Andhra Sugars Ltd. Vs. Commissioner of Income-tax - Court Judgment

Excerpt:
direct taxation - expenditure for business purpose - section 37 of income tax act, 1961 - assessee company celebrated silver jubilee - mementos presented to directors and shareholders - assessee claimed deduction of certain expenditure incurred in connection with its silver jubilee celebrations - whether such expenditure incurred by assessee is allowable deduction as business expenditure - shareholders who are sugarcane growers - expenditure incurred to give them mementos is certainly in connection for business - revenue's contention that 'expenditure not wholly and exclusively incurred for purpose of business' not sound - held, assessee entitled to claim deduction as per section 37. - motor vehicles act (59 of 1988)section 149 (2): [v. gopala gowda & jawad rahim, jj] insurers entitlement to defend the action joint appeal by insured and insurer - held, the language employed in enacting sub-section (2) of section 149 appears to be plain and simple and there is no ambiguity in it. it shows that when an insurer is impleaded and has been given notice of the case, it is entitled to defend the action only on grounds enumerated in sub-section (2) of section 149 of the act, and no other grounds are available to it. the insurer is not allowed to contest the claim of the injured or heirs of the deceased on other grounds, which are available to the insured. if insurer is permitted to contest the claim on other grounds it would mean adding more grounds of contest to the insurer and will be negation of the intention of the legislature and annihilate mandate of the provisions of sections 170 and 149 of the act. the insured can pursue appeal only after giving up the insurer as the appellant and not otherwise. in the instant case, the insurer has not withdrawn from party array but has remained prosecuting the appeal with the insured on the grounds which are available only to the insured. therefore, the joint appeal as filed by the insured and the insurer is not maintainable. section 166: [v. gopala gowda & jawad rahim, jj] claim for compensation accident due to mechanical defect in the vehicle held, it is not in dispute that the claimant suffered injuries in an accident, which occurred during the course of his employment, albeit due to his negligence but law does not render him remediless. statutory right is conferred on him, accruing by virtue of his employment under insured to claim compensation under workmens compensation act. the insurer is statutorily duty bound to discharge the liability of the owner of the vehicle, to pay such compensation to the employee, as mandated under the provisions of section 149 of the act. the right of an injured employee or his dependents as the case may be to be compensated, when injury is suffered or death occurs during his employment, is recognised not only under workmens compensation act, but also under benevolent provisions under section 166 and 167 of the m.v. act. the right of driver to seek compensation is not restricted only to the workmens compensation act, it has been enlarged to enable such person to seek just compensation (sections 166 and 168), conferring upon him the right of election engrafted under section 167 of the act to choose either of the two forum. the only defence which the insurer could take is limit of its liability as enumerated under section 147 of the act, leading to contest, inter alia, only between insured and insurer and does not impact claimants right to recover the compensation determined by the tribunal which crystallizes into enforceable right against both. in the instant case, the claimant/driver has exercised right of election under section 167 of the act to seek compensation under section 166 of the act resulting in award passed by the tribunal. therefore, the insured and the insurer have no escape but to discharge the said award as directed. undisputedly, in this case as deduced for proved facts, the vehicle in question was not properly maintained by the owner and despite faulty brake system, the claimant had undertaken the hazardous journey to his peril at the behest of and at the instruction of the owner. the owner is therefore, tortfeasor. section 168: [v. gopala gowda & jawad rahim, jj] insurers limit of liability - held, it is well settled that the liability of the insurance company for payment of compensation can be statutory or contractual. is for the insurance company to show that the insurance policy was a statutory policy and not a contractual policy to restrict its liability. that issue was neither raised before the tribunal nor is raised in this appeal requiring decision. thus, if at all the insurer has any valid ground to restrict its liability, it can proceed against the insured but firstly it has to discharge the award as required under section 149 (1) of the act. where the owner/insured has failed to maintain the vehicle as per prescribed safety standards and has caused the claimant to drive the vehicle with mechanical defects, the owner would be the tortfeasor and the claimant can maintain a petition seeking compensation under the provisions of the act, instead of seeking compensation under the workmens compensation act. on facts, held, the material evidence on record, particularly, with regard to the income of the claimant, his age, medical evidence and the evidence relating to pecuniary loss has not been considered by the tribunal in the correct perspective, which has resulted in passing of the impugned award, disproportionate to the pecuniary loss and the loss of future income of the victim. the settled principles governing determination of compensation has been given a go-bye. compensation of rs.4,15,150/- awarded by the tribunal was enhanced to rs.8,20,000/-. y.v. anjaneyulu, j. 1. this reference under section 256 of the income-tax act, 1961, relates to the income-tax assessment year 1974-1975. the question referred for consideration is : 'whether, on the facts and in the circumstances of the case, the amount of rs. 77,087, being the expenditure incurred by the appellant company for giving silver medals to the shareholders and silver wall plaques to the directors on the occasion of the silver jubilee celebration of the company, is allowable as a business expenditure ?' 2. the assessee is a leading company manufacturing and selling sugar in the state of andhra pradesh. for the assessment year 1974-1975, it declared an income of rs. 1.07 crores and was finally assessed on rs. 1.20 crores. in the computation of income, the assessee claimed by way of deduction, certain expenditure incurred in connection with its silver jubilee celebrations. these expenses included a sum of rs. 77,087 incurred by the assessee for giving silver momentous to the shareholders and directors. it appears that the expenditure incurred on account of the silver jubilee celebrations was allowed as business expenditure but the expenditure to the above extent of rs. 77,087 was disallowed on the ground that it was not incurred in connection with the business. the consideration that was brought to bear upon the matter is that the silver momentous presented to the shareholders and directors do not indicate a connection between the business carried on by the assessee and the presentation of the mementoes. 3. learned counsel for the assessee, sri parvatha rao, submits that although they are technically shareholders, almost all of them are sugarcane growers who supply sugarcane to the factory. the transactions of purchase of sugarcane accounted for the continued prosperity of the company in its business and, in that sense, learned counsel claims, it is not proper to consider these small momentous as having been given to the shareholders on considerations other than business. while we have no reason to disbelieve the aforesaid statement of learned counsel for the assessee, we do not find a categorical finding to that effect on the record. nevertheless, the shareholders constituting a large number of 2,000, as we are told, cannot be considered entirely distinct and separate from the various other persons having business connections. over a long period of 20 years, the shareholders, by their conduct contributed to the prosperity of the company in its business and there is nothing uncommon in the assessee-company endeavouring to recognize the part played by the shareholders in the prosperity of the company by giving them small momentous. we do not consider that the causal connection between the business carried on by the assessee and the shareholders is demolished merely by reason of the shareholders being other than business customers. as for as the directors are concerned, there can be little dispute that they worked for the company and played a significant part in the conduct of the business. considering the magnitude of the income earned by the assessee and the small expenditure of about rs. 35 on each silver memento presented to the shareholders or directors, we are unable to support the revenue's contention that the expenditure is not wholly and exclusively incurred for the purpose of business qualifying for deduction under section 37 of the income-tax act. 4. we accordingly answer the question in the affirmative, that is to say, in favour of the assessee and against the revenue. no costs.