COMMISSIONER OF INCOME TAX Vs. DYNAVISION LTD

JUDGEMENT

(1.) THE assessee is a public limited company carrying on the business of manufacture of television sets. In this reference, we are concerned with the asst. yr. 1985-86 with the relevant previous year ended on 31st Dec., 1984. The assessee claimed, in the course of assessment proceedings for the asst. yr. 1985-86, a deduction of the contribution made to Dynavision Dealers' Welfare Trust of a sum of Rs. 50 lakhs. The AO found that the Dynavision Dealers' Welfare Trust was formed on 27th Nov., 1984, with the assessee-company as settlor, and a sum of Rs. 50 lakhs was paid by the assessee on 26th Dec., 1984. It was also noticed that all the dealers of the Dyanora T.V. sets were the beneficiaries of the trust. After noticing the objects of the trust, the AO rejected the claim of the assessee for deduction for the following reasons recorded in the assessment order :

(2.) THE assessee challenged the order of assessment before the CIT(A). The CIT(A), after noticing the objects of the trust, found that nearly a sum of Rs. 46 lakhs out of Rs. 50 lakhs was deposited with the sister concerns of the assessee and Rs. 11.29 lakhs, Rs. 14.68 lakhs and Rs. 16.54 lakhs were said to have spent by the assessee-company on dealers as well as for sales promotion for the years ended 31st Oct., 1985, 31st Oct., 1986 and 31st Oct., 1987. The CIT(A) also noticed that Rs. 1.11 lakhs, Rs. 39,866 and Rs. 5,473 were spent by the trust for dealers' conferences for the years ended on 31st Oct., 1985, 31st Oct., 1986 and 31st Oct., 1987. He, therefore, held that the assessee has not established that the expenses were incurred for the purpose of its business and upheld the order of the AO and dismissed the appeal.

(3.) THE Revenue sought for a reference which was rejected by the Tribunal, and on the basis of the directions of this Court, the Tribunal has stated a case and referred the following questions of law for our consideration :