ARCHI EXIM PVT. LTD.,AHMEDABAD V. THE ITO, WARD-1(1)(3), AHMEDABAD

ITA 1350/AHD/2024

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Archi Exim Pvt. Ltd. appealed against the order of the CIT(A), National Faceless Appeal Centre, which upheld disallowances made by the Assessing Officer for the Assessment Year 2013-14. The disallowances included Rs.3,56,661 for travelling expenses and Rs.64,41,834 for reimbursement of expenses under Section 40(a)(ia) of the Income Tax Act. The Tribunal found that while the CIT(A) was correct in disallowing 25% of the travelling expenses based on past history and business acquired, the reimbursement of expenses should not have been disallowed as they were not subject to TDS, relying on judicial precedents and CBDT Circular No.715.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 470504 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Other Referred Cases: PCIT vs Consumer Marketing (India) (P.) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEEJU GUPTA
• Assessee Lawyers: S.N. DIVETIA; SAMIR VORA; ARS
• Keywords: Principle of natural justice; TDS; Rule 8D
• Section: 143(1); 64; 14A; 40(a)(ia)

Judgement Text

"ITA No.1350/Ahd/2024 Assessment Year: 2013-14 Archi Exim Pvt. Ltd. Vs. ITO Page 1 of 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.1350/Ahd/2024 Assessment Year: 2013-14 Archi Exim Pvt. Ltd., 807, Akik Complex, Opp. Rajpath Club, Bodakdev, Ahmedabad – 380 015 [PAN – AAGCA 5521 R] Vs. The Income Tax Officer, Ward-1(1)(3), Ahmedabad. (Appellant) (Respondent) Assessee by Shri S.N. Divetia & Shri Samir Vora, ARs Revenue by Ms. Neeju Gupta, Sr. DR Date of Hearing 22.01.2025 Date of Pronouncement 14.02.2025 O R D E R PER SUCHITRA KAMBLE, JUDICIAL MEMBER: This appeal is filed by the Assessee against order dated 21.05.2024, passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2013-14. 2. The assessee has raised the following grounds of appeal :- “1.1 The order passed by U/s.250 passed on 21.05.2024 by NPAC [CIT(A)], Delhi (for short CIT(A)\" upholding the disallowances in respect of travelling expenses of Rs.3,56,661/- and reimbursement of expenses u/s.40(a)(ia) of Rs.64,41,834/- made by A.O. is wholly illegal, unlawful and against the principles of natural justice. 2.1 The Id. CIT(A) has grievously erred in law and or on facts in upholding the disallowances in respect of travelling expenses of Rs.3,56,661/- and reimbursement of expenses u/s.40(a)(ia) of Rs.64,41,834/- made by A.O. 2.2 That the in the facts and circumstances of the Id. CIT(A) ought not to have upheld the disallowances in respect of travelling expenses of ITA No.1350/Ahd/2024 Assessment Year: 2013-14 Archi Exim Pvt. Ltd. Vs. ITO Page 2 of 4 Rs.3,56,661/- and reimbursement of expenses u/s.40(a)(ia) of Rs.64,41,834/- made by A.O. It is, therefore, prayed that the disallowances upheld by the CIT(A) may kindly be deleted.” 3. The assessee Company is engaged in the trading business of different types of chemicals alongwith seals, stationery items, coils, ceiling and other accessories and import of the products as well as purchase of the products from the local markets and selling the same in local market and in foreign market on small scale basis. The assessee filed return of income for the Assessment Year (A.Y.) 2013-14 on 29.09.2013 claiming refund of Rs.46,540/-. The case of the assessee was selected for scrutiny under Section 143(1) of the Income Tax Act, 1961. The statutory notices were issued and the assessee filed details as well as the submissions. After taking cognisance of the same, the Assessing Officer observed that the assessee has investment in shares of M/s. Rushi Mechatronics Pvt. Ltd. of Rs.31,00,000/-. However, managing and administrative cost or any other expenses with regard to making interest cost has not been disallowed in respect of the expenditure in terms of administrative cost or any other expenses with regard to making and managing such investment. After taking cognisance of the assessee’s contention, the Assessing Officer made disallowance of Rs.23,528/- under Section 14A of the Act read with Rule 8D of the Income Tax Rules. The Assessing Officer further made disallowance of Rs.7,13,322/- towards travelling expenses including Foreign Trips. The Assessing Officer made disallowance of Rs.64,41,834/- in respect of reimbursement of expenses under Section 40(a)(ia) of the Act 4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. The Ld. AR submitted that the CIT(A) was not right in disallowing the Travelling Expenses of Rs.3,56,661/- and reimbursement of expenses under Section 40(a)(ia) of the Act of Rs.64,41,834/-. The Ld. AR submitted that the CIT(A) in respect of disallowance relating to Travelling Expenses restricted the disallowance to 25% but the same should have been allowed as the expense was ITA No.1350/Ahd/2024 Assessment Year: 2013-14 Archi Exim Pvt. Ltd. Vs. ITO Page 3 of 4 solely for the purpose of business exigencies and the assessee has demonstrated various details that the assessee’s business has increased. The Ld. AR submitted that the majority of travelling expenses was incurred for visit to China and that is for visit to one party M/s. International Chem Limited from whom the assessee had imported goods worth Rs.36.53 Crores as against the total purchase by the assessee of Rs.38.47 Crores during the year under consideration. The assessee has already submitted statement showing details of foreign traveling undertaken by various persons of Company as well as invoices/bills in respect of foreign travel expenditure. 6. The Ld. DR submitted that the CIT(A) after verifying the details only has restricted the expenditure to 25% which is a reasonable disallowance and thus relied heavily on the order of the CIT(A). 7. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that from the perusal of the records it can be seen that the CIT(A) has disallowed 25% of the confirmed total expenses after taking into account past history of the expenses and in consonance with the business acquired by the assessee from the foreign parties. Therefore, the disallowance out of travelling expenses made by the Assessing Officer and the 25% confirmed by the CIT(A) is accordingly sustained. 7.1 As regards ground relating to disallowance under Section 40(a)(ia) of the Act of reimbursement of expenses, the assessee made TDS in respect of agency charges but being reimbursement has not made any TDS on such parties relying upon various judicial pronouncements & CBDT Circular No.715 dated 08.08.1995. The assessee had availed services of clearing and forwarding agency for clearing of its goods from Customs and had to make payment of agency charges to the C&F Agent. The assessee also made payment of reimbursement of expenses incurred by C&F agency on behalf of the assessee like Freight Charges, Transportation charges, Customs duty etc. on actual basis. The Ld. AR rightly relied upon the decision of Hon’ble Gujarat High Court in the case of PCIT vs Consumer Marketing (India) (P.) Ltd. (2015) 64 taxmann.com 16 (Guj.). ITA No.1350/Ahd/2024 Assessment Year: 2013-14 Archi Exim Pvt. Ltd. Vs. ITO Page 4 of 4 Therefore, the CIT(A) was not right in disallowing the same. Thus, this component of ground no.1.1, ground no.2.1 and ground no.2.2 is allowed. In the result, appeal of the assessee is partly allowed. Order pronounced in the open Court on this 14th February, 2025. Sd/- Sd/- (ANNAPURNA GUPTA) (SUCHITRA KAMBLE) Accountant Member Judicial Member Ahmedabad, the 14th day of February, 2025 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad "