CIT Vs. SRF LTD

JUDGEMENT

(1.) The captioned reference pertains to assessment year 1989-90. The reference has been made at the behest of the Revenue for adjudication of the following questions of law:

(2.) The assessee at the relevant time was in the business of manufacturing and selling nylon yarn, tyre coard fabrics, flours chemical etc. which was carried on through four divisions. In the course of business incurred expenses on travel undertaken by its employees. In consonance with provisions of section 37(3) of the Income Tax Act, 1961 (hereinafter referred to as I.T. Act?) read with Rule 6D of the Income Tax Rules, 1962 (hereinafter referred to as Rules?), the assessee had calculated the following disallowances for each of its four units: <FRM>JUDGEMENT_3251_ILRDLH21_2011_1.html</FRM>

(3.) The disallowance had been computed by the assessee by aggregating trips made by an employee during the year. Thus, if there was any surplus amount, according to the limits prescribed under Rule 6D, the same got adjusted against the deficit if any, arising viz-a-viz a subsequent visit of the same employee in the same year. The Assessing Officer, however, rejected this method of computation of disallowance. On a re-computation the Assessing Officer came to the conclusion that the disallowance had to be pegged at 12,97,632/-. The break-up of the disallowance of each of the four units was as under: <FRM>JUDGEMENT_3251_ILRDLH21_2011_2.html</FRM>