1. The first contention in this appeal is that the Commissioner (Appeals) was wrong in confirming the disallowance of 25 per cent of the car expenses incurred by the assessee including road tax and depreciation on account of the personal use of the cars by the directors of the company. It is the contention of the assessee that it is a private limited company which has a separate juristic personality and that when its directors make use of the company's cars for their private use, the expenditure relating to such user could be only treated as a perquisite in the hands of the directors and could not be disallowed as personal expenditure in the hands of the assessee. In support of this contention, reliance was also sought to be placed on certain decisions of the Tribunal.
2. It is common ground that, in the present case, the assessee has not granted the use of the cars to the directors by way of perquisite by any resolution of the company. Thus, in fact, the directors have not been allowed any perquisites by way of use of cars by the assessee. In these circumstances, if the directors used these cars for their personal use, it would only amount to use of the cars for purposes other than the business of the assessee. Any expenditure incurred on such use, otherwise than for the business of the company, will not be admissible in determining the total income of the assessee. The position would be different if the company had granted the use of the cars to the directors by way of perquisite. However, as stated earlier, we are not concerned with a situation like that as the assessee has not given its directors such a perquisites. In the result, the disallowance of that proportion of the car expenses and depreciation, which did not relate to the business of the company is properly disallowed.
3. The next contention is against the disallowance of Rs. 2,500 out of staff welfare expenses. The details of these expenses are already on record and these show that the expenses have been incurred on the supply of tea, soft drinks, etc., to the staff. There is no element of entertainment involved in any of the expenses claimed by the assessee.
Accordingly, there is no reason to disallow an amount of Rs. 2,500 out of the assessee's claim. The addition is deleted.
4. The third ground relating to the disallowance of Rs. 5,000 was not pressed before us at the time of hearing of the appeal.