APPELLATE TRIBUNAL
Decided on March 13,1989

Appellant
VERSUS
Respondents

JUDGEMENT

G. Krishnamurthy President - (1.)THIS appeal is filed by the assessee M/s Kelvinator of India Ltd., New Delhi against the order of the Commissioner (A) raising several grievances in relation to the assessment year 1985-86.
(2.)The first point urged in the grounds of appeal was that that the Commissioner (A) erred on facts and in law in upholding the action of the Inspecting Asstt. Commissioner (Asstt.) in reducing the actual cost by the amount received from the insurance company for the purpose of calculating depreciation and investment allowance thereby allowing the claim for depreciation short by Rs. 3,67,361 and investment allowance short by Rs. 96,993. Our attention is invited to an order passed by the Income-tax Appellate Tribunal on 27-2-1988 in the assessee's own case in relation to the assessment year 1982-83 vide ITA No. 2855 (Del.)/ 1985 where on identical point, the Tribunal decided against the assessee. The point at issue now being identical and agreed to be so by the parties before us, following with respect the order of the Tribunal for the preceding year 1982-83, we hold that the Commissioner (A) was right in reducing the actual cost for the purpose of allowance of depreciation and investment allowance the amount received from the insurance company.
The next ground urged was that the Commissioner (A) erred on facts and in law in confirming the action of the Inspecting Asstt. Commissioner (Asstt.) in allowing 10 per cent of the expenditure on entertainment towards the employees' participation as against the claim of 50 per cent of the expenditure made by the appellant. The orders show that the assessee had incurred entertainment expenditure of Rs. 2,22,006 and claimed that out of the sum 50 per cent was spent on employees' participation in business meetings and expenditure to that extent should not be considered as entertainment expenditure disallowable under the provisions of Section 37(2A) of the Act. The Inspecting Asstt. Commissioner did not agree with this submission and restricting the participation of the employees to 10 per cent allowed only Rs. 22,200 and of the balance, he allowed Rs. 50,000 as permissible deduction under Section 37(2A) and disallowed the balance, which worked out to Rs. 1,49,806. On appeal this disallowance was confirmed by the Commissioner (A).

(3.)IN the appeal against that view, it was submitted on behalf of the assessee that employees do participate in every business meeting and the number of employees participating would be larger than the outsiders. Besides certain refreshments are served to the employees during office hours. The entire expenditure was debited under the head 'entertainment expenditure', although it is difficult to apportion the expenditure between employees and outsiders, the estimate of 10 per cent was very unreasonable and excessively low. There are cases where the Tribunal had taken the view that in such matters the employees participation could be as high as even 35 per cent. He pleaded for the allowance of a higher sum under the employees participation account, whereas the learned Departmental Representative urged that in the absence of any information merely on guess work the estimate for employees participation could not be increased from 10 per cent to anything higher. There was an order passed by the Commissioner (A) in the earlier year restricting the employees participation to 10 per cent and that order not having been disturbed, the same should be followed.


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