COMMISSIONER OF INCOME TAX Vs. PUNJAB TRACTORS LTD.

JUDGEMENT

(1.) THE Tribunal, Chandigarh Bench, Chandigarh (in short "the Tribunal"), at the instance of the Revenue, pursuant to the short "the Act"), has referred the following question of law for the opinion of this Court :

(2.) THE dispute referred to herein pertains to the asst. yr. 1980 -81. The assessee -respondent, while filing its revised return, excluded certain expenditure made on entertainment and on account of gifts. The AO disallowed the expenditure of Rs. 1,51,570 pertaining to tractors gifted to foreign Governments, under r. 6B of the IT Rules, 1962 (in short "the Rules"). This expenditure was held to be disallowable by the AO as business expenditure as well as for purpose of 1985 by the CIT(A), Chandigarh.

(3.) DISALLOWANCE of the expenditure. Subsequently, the assessee moved a miscellaneous petition. The Tribunal on given to the foreign Governments and to the delegates of the foreign countries, as gifts. The cost of the tractors was Rs. 1,45,970 and a sum of Rs. 5,600 was the freight and packing charges etc. The Tribunal observed that it was uneconomical to bring back the tractors to India and, therefore, the expenditure incurred by way of gifts is liable to be treated as expenditure incurred for the purpose of business. The Tribunal observing further that it was not an expenditure on advertisement but incidental to the carrying on the business held the said amount allowable under s. 37 (1) of the Act.