V. RAMASWAMI J.


The following questions have been referred at the instance of the Revenue

"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee's claim of Rs. 16, 544 towards foreign tour expenses was an admissible deduction for the assessment year 1965-66 ?


2. Whether, on the facts and in the circumstances of the case, the foreign tour expenses are allowable in the hands of the assessee-firm and whether they are connected with the business activities of the assesseefirm ?


3. Whether there are any materials for the Tribunal to come to the conclusion that the object of the partners' foreign tour was to produce conditions or circumstances whereby the assessee itself would have increased income and whether on the material available such a conclusion was reasonable ?" *


The assessee in this case, M/s. Southern Leather Industries, is a partnership firm. Some of the partners are also partners of a sister concern called Southern Leather Corporation, hereinafter referred to as the Corporation. The assessee was carrying on business in the manufacture, sale and export of leather. Two of the partners of the assessee-firm along with another partner of the Corporation went to the United Kingdom, the United States of America and also attended the International Leather Trade Fair at Paris. The firm claimed in respect of the assessment year 1965-66 deduction of foreign tour expenses of two of its partners amounting to Rs. 16, 544. The quantum of the amount expended on the foreign tour is not in dispute. It is not also the case of the Department that there was any element of personal expenditure of the partners included in the said sum of Rs. 16, 544. The Income-tax Officer disallowed the claim on the ground that the firm which exports these goods is the corporation, though the goods are those of the assessee and that, therefore, it could not be said that the assessee was in any way directly connected with the export business. This view was confirmed by the Appellate Assistant Commissioner. However, the Tribunal held that the assessee was entitled to the deduction in respect of this foreign tour. The finding of the Tribunal was that the object of the foreign tour was clearly to produce conditions or circumstances whereby the assessee would have had an increased income. It is also seen from the facts that the assessee itself was an exporter. The goods sent abroad bore their individual marks. They were, however, exporting them through the corporation by paying a commission to the corporation. In these circumstances, they may be considered as direct exporters. It is with a view to increase the export and the business, the partners wanted to attend the International Leather Trade Fair at Paris and they did visit Paris. It is not also in dispute that the United Kingdom is the major market for the sale of Indian leather. Normally, goods are sent there for auction and the prices fetched in the auction are only remitted. In the circumstances, therefore, if the partners proceeded to the United Kingdom and Paris, certainly it would have advanced the business interest of the assessee and they could incre

ase the export trade also. We are in agreement with the Tribunal that the object of the trip was to produce conditions or circumstances which would have increased the income of the assessee. In the circumstances, therefore, we answer the three questions referred to us in favour of the assessee and against the Revenue. There will, however, be no order as to costs.