Hindustan Monark (P.) Ltd. vs Income-Tax Officer.
1989 Latest Caselaw 556 Del

ORDER

Per Krishnamurthy, President - This is an appeal filed by the assessed M/s Hindustan Monark Pvt. Ltd. taking exception to the disallowance of a sum of Rs. 50,400 which represents the loss of commission as per the claim of the assesse. There is another point relating to a disallowance of Rs. 5,296 which we shall deal with a little later.

2. The assesse is a private limited company engaged in the business of manufacturing machine tools at its factory at Ghaziabad and HYderabad. During the course of its business transactions, it received commission of Rs. 50,400 from Kuo Oil Ltd., Japan for services rendered to it by the assessed company. This commission was received by a bank draft and the draft was sent for encashment, it was embezzled by the person who had gone to the Bank for the encashment with the connivance of the bank officials. the assessed company thereafter instituted a civil suit against the bank and other authorities. While the suit is pending the assessed claimed it as a business loss in computing its business income. The ITO disallowed the claim of the assessed solely on the ground, that since the so-called fraud was committed with the connivance of the bank officials, the assessed company was bound to succeed in the suit and, therefore, it could not be said that the assessed lost this sum of commission and thereby incurred any loss. He was of the opinion that this amount was clearly taxable in this year only perhaps for the reason that it was in this year that the assessed company received the draft for the commission. The ITO, however, observed that the assessed would be given deduction, if and when the case was finally decided against it. Thus, according to the ITO, the loss by way of embezzlement did not occur or accrue to the assessed in this accounting year, all on the ground that a suit was filed which was pending and the chances of success of the suit were very bright. Agreeing with this reasoning, the Commissioner of Income-tax confirmed the disallowance. He also held that the claim of the assessed was pre-matured.

3. In the appeal now filed against this order, though notices were sent several times, but for one reason or the other, the case got adjourned and finally when the case was fixed for hearing today the 21-11-1989, no one was present on behalf of the assessed and a request was received, signed by the Accountant of the assessed company that one Shri P. D. Mittal was suffering from fever. He could not, therefore appear for the matter. We did not think it a proper reason to adjourn the case because there was no proof of the fact that Shri P. D. Mittal was suffering from fever. We have, therefore, decided to decide the appeals by going through the record and hearing the Departmental Representative.

As we have mentioned earlier, the reason that prevailed with the authorities below to disallow the claim was that it was pre-mature only on the ground that a suit was pending for the recovery of the sum and the chances of success were very bright. In support of this view, the learned Departmental Representative had relied upon a decision of the Tribunal rendered in the case of Eagle Theatres [IT Appeal No. 3506 (Delhi) of 1986 decide on 2-5-1989] and also on the decision of Canara Sales Corp. Ltd. v. CIT [1989] 176 ITR 340/44 Taxman 430 rendered by the Karnataka High Court and submitted that as there were good prospects of recovery, the loss could not be said to have arisen to the assessed in the year under appeal and that its disallowance was, therefore, proper. In the case before the Karnataka High Court, the question was whether section 147(a) was properly invoked in a case where some moneys were embezzled by the employees by inflating the purchases over a period of years namely 1957-58 to 1960-61. There the assessed was a public limited company carrying on the business of purchase and sale of motor parts and accessories. The assessed later on found that its employee had embezzled certain amounts by using forged cheques by debiting the purchase account with fictitious purchases and drawing the amount by forged cheques. The sum misappropriated came to substantial sums in each of the four assessment years. On obtaining this information, the ITO reopened the assessments u/s 147(a) of the I. T. Act. The assessed challenged the reopening of assessments submitting that the assessed had no knowledge of mis-appropriation and, therefore, there was no failure on his part to disclose fully and truly all the material facts relevant for those assessment years. Simultaneously, it was submitted "with which submission we are concerned here" that the amount misappropriated by the employee and now sought to be disallowed should in any case be allowed as a loss against the income of the assessed. The ITO overruled the objections. The Tribunal held that the re-assessment proceedings were valid but the sums of embezzlement were not allowable as deductions in the assessments years in which the embezzlement took place as the assessed had good prospects of recovery. When the matter came before the Karnataka High Court at the instance of the assessed, the Karnataka High Court pointed out that the assessed had succeeded in all the courts in its efforts to recover the embezzled amounts against the defendant which was a nationalised bank. Since recovery from such an Institution could not be said to be impossible or difficult, the Tribunal was right in its conclusion that there was a reasonable prospect of the recovery of the amount by the assessed and, therefore, the loss could not be allowed in the respective assessment years. In arriving at this conclusion, the Karnataka High Court placed reliance upon a judgment of the Supreme Court in the case of Associated Banking Corpn. of India Ltd. v. CIT [1965] 56 ITR 1 (SC).

5. In the case before the Supreme Court, the facts were that the secretary of a bank misused the powers conferred on him under a power of attorney and withdrew Rs. 18 lakhs by posting false entries in the books of the bank in the accounting year ending June 30, 1947. The withdrawals foe the first time came to the knowledge of the liquidator of the bank after the ending of the accounting year. The liquidator had to pay to the constituents of the bank Rs. 10,15,000 pursuant to an order of the Court made in 1949 and a settlement reached in 1951. The Supreme Court held on these facts :

(i) That the loss must be deemed to have occurred to the bank after the liquidator came to know about the embezzlement and realised that the amounts embezzled could not be recovered.

(ii) It is wrong to say that irrespective of other considerations, as soon as an embezzlement of the employers funds takes place, whether the employer is aware or not of the embezzlement, there results a trading loss. So long as there is a reasonable prospect of recovery of the amounts embezzled, trading loss in a commercial sense cannot be deemed to have resulted.

(iii) Embezzlement of funds by an agent, does not necessarily results in loss immediately when the embezzlement takes place, or the adventure is commenced. embezzlement may remain unknown to the principle, the assets embezzled may be restored by the agent or servant. In such a case in the commercial sense no real loss has occured. It cannot be said that in all cases when the principle obtains knowledge of the embezzlement, a trading or compelled by process of law or otherwise to restore wholly or practically his ill-gotten gains.

Therefore, so long as a reasonable chance of obtaining restitution exists, loss may nat in a commercial sense be said to have resulted. It was applying these decisions that the Tribunal in the case of Eagle Theatres, New Delhi had come to a similar conclusion in respect of embezzlement of money.

6. Now applying these principles of law to the facts of the case before us, it would be seen that the assessed had lost the money of Rs. 50,400 with the embezzlement of draft by the employee with the connivance of bank officials. There is no prospect, nothing was heard so far atleast the fate of the proceedings against the bank. It is also not known at what stage the recovery proceedings stand nor do we know whether the employees of the bank against whom proceedings were initiated have admitted their guilt or denied it. Merely because a bank is invoked, we do not think, it is possible to say that the chances of recovery are bright unless it is shown that it is on account of the negligence of the bank that the assessed incurred the loss. without discussing these material facts, we are unable to appreciate that the chances of recovery are bright. Had they been so bright, by now some results must have come out. We are, therefore, of the opinion that the matter requires investigation into these facts, first to establish whether there is any prospect of the recovery of the sum and only after prospect of recovering the amount was established, then it can be said that the loss in question was not allowable in the year under appeal but if there was no reasonable prospect of recovering the sums then the loss must be allowed in the year under appeal. With these observations we remit the case back to the CIT for fresh disposal.

7. the next question is about the disallowance of Rs. 5,296. this is the amount of premium paid to the General Insurance Co. on the insurance cover taken for the Directors. The I. T. O. held that the payment of this insurance premium has no connection with the business carried on by the assessed and it was therefore, not a business expenditure except for sentimental reason there was no obligation on the part of the assessed company to make this payment. The C. I. T. (Appeals) following the decision of the Gujrat High Court in CIT v. Khodias Motiram Panchal [1986] 161 ITR 99/27 Taxman 208 justified the disallowance. He looked at it from the point of view of section 31 and held that the Directors could not constitute the stock of the company. He also applied principle of general bus special derogant. He also had in mind the provision of section 40(c) as well.

8. The Departmental Representative relying upon the resoning adopted by the CIT as well as the ITO submitted before us that the claim was rightly allowed but we are unable to share this view. The insurance was taken by the assessed company not so much as a cover on the life but to provide against accidents. Insurance premium paid against any accident to Directors or to senior staff of a company resulting in the loss of their valuable services to the company has got intimate business connection and is always allowed as a deduction. It is not different from insurance against any injury to an employee whether resulting in a temporary disablement or total disablement or death which was allowable under the Income-tax Act as an allowable deduction. In taking note of the insurance cover, the assessed company is securing to itself two distinct advantages. One advantage is to provide a cover against the life and the amount payable under the Workmen Compensation Act. Second advantage is the Directors would be more free to devote themselves to the task of the assesseds business without any inhibition or apprehension about the accident. That was the reason why the insurance cover was taken from the General Insurance Company which provides insurance cover only against accidents etc. and not Life Insurance Corpn. When an individual travels on business and if an insurance policy is taken against accident and if the premium paid is allowable as expense necessary, wholly and exclusively for the purpose of the business, there is no reason why such an expenditure is not allowable in the case of Directors because Directors are not the owners of the business but only employees in one sense. The ruling by the Gujrat High Court relied upon by the learned Commissioner of Income-tax reported in 161 I. T. R. 99 does not apply to the facts of the case at all. Hear the assessed was a firm, entered into contracts for insuring the lives of its partners. The underlying object being to provide for liquid cash to pay off the dues of the deceased partner and continue the business of the firm without interruption. The claim for deduction was put u/s 36 or in the alternative u/s. 37. The Tribunal held that the premium was allowable u/s 37 but the High Court reversed the decision of the Tribunal by pointing out that when the share of the deceased partner was paid off the shares of the surviving partners in the assets of the firm would be augmented. Hence what was sought to be acquired from the insurance company was a capital asset. The amount expended for acquiring that capital could only be said to be capital expenditure within the of section 37(1) and was, therefore, not deductible u/s 37(1). Hear we are not dealing with a case where the premium was paid to insure the lives of the partners. So this case is clearly distinguishable because there the object was to acquire a capital asset to augment the resources of the firm in the event of the payment of the dues due to the deceased partner. Such a situation does not exist here because here it is policy against accident, which is an expenditure allowable as a business expenditure. We, therefore think that the view taken by the C. I. T. is not correct and we direct that the amount be allowed as a deduction. We are not able to see how Section 40(c) is attracted to this case. The question the case u/s. 31 of the I. T. Act, does not arise because the case of the assessed was that the amount was allowable u/s. 37 of the I. T. Act.

I. T. A. No. 6137.

9. Now we will take up the departmental appeal. In the departmental appeal filed, the first point was against the allowance of bonus Rs. 1,38,135. The assessed company paid bonus to its employees by way of production incentive on attendance bonus and claimed the entire amount as a deduction is computing its income. The claim of the assessed was that these amounts were paid to the labour to encourage them to come to the factory in time and to produce more by working sincerely and honestly. The ITO was of the opinion that the claim for deduction of bonus was allowable u/s 36 and section 36 did not provide for the allowance of production incentive on attendance bonus. The assessed company filed a copy of the agreement entered into by it with the labour union under which the payment came to be made. Even though the payments were made pursuant to the terms of these agreements, the ITO insisted that the allowance of bonus could only be u/s 36 and section 36 provided for the allowance of bonus not exceeding the limits provided for in the Payment of Bonus Act. The Payment of Bonus Act did not make a separate provision for the payment of production incentive on attendance bonus and all items of incentives were covered by the limits provided by the Payment of Bonus under that Act.

10. When the matter in appeal before the C. I. T., he found that the ITOs reasoning was totally untenable and allowed the claim of the assessed in full. He found as a fact that production incentive on attendance bonus was paid to the employees monthly, on the basis of production and attendance of the individual employee concerned and since this bonus was paid with reference to individual performance, with reference to production from month to month, the amount so paid could not be labelled as bonus and would not be subject to the limit provided u/s 36(1) (ii) of the I. T. Act and in any case it would be allowable u/s 37. He therefore, allowed the claim.

11. The department is aggrieved by this allowance and came up in appeal before us. After going through the relevant facts found by the C. I. T. which was not refuted before us by any evidence that the production incentive on attendance was paid to the employees concerned. This shows that the bonus paid to the employees was not the bonus payable ex-gratia voluntarily by the employer to the employees, subject to the limit provided for the Payment of Bonus Act. Section 36(1) (ii) provides for the deduction of the bonus in computing the income. It says :

"36(1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28 -

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(ii) any sum paid to an employee as bonus or commission for services rendered, where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commission :
 

Provided that the deduction in respect of bonus paid to an employee employed in a factory or other establishment to which the provisions of the Payments of Bonus Act, 1965 (21 of 1965), apply shall not exceed the amount of bonus payable under that Act :
 

Provided further that the amount of the bonus (not being bonus referred to in the first proviso) or commission is reasonable with reference to- (a) the payment of the employee and the conditions of his services;
 

(b) the profits of the business or profession for the previous year in question; and
 

(c) the general practice in similar business or profession.
 

It will be seen from this that any amount paid to employee by way of bonus which would not have been payable to him as profits or dividend, if it had not paid as bonus would only be allowable as deduction. In other words, payment of bonus by way of share of profits is not to be allowed as deduction. In CIT v. Swadeshi Cotton & Floor Mills (P.) Ltd. [1964] 53 ITR 134, the Supreme Court said that payment of bonus is like sharing of profits on the basis of a certain formula because the word bonus by itself means a gift, reward, a premium granted voluntarily as a matter of grace and without consideration or obligation but this concept has undergone a change in our welfare state on account of the demands raised from the workmen for payment of bonus i.e. for a share in the profits because it was on account of their sweat and labour that the capital is able to produce profits. Thus the original concept of bonus which took within its fold only ex-gratia payments voluntarily made by the employer to the employees has undergone a change with the growth of industry and organized through trade unions. Thus the payment of bonus is no more a gratuitous payment and the Parliament has intervened by making an enactment called Payment of Bonus Act, 1965 providing for the payment of minimum bonus subject to certain formula. It has now become a vested right of the employees to demand bonus and a liability on the part of the employer to pay bonus. This right could be enforced through the Industrial Disputes Act of 1947. Now when the liability of bonus has become a statutory obligation, the Income-tax Act adopted this Payment of Bonus Act as a basis for the quantum of the bonus allowable under the Payment of Bonus Act retrospective effect from 25-9-1975. Thus it provided that the deduction in respect of bonus paid to an employee employed in a factory or other establishment to which the provisions of Payment of Bonus Act, 1965 apply shall not exceed the amount of bonus payable under that Act. In other words, the amount i.e. to be allowed as a bonus is not to exceed the bonus payable under the Payment of Bonus Act. We are not concerned with the formula laid down under the Payment of Bonus Act, but we are concerned here with the question as to whether the Payment of Bonus Act as provided for the payment of bonus and provided a ceiling for all types of bonuses payable under that Act or was it limited to a particular type of bonus. If we read the Payment of Bonus Act, it will become clear that it applies to only certain persons and certain types of bonuses. The Payment of Bonus Act also provided for the payment of festival bonus or customary bonuses. These are separate from and independent of the profit bonus for which alone the limitation is provided under the Payment of Bonus Act. In other words, there is no limit provided in the Payment of Bonus Act for the payment of customary bonus or incentive bonus or any other type of bonus other than profit bonus. The Supreme court held in the case of Mumbai Kamgar Sabha v. Abdulbhai Faizullabai AIR 1976 SC 1455 that it is only the profit bonus that would come into Payment of Bonus Act and not any other bonus, although the employer was given the right under the Payment of Bonus Act to adjust the amount paid as customary or festival bonus out of the amount payable as profit bonus. If the employer does not so adjust the customary or festival bonus paid out of the amount of profit bonus, the question is whether the Income-tax Act empowered the disallowance of the excess amount. It is very clear from the language that such a power does not vest in the I. T. O. do disallow the excess payment u/s 36(1) (ii) because 36(1) (ii) clearly provides that the deduction in respect of bonus shall not exceed the amount of bonus payable under that Act and laid down further condition in subsequent sub-clauses extracted above. Therefore, if amount payable under the Act is the ceiling for the deduction of the bonus paid to an employee that ceiling alone has to be applied. It is now common ground that the bonus in question is not a profit bonus to which the ceiling provided in the Payment of Bonus Act applies. The bonus paid here as found by the C. I. T. is directly related to the production and attendance. If a worker produces more than the normal expectation, for the excess production he is remunerated by way of bonus. This acts as an incentive to produce more than the normal to be expected production and acts as a check against sluggishness and slow-down tacties. Simliarly, the attendance bonus is an insurance against absentism. Both these payments, though made with reference to the Payment of Bonus Act can also be made without reference to the Payment of Bonus Act. Therefore, the ceiling referred to in section 36(1) (ii) does not apply to those payments which are not covered by the formula laid down therein. The power given to adjustments to the employer id intended to safeguard his liquid position and his interest, but is not to act as a bar on the payments of these incentive bonuses, in addition to profit bonus.

12. In CIT v. Sivanandha Mills Ltd. [1985] 156 ITR 629 the Madras High Court has pointed out that section 36(1) (ii) of the Income-tax Act, 1961 which has reference only to payments made under the Payment of Bonus Act has no application to incentive bonus, attendance bonus or customary bonus which are not paid under the Bonus Act. These payments are expenditure for purposes of the business and hence allowable under section 37. The Madras High Court went to the extent of saying that consequently when the Tribunal allows deduction of such payments, no question of law arises.

13. The Calcutta High Court held in the case of CIT v. Babcock & Willcox of India Ltd. [1987] 165 ITR 105/33 Taxman 258 that payment of bonus other than profit bonus must be considered as paid on commercial expediency to maintain good relation with the employees and, therefore, allowable as a deduction. Here also, the application made by the C. I. T. u/s 256(2) was dismissed.

14. The Departmental Representative had sited a case decided by the Supreme Court in the case of Workmen of Associated Rubber Industry Ltd. v. Associated Rubber Industry Ltd. [1986] 157 ITR 77 but that was a decision which has no direct connection with the case before us except that it lays down the principle that Payment of Bonus Act was a welfare legislation and the approach of the Courts should be to counteract tax evasion and the Court must get the substance of the transaction and to be satisfied with firm. This decision does not help really the revenue in any manner because here there is no apparent objective of tax evasion except that to consider the nature of the bonus paid and whether it is covered by the ceiling prescribed under the Payment of Bonus Act.

15. In the case of CIT v. P. Alikunju, M. A. Nazir, Cashew Industries [1987] 166 ITR 611/33 Taxman 528 the Kerala High Court has gone to the extent of saying that section 36 of the I. T. Act after its amendment by incorporating in it the Payment of Bonus (Amendment) Act, 1976 on which the retention of the second proviso with the addition of words not being bonus referred to the first proviso. The position that emerged was that bonus was paid in accordance with the requirements of the Bonus Act to an employee covered by that Act and the amount so paid would without doubt be an allowable deduction. On the other hand, if bonus or commission is paid to such an employee in excess of, or otherwise than, what is required to be paid under the Bonus Act, or, if bonus is paid to an employee not covered by the Bonus Act, even then the amount will have to be allowed not automatically but only upon the satisfaction of the Officer that it is reasonable payment considered in the light of clauses (a) to (c) of the second proviso. The Kerala High Court held that these clauses i.e. (a) to (c) of the second proviso show that such payment which is not warranted by the Bonus Act will be regarded as reasonable only when it is justified by the satisfaction of the requirements of those clauses in which case it would be allowed as a deduction. Then the Kerala High Court pointed out that object of the clause is to encourage the management to pay bonus not only to the extent to which it is a statutorily bound to pay to the employee but also in excess of that limit provided the payment is justifiable as a reasonable payment rejecting the argument that the second proviso to clause (ii) of section 36(1) of the Act has no application in respect of employees covered under the Bonus Act and any payment made in excess of the statutory requirement under the Payment of Bonus Act (although reasonable when considered with reference to clauses (a) to (c) of the second proviso) is not deductible under section 36. This decision rendered by the Kerala High Court Court by Justice T. Kochu Thomen (as he then was) shows the real intention of the Legislature in enacting section 36(1) (ii) relating to the Payment of Bonus. Which fortifies any point. First, it must satisfy the requirements of the Payment of Bonus Act so as to apply the ceiling and than the other test laid down as to reasonableness. But in no case, it is to be disallowed, if the payment was warranted by business considerations and is reasonable merely because it happened to be in excess of the Payment of Bonus Act. Thus what is allowable u/s 36(1) (ii) is not only the bonus subject to the limits laid down in Payment of Bonus Act but also excess amount paid, provided it is reasonable and satisfy the requirements of clauses (a) to (c) spoken of about and also the other bonus payable under the same Act like production incentive, attendance incentive etc. In fact, it can be described that the payment of incentive bonus call it by any names as only a part of wages paid for extra work done and not profit sharing which is the real meaning of the expression bonus. It is, therefore, incorrect to suggest that the Income-tax Act envisaged disallowance of wages paid to the workers by inducing them to work more for the benefit of the industry by providing incentives. We are, therefore, of the opinion that the C. I. T. has taken a right view and we uphold it.

16. The next objection of the department in this appeal is to the allowance of gardening expenses of Rs. 21,640. Before the ITO, the assessed company contended that in order to avoid pollution of environment and to maintain a proper balance of ecology, it has to plant peepal trees and also maintain gardens with tender flowers. The I. T. O. disallowed the claim of the assessed on the ground that howsoever relevant it may be to plant the peepal trees, the planting of the flowers would be that these flowers meet their unnatural death even before blossoming on account of the pollution of the factory and that such an act should be discouraged.

The C. I. T., however, on appeal disagreeing with the uncommon reasoning given by the I. T. O. allowed the claim, aggrieved by which the Department has come up in appeal before the Tribunal contending that disallowance was totally uncalled for. The C. I. T. found out that this expenditure included the Panchayat tax paid for the land use for the planting of flowers and that expenditure on planting of trees, payment of Panchayat tax and maintaining the garden in the factory premises and labour quarters were all very essential and they constitute permissible expenditure. The Departmental Representative contested this allowance, but in our opinion, it is not possible to agree with him because as rightly pointed out by the C. I. T., it is a part of the social responsibility of every factory to maintain the ecological balance and thereby discharge its obligation to Soceity. The discharge of social responsibility by preventing pollution by planting trees of various kinds and maintaining garden in the factory and also in the labour quarters develops a sense of well being and create congenial atmosphere is a most essential business expenditure and it should not be said to be without any nixes to the business. In fact the license to start a factory is not given unless there is a clearance from the ecological point of view. The expenditure incurred to maintain a pollution-free atmosphere cannot be said to be unrelated to the business in the present day context. We, therefore, agree with the C. I. T. and uphold the allowance.

17. The next objection is to the allowance of Rs. 17,000 claimed to have been paid by way of commission. The ITO pointed out in his order that the assessed had shown as if this commission was paid to one Samrat Udyog for sale of machinery but no supporting independent documentary evidence was produced to justify the payment of commission. It is seen from the order of the ITO that the machinery worth Rs. 2,36,658 was sold and it was in that connection that commission was paid to Samrat Udyog. On appeal, the Commissioner of Income-tax (A) that this payment was not disallowable. All that he said was that the payment was made by cheque with reference to the sale of its products and, therefore, the commission was allowable. No other details were given in the order. We are of the view that the reasoning adopted by the C. I. T. (Appeals) was not proper nor would justify the allowance of commission. When the ITO says that the commission was paid in respect of sale of machinery, the C. I. T. says that it was paid in relation to the sale of its products. It is not clear what were those products in respect of which the payment of commission became necessary and payable and what were the services rendered by the said Samrat Udyog making it eligible for the commission. The C. I. T. should have given more details to justify his conclusion. Since, no details were furnished, we though the best course would be set aside his finding on this point, restore the matter to his file and direct him to decide the matter afresh after calling the relevant evidence.

18. The next objection taken by the Department in the grounds of appeal was to the limit of the remuneration of the employee Director of the company by applying section 40(c) and not section 40A (5). This controversy has now been more or less settled by a Special Bench decision of the Income-tax Appellate Tribunal in the case of Geoffrey Manners and Co. Ltd. vs. ITO [1983] 3 SOT 40 (Bom.). Following respectfully the order of the Special Bench, we hold that the view taken by the C. I. T. is correct and we confirm it. The C. I. T. found that the application of section 40(c) was involved in the case of two Directors A. C. Jain and Harish Jain and two both of them emoluments paid including the value of perquisite came to below the ceiling of Rs. 72,000. In view of this, no question of disallowance is called for. We agree with this view even.

19. The next objection was to the allowance of foreign travels expenses of Harish Jain. It appears that Shri Harish Jain had been to abroad on behalf of the companys business and a some of Rs. 14,117 was claimed as foreign traveling. Though the C. I. T. allowed the claim of assessed, his order show that the assessed purchased 1500 dollars for his travel on 27-05-1982 and another amount was purchased on 31-05-1982. That Shri. Jain undertook one journey from 6th to 10th May to West Germany, and Switzerland, and another journey from 30-05-1982 to 24-06-1982 to West Germany, Belgium and France. The ITOs point was that the same person could not have travelled within a short pan of three days to different directions and, therefore, the claim was not proper and disallowed it but the C. I. T. allowed the claim by pointing out that the ITO should have verified the facts instead of making the disallowance and, therefore, the disallowance was improper. But we are unable to subscribed to the view of the C. I. T. because even for the ITO or for the C. I. T. or for that matter even for any appellate authority the basis for the allowance of claim should be the facts. When the facts were admittedly not brought on record, no case can be said to have been made out for its allowance. The C. I. T having found fault with the ITO for not bringing on record the facts allowed claim without bringing the facts on record thereby committing the same mistake. We, therefore, thing it proper that the matter be remitted to him to ascertain the facts in this regard and then allow the claim only if it is found that the expenditure was incurred solely and exclusively for the purpose of the business by relating the foreign trips to the business expediency.

20. The next objection taken is to the allowance of 50% of electricity and water charges relating to Directors residence charged to the companys accounts. A some of Rs. 11,646 was involved in this claim. It was said that it was 50% of the claim on electricity and water charges. The C. I. T. found that in the residence of the Directors of the assessed company, a telex was installed. A steno was attached along with the telex operator and that the assessed company was not paying any rent for the use of the premises and that 50% of the expenditure was reimbursed by the company. He also found that such reimbursement expenditure was allowed in the past. It was on these premises that he allowed the claim of the assessed by allowing the sum 50% i.e. Rs. 6,000. We are unable to take any exception the reasons given by the C. I. T. for allowing the claim. We, therefore, confirm his order on this point.

21. The last objection in grounds of appeal was that the C. I. T. was not justified in holding that deductions under both the section 35B and 80HHC were allowable to the assessed in the same year. This is what the C. I. T. has observed in his order :

"17. The last ground of appeal is against refusal of deduction in terms of section 80HHC. The ITO has declined to allow it on the ground that the same amount deductions, both under section 35B and 80HHC, cannot be allowd. If the provisions of law are clear, which is a case here, the deductions admissible cannot be denied on the mere ipse dixit of the ITO. He is called upon to the needful."

We are unable to take any exception to allowance of the claim. Section 35B deals with weighted deduction in respect of expenditure incurred on export market development allowance and 80HHC deal with deduction in respect of profit retained for export business. There is no overlapping of these reliefs. The legislature advisedly granted this two reliefs to operate in two distinct fields. While one relates to the development of export markets, the other relates to encouragement of export business both to earn foreign exchange. Though the object of both the sections was in the ultimate analyses to earn more foreign exchange for the country, one by encouraging exports market development and other by encouraging exports themselves. There is no prohibition as seen in the Income-tax Act for the allowance of both the reliefs in the same year if the conditions necessary for the allowance of those reliefs were satisfied. It is not the case of Revenue that these conditions were not satisfied. Since the objects of both the sections are clear, distinct and separate, and admittedly the requirements for their allowance were satisfied, the C. I. T. was justified in allowing the relief and we do not think the department can take any objection to the allowance. This is, therefore, confirmed.

22. In the result, this appeal is dismissed.