ACIT, Kottayam V. M.M Publication Ltd, Kottayam

ITA 906/COCH/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8222 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2010
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 17-03-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 31-10-2008
• Court: TRIBUNAL
• Department Lawyers: DR BABU JOSEPHSR
• Assessee Lawyers: Z T ZACHARIAH
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital expenditure
• Section: 32; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.VIJAYAKUMARAN & SHRI SANJAY ARORA I.T.A.NO.906/COCH/2008 ASSESSMENT YEAR:2005-06 THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOTTAYAM. VS. M/S. MM PUBLICATIONS LTD. KOTTAYAM. AACCM 2082 P (APPELLANT) ( RESPONDENT ) I.T.A.NO.490/COCH/2009 ASSESSMENT YEAR:2006-07 M/S. MM PUBLICATIONS LTD. KOTTAYAM. AACCM 2082 P VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOTTAYAM. (APPELLANT) (RESPONDE NT) & C.O.NO.124/COCH/2008 (ARISING OUT OF I.T.A.NO.906/COCH/2008) ASSESSMENT YEAR:2005 - 06 M/S. MM PUBLICATIONS LTD. KOTTAYAM. AACCM 2082 P VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOTTAYAM. ( CROSS OBJECTOR) (RESPONDENT) REVENUE BY DR. BABU JOSEPH,SR.DR ASSESSEE BY SSHRI Z.T. ZACHARIAH O R D E R PER N.VIJAYAKUMARAN,J.M: ITA NO.906/COCH/2008 IS FILED BY THE DEPARTMENT FO R THE ASSESSMENT YEAR 2005-06 AND C.O.NO.124/COCH/200 8 IS FILED BY THE ASSESSEE ARISING OUT OF THAT APPEAL. BOTH ARE ITA NO. 906/COCH/2008 & OTRS. 2 DIRECTED AGAINST THE ORDER OF THE LD. CIT(APPEALS) IV, KOCHI, DATED 29-07-2008. 2. THE FACTS RELEVANT ARE THAT THE ASSESSEE M/S.M.M . PUBLICATIONS, KOTTAYAM, IS A LIMITED COMPANY. THE ASSESSEE IS ENGAGED IN THE PRINTING AND PUBLICATION OF VARIO US PERIODICALS. FOR THIS ASSESSMENT YEAR 2005-06 END ED WITH THE PREVIOUS YEAR 31-03-2005, ASSESSEE DECLARED THE TAXABLE INCOME OF MORE THAN RS.1.61 CRORES. WHILE COMPLE TING THE ASSESSMENT, THE ASSESSING OFFICER DISALLOWED A PORT ION OF FOREIGN TRAVEL EXPENDITURE ALLEGEDLY INCURRED BY TH E EMPLOYEES OF THE ASSESSEE COMPANY. ANOTHER DISALLOW ANCE IS THE EXPENDITURE INCURRED FOR REPAIRING THE SPACE US ED FOR THE RECREATION ROOM USED BY THE STAFF. 3. THE LD. SR.D.R. WOULD CONTEND THAT THE LD. CIT(A PPEALS) OUGHT TO HAVE SEEN THAT THE EXPENSES INCURRED WAS F OR CREATING A NEW RECREATION HALL WHICH IS AN ASSET OF ENDURING NATURE. SINCE THERE WAS NO EXISTING ASSET, THERE CANNOT BE ANY RENOVATION AS HELD BY THE LD. CIT(APPEALS). TH EREFORE, THE LD. SR.DR WOULD SUBMIT THAT AS PER EXPLANATION 1 TO SECTION 32 WHICH PROVIDES THAT WHERE THE ASSESSEE I S A LESSEE, IT CAN CLAIM DEPRECIATION ON THE AMOUNT OF A CAPITAL ITA NO. 906/COCH/2008 & OTRS. 3 NATURE INCURRED BY IT. THEREFORE, THE STAND THAT THE ASSESSEE IS ONLY A LESSEE DOES NOT STAND. THUS, T HE LD. SR.DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER. THE LD. CIT(APPEALS) WHILE DELETING THIS DISALLOWANCE MADE UNDER THE HEAD EXPENDITURE INCURRED FOR REPAIRING THE SPA CE USED FOR RECREATION ROOM BY THE STAFF FOUND THAT AS MENT IONED BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER, WHO HIMSELF ADMITTED THAT PRIOR TO THE RENOVATION THERE WAS NO RECREATION ROOM. AS A RESULT OF THE REPAIRS AN EMPTY DERELICT HALL WAS CONVERTED INTO A RECREATION ROOM. THE LD. CIT(APP EALS) ANSWERED THE QUESTION WHETHER THE CONVERSION OF AN EMPTY DERELICT HALL INTO RECREATION ROOM HAS RESULTED IN THE CREATION OF A NEW ASSET. ADMITTEDLY THIS RENOVATION HAS BE EN UNDERTAKEN IN THE RENTED PREMISES. THERE IS NO CA SE THAT THE AMOUNTS SPENT BY THE ASSESSEE WILL BE REIMBURSE D OR COMPENSATED BY THE LESSOR. THE EXISTING SPACE DID NOT MEET THE REQUIREMENT OF A PROPER RECREATION AREA, THE EXISTING AREA WAS REDESIGNED AND RENOVATED SO AS TO CONFIRM TO THE STANDARDS OF A PROPER RECREATION FACILITY. SUCH REDESIGNED AREA WILL CERTAINLY AT THE END OF THE LE ASE PERIOD BE HANDED BACK TO THE LESSOR. THE ADDITIONAL FACI LITY THUS SECURED BY THE ASSESSEE COMPANY WHICH IS FOR THE PU RPOSE OF RUNNING THE BUSINESS MORE EFFICIENTLY. RECREATION F ACILITIES ITA NO. 906/COCH/2008 & OTRS. 4 UNDERTAKEN ARE PART OF THE WELFARE MEASURES UNDERTA KEN BY THE ASSESSEE COMPANY. THE LD. CIT(APPEALS) CITING VARIOUS DECISIONS CAME TO THE CONCLUSION THAT IT IS AN ALLO WABLE EXPENDITURE, BEING THE REVENUE EXPENDITURE AND IT I S TO BE ALLOWED U/S.37 BY RELYING ON THE DECISION OF THE H ONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. DR. AM SINGHVI (2008) 302 ITR 26. HE, THEREFORE, DIRECTED THE ASSESSING OFFICER TO TREAT THIS EXPENDITURE OF RS.6,51,670/- AS REVENUE EXPENDITURE. AGGRIEVED, THE DEPARTMENT IS IN APPE AL BEFORE THE TRIBUNAL CONTENDING AS ABOVE. 4. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE WOULD SUBMIT THAT THIS AMOUNT WAS SPENT FOR RENOVAT ION OF THE RENTED PREMISES. IT IS REVENUE EXPENDITURE. THE ASSESSEE COMPANY FUNCTIONS IN THE LAND COMPRISING O F 1 HECTRE 10 ARES 24 SQ.MTRS. AND A BUILDING THEREON T AKEN ON LEASE FROM M/S. AERO ESTATE LEASING COMPANY LTD. ON 27-11- 1998. THE LEASE IS FOR A PERIOD OF 25 YEARS. TH E COMPANY HAD ALREADY MADE CERTAIN RENOVATIONS AND ADDITIONS TO THE LEASED OUT BUILDING SPENDING MORE THAN RS.2.83 CROR ES IN THE EARLIER FINANCIAL YEARS AND THESE EXPENDITURES WERE CAPITALIZED. CERTAIN PORTION OF THE BUILDING WAS USED AS RECREATION ROOM FOR THE STAFF. FOR THAT, THE COMP ANY HAD ITA NO. 906/COCH/2008 & OTRS. 5 INCURRED RS,6,51,670/- FOR REPAIRS, REPLACEMENT AND CREATION OF A RECREATION ROOM FOR THE STAFF. IT IS FOR THE PURPOSE OF THE BUSINESS. THE ASSESSING OFFICER DISALLOWED IT ON THE GROUND THAT IT IS CAPITAL EXPENDITURE WHEREAS THE CIT(APPEALS) ALLOWED IT AS REVENUE EXPENDITURE ON T HE DETAILS SUBMITTED BY THE ASSESSEE. IT IS THE ASSESS EES CONTENTION THAT THERE IS AN ENDURING BENEFIT ACQUIR ED BY THE ASSESSEE BY INCURRING THIS EXPENDITURE. IT IS ONLY AN ADVANTAGE IN THE COMMERCIAL SENSE AND THEREFORE IT IS TO BE TREATED AS REVENUE EXPENDITURE. UNDER THE ABOVE CIRCUMSTANCES, THE LD. COUNSEL FOR THE ASSESSEE REL YING ON THE FINDINGS OF THE LD. CIT(APPEALS), ADVANCED HIS ARGUMENTS BY CONTENDING THAT THIS EXPENDITURE IS REVENUE IN N ATURE AND AS SUCH IT IS AN ALLOWABLE EXPENDITURE, WHICH WAS A CCEPTED BY THE CIT(APPEALS). 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PRECEDE NCE. THE ARGUMENT OF THE LD. SR.DR AS MENTIONED IN THE GROUN DS THAT AS PER EXPLANATION 1 TO SECTION 32(1) W.E.F. 01-04- 1988 BY WAY OF INSERTION BY TAXATION LAWS AMENDMENT AND MISCELLANEOUS PROVISIONS ACT, 1986, WHICH WAS RELIE D BY THE LD. SR DR THAT WHEN THE ASSESSEE POSSESS THE PREMIS ES ITA NO. 906/COCH/2008 & OTRS. 6 WHICH IS NOT OWNED BY IT AND INCURRED EXPENDITURE F OR THE PURPOSE OF THE BUSINESS ON THE CONSTRUCTION OF ANY STRUCTURE OR DOING ANY WORK AND BY WAY OF RENOVATION OR EXTE NSION THEN PROVISIONS OF THIS CLAUSE SHALL APPLY AS IF TH E SAID STRUCTURE OR BUILDING OWNED BY THE ASSESSEE. IN V IEW OF THIS EXPLANATION, THE EXPENDITURE INCURRED IS ONLY CAPIT AL EXPENDITURE AND IT CANNOT BE ALLOWED AS DEDUCTION A S IT IS EXPENDITURE IN THE CAPITAL FIELD AND NOT AN ALLOWAB LE EXPENDITURE. THE FACTS AS OBSERVED BY THE LD. CIT (APPEALS) IN PARA.15 PAGE 11 LAST TWO LINES IN THE ASSESSMEN T ORDER THE ASSESSING OFFICER HAS HIMSELF STATED THAT PRIO R TO THE RENOVATION THERE WAS NO RECREATION ROOM. AS A RES ULT THE REPAIRS AN EMPTY DERELICT HALL WAS CONVERTED INTO A RECREATION ROOM. THIS IS A VERY IMPORTANT FACTOR TO DECIDE THE ISSUE. THE DECISION OF THE HONBLE MADRAS HIG H COURT IN THE CASE OF CIT VS. TVS LEAN LOGISTICS LTD. (2007) 293 ITR 432 WHERE THE HONBLE HIGH COURT HAS HELD AS UNDER: WHAT CONSTITUTES CAPITAL EXPENDITURE AND WHAT DOES NOT, TO ATTRACT EXPLANATION 1 TO SECTION 32(1 ) OF THE ACT DEPENDS UPON THE CONSTRUCTION OF ANY STRUCTURE OR WORK IN RELATION TO AND BY WAY OF RENOVATION, EXTENSION OR IMPROVEMENT TO A BUILDING TAKEN ON LEASE BY THE ASSESSEE FOR CARRYING ON HIS BUSINESS AND PROFESSION BUT NOT IN A CASE OF CONSTRUCTION OF ANY STRUCTURE OR DOING ANY WORK WHE RE ITA NO. 906/COCH/2008 & OTRS. 7 SUCH BUILDING IS PUT UP OR CONSTRUCTED FOR THE PURP OSE OF THE BUSINESS OR PROFESSION OF THE ASSESSEE IN LA ND TAKEN ON LEASE BY THE ASSESSEE. THE ASSESSEE DID NOT ACQUIRE A CAPITAL ASSET BUT HAD PUT UP A CONSTRUCTI ON OF THE BUILDING ONLY FOR BUSINESS ADVANTAGE WITH THE RESULT THAT THE ENTIRE CONSTRUCTION COST WAS ADMISS IBLE AS REVENUE EXPENDITURE. THIS DECISION IS DIRECTLY ON THE POINT. BEFORE TH E RENOVATION THERE WAS NO RECREATION ROOM IS AN ADMITTED FACT. AS A RESULT OF THE REPAIRS OF AN EMPTY DERELICT HALL WAS CONVERTED INTO A RECREATION ROOM IS ALSO NOT A DISPUTED FACT. UNDER THE CIRCUMSTANCES, EXPLANATION 1 TO SECTION 32(1) O F THE ACT DEPENDS UPON THE CONSTRUCTION OF ANY STRUCTURE OR D OING OF ANY WORK IN OR IN RELATION TO, AND BY WAY OF RENOVA TION BUT NOT IN CASE OF CONSTRUCTION OF ANY STRUCTURE OR DOI NG ANY WORK WHERE SUCH BUILDING IS PUT UP OR CONSTRUCTED F OR THE PURPOSE OF BUSINESS OR PROFESSION OF THE ASSESSEE A NY LAND TAKEN ON LEASE BY THE ASSESSEE. THE ASSESSEE DID NOT ACQUIRE A CAPITAL ASSET BUT PUT UP A CONSTRUCTION O F THE BUILDING ONLY FOR THE PURPOSE OF BUSINESS WITH THE RESULT THAT THE ENTIRE CONSTRUCTION COST WAS ADMISSIBLE FOR DED UCTION AS REVENUE EXPENDITURE. THIS DECISION IS DIRECTLY ON THE ISSUE WHICH WILL GO TO REJECT THE ARGUMENTS OF THE LD. SR .DR, WHO ADVANCED HIS ARGUMENT REGARDING THE GROUNDS SPECIFI CALLY THAT EXPLANATION 1 TO SECTION 32(1). THEREFORE, THIS APPEAL ITA NO. 906/COCH/2008 & OTRS. 8 OF THE REVENUE FOR THE ASSESSMENT YEAR 2005-06 DESE RVES TO BE DISMISSED AND ACCORDINGLY DISMISSED. 6. THE CROSS OBJECTION OF THE ASSESSEE IS WITH REGA RD TO THE DISALLOWANCE OF FOREIGN TRAVEL EXPENDITURE. IN ITA NO.490/COCH/2009 FOR THE ASSESSMENT YEAR 2006-07 TH E ISSUE RAISED BY THE ASSESSEE IS IN RESPECT OF DISAL LOWANCE OF FOREIGN TRAVEL EXPENDITURE OF THE EMPLOYEES. 7. WE HAVE TAKEN BOTH THE APPEAL AS WELL AS THE CRO SS OBJECTION OF THE ASSESSEE TOGETHER, AS BOTH RELATES TO THE COMMON ISSUE, OF-COURSE FOR TWO DIFFERENT YEARS. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ENTIRE MATE RIALS AVAILABLE ON RECORD. 8. THE LD. COUNSEL FOR THE ASSESSEE WOULD SUBMIT BY WAY OF ARGUMENT NOTE AS WELL AS BY WAY OF PAPER BOOK TH AT FOREIGN TRAVEL EXPENSES INCURRED BY THE ASSESSEE WH ICH WAS SUBJECTED TO DISALLOWANCE IS BASED NOT ON FACTS BUT ON MERE CONJUNCTURES AND SURMISES. THE LD. COUNSEL FOR TH E ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE, M/S. MM PUBLICATIONS IS A COMPANY IN WHICH PUBLIC ARE SUBST ANTIALLY INTERESTED AND IT IS ENGAGED IN THE PRINTING AND PU BLISHING OF ITA NO. 906/COCH/2008 & OTRS. 9 VARIOUS PERIODICALS SINCE 1970. DURING THE YEAR U NDER CONSIDERATION, IT HAS EIGHT PERIODICALS AND OTHER O NE TIME SPECIAL ISSUES OF VARIOUS TOPICS LIKE, WRITE-UPS, I NFORMATIVE ARTICLES, ON SUBJECTS OF COVERING HEALTH, EDUCATION , FASHION, COOKERY, FACTORS AFFECTING HUMAN LIFE AND VARIOUS O THER TOPICS OF INTEREST AND GUIDANCE TO THE READERSHIP, BOTH IN INDIA AND ABROAD. BEING A PUBLISHER OF PERIODICAL S DEALING WITH SUBJECTS COVERING TOPICS OF INTEREST FOR THE R EADERSHIP ABROAD, THE CHIEF EDITOR AND ASST. EDITORS AND OTHE R STAFF HAVE TO UNDERTAKE TOURS ABROAD OFTEN TO STUDY AND B RING OUT TOPICS OF INTEREST TO THE READERSHIP INLAND AND ABR OAD. FURTHER, THE PUBLICATIONS BEING CIRCULATED ABROAD, REGULAR INTERACTION BETWEEN THE READERSHIP AND PROSPECTIVE SUBSCRIBERS ABROAD ARE ESSENTIAL FOR INCREASING THE READERSHIP. THESE ARE THE MAIN REVENUE OF THE ASSES SEE COMPANY. THIS INTERACTIONS AND CONSTANT FOLLOW UPS ARE NECESSARY FOR OBTAINING ADVERTISEMENTS, VARIOUS TEC HNIQUES OF PRINTING AND PUBLISHING AND OF MODERN EQUIPMENTS FROM TIME TO TIME. THESE ARE NECESSITATED FOR THE PURP OSE OF BUSINESS. BESIDES, VARIOUS PERSONS, ORGANIZATIONS, ASSOCIATION, ETC. AND FUNCTION WHEREVER THERE IS A CHANCE THE OFFICIALS CAN UPDATE THEIR KNOWLEDGE AND INTER-ACT WITH THE CONCERNED PEOPLE, WHICH WILL ULTIMATELY BENEFIT THE BUSINESS ITA NO. 906/COCH/2008 & OTRS. 10 OF THE ASSESSEE. IT IS A REGULAR ROUTINE WORK WITH AN INTENTION TO GATHER MATERIALS OR TO STUDY THE TECHN IQUES FOR IMPROVING THE KNOWLEDGE AND QUALITY OF THE PUBLICAT IONS AND OTHER PERIODICALS. WHEN A TRIP IS UNDERTAKEN BY T HE OFFICIALS, ALL THESE PURPOSES ARE FOCUSED AND IT WI LL BE IMPRACTICABLE AND IMPOSSIBLE TO CONTRIBUTE ONE SING LE PURPOSE TO SUCH TRIPS UNDERTAKEN BY THE STAFF. THE LD. COUNSEL FURTHER SUBMITTED THAT THE DEPARTMENT IN EA RLIER YEARS I.E. FROM THE ASSESSMENT YEARS 1995-96 ONWARD S EXCEPT FOR THESE ASSESSMENT YEARS 2005-06 AND 2006- 07, THE TRAVEL EXPENSES INCLUDING FOREIGN TRAVEL EXPEND ITURES WHICH WERE CLAIMED BY THE ASSESSEE WAS ALLOWED AFTE R SCRUTINY. SAME WAY, IN THE ASSESSMENT YEAR 2007-0 8 WAS ALSO COMPLETED AFTER SCRUTINY. FOR THE FIRST TIME IN THE HISTORY OF THE ASSESSMENT OF THE ASSESSEE, THE DEPA RTMENT DISALLOWED A PORTION OF THE FOREIGN TRAVEL EXPENDIT URE ON AD HOC BASIS BASING OF ERRONEOUS CONCEPTS. THE LD. C OUNSEL THEREFORE WOULD SUBMIT THAT THERE IS NO SCOPE FOR M AKING AN AD HOC DISALLOWANCE. EITHER THE DEPARTMENT SHOULD ACCEPT THE CASE AND ALLOW THE CLAIM OF THE ASSESSEE IN FUL L OR THEY SHOULD HAVE REJECTED THE CLAIM BY DISALLOWING THE E NTIRE FOREIGN TRAVEL EXPENDITURE. THERE WAS NO PERSONAL OR PLEASURE TRIPS WERE UNDERTAKEN. NO PERSONAL ELEME NT IS ITA NO. 906/COCH/2008 & OTRS. 11 INVOLVED. THEY WERE ALL THE STAFF OF THE ASSESSEE COMPANY. THEY ARE NOT THE SHAREHOLDERS OF THE ASSESSEE COMPA NY. ITEM BY ITEM OF TRAVEL EXPENDITURE INCURRED BY THE EMPLOYEES WERE CALLED FOR EXPLANATION AND THE ASSE SSEE COMPANY FILED TWO LETTERS SUBMITTING THEIR EXPLANAT ION AND CONTENDING WITH RELEVANT MATERIALS THAT THESE FOREI GN TRAVEL EXPENDITURES WERE LAID OUT AND EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. THER EFORE, THEY ARE ALLOWABLE U/S.37 OF THE I.T.ACT. BEING THE PU BLISHER OF SEVERAL PERIODICALS DEALING WITH THE SUBJECT, THE E DITORS AND OTHER STAFF HAVE TO UNDERTAKE TOURS IN INDIA AND AB ROAD AND GATHER CURRENT TOPICS OF INTEREST TO THE READERSHIP . THEREFORE, THERE IS NO PERSONAL ELEMENT INVOLVED AN D THE EXPENSES INCURRED UNDER THE HEAD FOREIGN TRAVEL IS FOR THE PURPOSE OF BUSINESS EXCLUSIVELY AND IT HAS TO BE AD JUDGED FROM THE POINT OF A BUSINESSMAN AND NOT AS A SPECTA TOR. LASTLY HE RELIED ON THE DECISION OF SUPREME COURT IN THE CASE OF JK WOOLLEN MANUFACTURERS VS. CIT (1969) 72 ITR 612(SC). 9. ON THE OTHER HAND, THE LD. SR.DR WOULD SUBMIT TH AT THE ORDERS OF THE AUTHORITIES BELOW ARE QUITE JUSTIFIED . THEY ARE WELL REASONED ORDERS. SO FAR AS THE FOREIGN TRAVE L ISSUE IS ITA NO. 906/COCH/2008 & OTRS. 12 CONCERNED WHEREVER THE ASSESSEE FAILED TO SATISFY T HE DEPARTMENT, THE DISALLOWANCE MADE BY THE AUTHORITIE S ARE JUSTIFIED, IS THE ARGUMENT OF THE LD. SR.DR. 10. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PRECEDE NCE. SECTION 37 IS A RESIDUARY PROVISION. IT PROVIDES FOR DEDUCTION OF ALL EXPENDITURE WHOLLY AND EXCLUSIVELY LAID OUT OR EXPENDED FOR THE PURPOSE OF THE BUSINESS. THE EXPENDITURE MUST NOT BE A PROCEEDING IN NATURE BUT AT THE SAME TIME THE EXPENDITURE MUST NOT BE A CAPITAL IN NATURE. UNDER THE CIRCUMSTANCES, WHEN THE EXPENDITURE NOT C OVERED BY THE PROVISIONS OF SECTION 30 TO 36 AND THE EXPEN DITURE WHICH WAS LAID OUT WHOLLY AND EXCLUSIVELY FOR THE P URPOSE OF THE BUSINESS OF THE ASSESSEE, THERE SHOULD NOT BE A NY IMPEDIMENT ON THE PART OF THE AUTHORITIES TO ALLOW IT UNDER THE RESIDUARY PROVISION OF SECTION 37. WE HAVE TO SEE THE INCURRING OF EXPENDITURE WHETHER IT IS NECESSITATED FOR THE PURPOSE OF BUSINESS. IT IS NOT A DISPUTED FACT TH AT THE ASSESSEE IS IN THE BUSINESS OF PRINTING AND PUBLISH ING OF POPULAR MAGAZINES. DURING THE RELEVANT YEAR, THE A SSESSEE HAS EIGHT PERIODICALS PUBLISHING REGULARLY AND OTHE R ONE TIME SPECIAL ISSUE OF VARIOUS TOPICS LIKE WRITE UPS, INF ORMATIVE ITA NO. 906/COCH/2008 & OTRS. 13 ARTICLES, ON SUBJECTS LIKE HEALTH, EDUCATION, FASH ION, COOKERY, FACTORS AFFECTING HUMAN LIFE, ETC. ALL T HESE PUBLICATIONS HAVE A WIDE READERSHIP OUTSIDE INDIA I S ALSO NOT DISPUTED. FOREIGN TRAVEL UNDERTOOK BY THE STAFF W HO WERE CHIEF EDITOR, ASST. EDITORS, ETC. AND THEIR DESIG NATIONS ARE NOT DISPUTED. IT IS A CLEAR CUT CASE OF THE ASSES SEE THAT THEY HAVE NOTHING TO DO WITH THE MANAGEMENT AND THE Y ARE STAFF. IN SOME CASES, THEY ACCOMPANIED THEIR HUSB AND WHEREAS HUSBAND ARE THE EMPLOYEES OF THE OTHER GROU P CONCERNS OF THE ASSESSEE, VIZ. MALAYALA MANORAMA. THIS FACT ALSO MADE CLEAR BY THE LD. COUNSEL THAT THOSE FOREIGN TRAVEL EXPENDITURE OF THE HUSBANDS OF THE STAFF WER E TAKEN CARE BY THEIR EMPLOYER, MALAYALA MANORAMMA. THE S TAFF OF THE ASSESSEE COMPANY VISITED VARIOUS PLACES IN VARI OUS COUNTRIES TO ATTEND INTER-NATIONAL PRESS MEETING, T O EXPLORE THE POSSIBILITIES TO BRING OUT ADVERTISEMENT INCOME AND TO EXPLORE THE POSSIBILITIES FOR BRINGING OUT AN INTER -NATIONAL EDITION OF ITS MAGAZINES WHICH WAS NECESSITATED TO MAKE THE STAFF TO TRAVEL ABROAD. THIS IS FOR THE PURPOSE O F BUSINESS OF THE ASSESSEE. 11. THE LD. CIT(APPEALS), HOWEVER, FOUND THAT SOME ELEMENT OF PERSONAL NATURE IS THERE, SOME PLEASURE TRIP WAS ITA NO. 906/COCH/2008 & OTRS. 14 UNDERTAKEN. AS RIGHTLY CONTENDED BY THE LD. COUNS EL FOR THE ASSESSEE, NOTHING HAS BEEN POINTED OUT THAT THE STA FF OF THE ASSESSEE COMPANY WENT ON PURE PLEASURE TRIPS DIS- ASSOCIATING FROM THE BUSINESS OF THE ASSESSEE SO AS TO REJECT THE CLAIM OF THE ASSESSEE. ON A PERUSAL OF THE OR DERS OF THE AUTHORITIES, WE FIND THAT AN AD HOC DISALLOWANCE HA S BEEN MADE AND NOTHING HAS BEEN PIN POINTED FOR THE DISAL LOWANCE. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE WOULD CONVINCE US THAT THIS FOREIGN TRAVEL WAS NECESSITAT ED TO GROW THE BUSINESS OF THE ASSESSEES MAGAZINES, PERIODICA LS, ETC. WHICH IS NOW ON GLOBALIZATION AND ON COMPETITION, W HICH REQUIRES TO KNOW MORE ABOUT TO CUT DOWN THE COST OF THE PUBLICATIONS AND PRINTINGS AND SUCH OTHER MATTERS, WHICH ARE REQUIRED FOR THE PURPOSE OF THE BUSINESS. UNDER T HE ABOVE CIRCUMSTANCES, WE HAVE NO HESITATION IN ACCEPTING T HE CLAIM OF THE ASSESSEE THAT THE FOREIGN TRAVEL EXPENSES WE RE INCURRED ONLY FOR THE PURPOSE OF BUSINESS. HENCE, THE CROSS OBJECTION FOR THE ASSESSMENT YEAR 2005-06 AND THE A PPEAL FOR THE ASSESSMENT YEAR 2006-07 FILED BY THE ASSESS EE ARE ALLOWED. 12. IN THE RESULT, APPEAL FILED BY THE REVENUE IN I.T.A.NO.906/COCH/2008 IS DISMISSED WHEREAS C.O. ITA NO. 906/COCH/2008 & OTRS. 15 NO.124/COCH/2008 AND I.T.A.NO.490/COCH/2009 FILED BY THE ASSESSEE ARE ALLOWED. SD/- SD/- (SANJAY ARORA) (N.VIJAYKUMARAN) ACCOUNTANT MEMBER JUDICIAL M EMBER ERNAKULAM, DATED THE 19 TH MARCH,2010. PM. COPY FORWARDED TO: 1. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOT TAYAM. 2. M/S. MM PUBLICATIONS LTD., ERAYILKADAVU, KOTTAYAM. 3. CIT(A)-IV, KOCHI 4. CIT, KOTTAYAM. 5. D.R. BY ORDER SD/- ASSISTANT REGISTRAR