1.   J K INDUSTRIES LTD Vs. COMMISSIONER OF INCOME TAX, (CENTRAL-1), ITA NO. 624 OF 2004, DATED: MARCH 17, 2011 HIGH COURT OF CALCUTTA

That in the Board Resolution, the Company had not taken decision for spending on the foreign tour of the wife of a Deputy Managing Director and thus, the amount claimed for the foreign tour of the wife of the Deputy Managing Director is on the face of it not authorized by the said resolution and cannot be considered for deduction under Section 37 of the Act. That the fact that the Managing Director of the Company visited the foreign country for the purpose of the business of the assessee is not in dispute.

The fact that his wife also accompanied him on such tour is not in dispute. It was a decision of the Company to send her for promoting better business understanding and as a matter of reciprocity in international business for the reasons thought fit by the Company. Therefore, the reason assigned by the Tribunal, that as the wife of the Managing Director is not an employee the expenditure made for her foreign tour cannot be accepted as business expenditure, is not tenable in the eye of law. It is not the law that business expenditure should be limited to the expenditure made for an employee only. That when the Board of Directors of the assessee had thought it fit to spend on the foreign tour of the accompanying wife of the Managing Director for commercial expediency, the reasons being reflected in its resolution, it was not within the province of the Income-tax Authority to disallow such expenditure by sitting over the decision of the Board, in the absence of any specific bar created by the Statute for such expenditure. Thus, the expenditure for foreign travel of wife of managing director is allowed.

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2.   RAJ RATAN PALACE CO OP HSG SOCIETY LTD Vs. DEPUTY COMMISSIONER OF INCOME TAX, ITA No. 674/Mum/2004, Assessment Year: 1997-1998  DATED: 25.02.2011, ITAT – MUMBAI

No part of the land was ever transferred by the society. The society merely gave permission to the developer to carry out development in the rear side of the existing building Raj Ratan Palace after demolishing a small bungalow, which was in existence. Clause 12 & 13 of the agreement dated 18/5/96 clearly mentions that the developer will pay compensation at Rs. 1431/- to the society and members; the sum was quantified at Rs. 2,00,16,828/-. Out of this only a sum of Rs. 2,51,000 was paid to the society. Admittedly the remaining sum and the additional sum payable under clause 13 of the agreement dated 18/5/96 was paid to the individual members of the society under 51 different agreements.

Thus it is clear that the assessee did not part with any rights and did not receive any consideration except a sum of Rs.2,51,000. In such circumstances, we fail to see as to how there could be any incidence of taxation in the hands of the assessee; besides this, the order of the Assessing Officer is vague. It is not clear as to whether the sum in question is brought to tax as capital gain in the hands of the assessee or as income under section 2(24) of the Act. In our view neither of the above provisions can be pressed into service for bringing the sum in question to tax in the hands of the assessee. We have already seen that there was no receipt by the assessee except a sum of Rs.2,51,000/-. The sum so received was for merely granting consent to consume TDR purchased by the Developer from a 3rd party. The Society continues to be the owner of the land and no change in ownership of land had taken place. Mere grant of consent will not amount to transfer of land/or any rights therein.

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