JCIT, (OSD), CIR-11(1), KOLKATA, Kolkata V. M/s Almal Industries Pvt. Ltd., Kolkata

ITA 1232/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1650 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 01-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGYUPTA
• Keywords: Business expenditure; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASE EM AHMED, AM] I.T.A NO. 1232/KOL/20 16 ASSESSMENT YEAR : 2010-1 1 J.C.I.T. (OSD), CIRCLE-11(1),. -VS.- M/S AL MAL INDUSTRIES PVT.LTD. KOLKATA KOLKATA [PAN : AAECA 5984 E] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI S.DASGYUPTA, ADDL. C IT(DR) FOR THE RESPONDENT : SHRI RAVI TULSIYAN, FCA DATE OF HEARING : 24.01.2018. DATE OF PRONOUNCEMENT : 02.02.2018. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 31.03.2016 OF C.I.T.(A)-16, KOLKATA RELATING TO A.Y.2010-11. 2. GROUND NO.1 RAISED BY THE REVENUE READS AS FOLLO WS :- 1. THAT ON THE FACTS AND IN THE CIRSMSTANCES OF TH E CASE, LD. CIT(A) HAS ERRED IN DELETING DISALLOWANCE OF EXPENSES OF RS. 29,76,096/ - TOWARDS FOREIGN STUDY OF THE SON OF A DIRECTOR. 3. THE FACTS OF THE CASE AS FAR AS GROUND NO.1 IS C ONCERNED ARE THAT THE ASSESSEE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFAC TURING OF HINGES, TOWER BOLTS AND ALUMINIUM FITTINGS. THE ASSESSEE MET THE TUITIONS F EES, BOARDING AND LODGING AND TRAVELLING EXPENSES TO USA OF SHRI AKSHAY ALMAL, SO N OF ONE OF THE DIRECTOR OF THE ASSESSEE. THE ASSESSEE INCURRED A SUM OF RS.29,76,0 96/- IN THIS REGARD AND CLAIMED THE SAME AS AN EXPENDITURE INCURRED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE AND AS A DEDUCTION IN COMPUTING INCOME FROM BUSINESS. SHRI A KSHAY ALMAL JOINED THE SERVICES OF THE ASSESSEE COMPANY ON 16.06.2009 AND ON 01.07. 2009 HE LEFT FOR USA FOR HIGHER 2 ITA NO.1232/KOL/2016 M/S ALMAL INDUSTRIES PVT. LTD. A.YR.2010-11 2 STUDIES. IT IS NOT IN DISPUTE THAT THERE IS AN AGRE EMENT BETWEEN THE ASSESSEE AND SHRI AKSHAY ALMAL WHEREBY MR. AKSHAY ALMAL AGREED TO SER VE THE ASSESSEE AFTER COMPLETION OF HIS HIGHER STUDIES. COPY OF THE SAID AGREEMENT IS PLACED AT PAGE NOS. 6 TO 10 OF THE ASSESSEES PAPER BOOK. IT IS ALSO NOT DIS PUTED THAT AFTER COMPLETION OF THE STUDIES ABROAD SHRI AKSHAY ALMAL JOINED THE SERVICE S OF THE ASSESSEE COMPANY ON 01.04.2015. 4. ON THE ABOVE FACTS THE AO TOOK THE VIEW THAT EXP ENDITURE IN QUESTION CANNOT BE ALLOWED AS A DEDUCTION BECAUSE IT WAS NOT FOR THE P URPOSE OF THE BUSINESS OF THE ASSESSEE. HOWEVER, CIT(A) AGREED WITH THE SUBMISSIO NS OF THE ASSESSEE THAT EXPENDITURE IN QUESTION WAS ALLOWABLE AS A DEDUCTION. THE CIT(A ) PLACED RELIANCE ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF HIUN DUSTAN ALUMINIUM CORPORATION VS CIT 159 ITR 673 (CAL) WHEREIN ON IDENTICAL FACTS TH E CLAIM FOR DEDUCTION AS A BUSINESS EXPENDITURE WAS HELD BY THE HONBLE CALCUTTA HIGH C OURT TO BE ALLOWABLE AS DEDUCTION. FOLLOWING THE AFORESAID DECISION THE CIT(A) DIRECTE D THE AO TO DELETE THE ADDITION MADE. 5. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE HAS RAISED GROUND NO.1 BEFORE THE TRIBUNAL. THE LD. DR RELIED ON THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE CIT(A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS WE HAVE ALREADY STATED THAT THE FACTS ARE NOT IN DISPUTE. SEVERAL DECISIONS HAVE BE EN RENDERED ON IDENTICAL FACTS WHEREIN A VIEW HAS BEEN TAKEN THAT EXPENDITURE OF A SIMILAR NATURE HAVE TO BE REGARDED AS INCURRED FOR THE PURPOSE OF THE BUSINESS OF THE ASS ESSEE. APART FROM THE DECISION REFERRED TO BY THE CIT(A) IN HIS ORDER, THE DECISIONS OF ITA T, MUMBAI IN THE CASE OF J.B.ADVANI & CO.LTD VS JCIT (2005) 92 TTJ 175 ALSO SUPPORT THE CONCLUSIONS ARRIVED AT BY THE CIT(A). IT HAS BEEN HELD BY MUMBAI BENCH OF TRIBUNA L IN THE CASE OF J.B.ADVANI & COMPANY LTD (SUPRA) THAT WHERE DAUGHTER OF THE DIRE CTOR OF THE ASSESSEE COMPANY WHO 3 ITA NO.1232/KOL/2016 M/S ALMAL INDUSTRIES PVT. LTD. A.YR.2010-11 3 WAS ALSO AN EMPLOYEE OF THE ASSESSEE COMPANY AND CO NTINUED TO WORK FOR THE ASSESSEE COMPANY PURSUANT TO THE AGREEMENT BEFORE LEAVING IN DIA, WAS SENT ABROAD FOR HIGHER STUDIES IN BUSINESS ADMINISTRATION, EXPENSES ON SUC H EDUCATION. WAS TREATED AS BUSINESS EXPENDITURE. IT HAS BEEN HELD BY KARNATAKA HIGH COU RT IN THE CASE OF CIT VS. RAS INFORMATION TECHNOLOGIES (P) LTD (2011) 50 DTR 93 T HAT WHERE SON OF THE MANAGING DIRECTOR WAS SENT FOR HIGHER STUDIES BY THE ASSESSE E COMPANY, EXPENSES INCURRED IN CONNECTION THEREWITH WAS FOUND ALLOWABLE WHEN THE C OURT FOUND THAT THE STUDY UNDERTAKEN HAD NEXUS WITH THE BUSINESS AND WHERE TH E SON ENTERED INTO THE AGREEMENT WITH THE ASSESSEE COMPANY UNDER WHICH HE AGREED TO WORK FOR THE COMPANY ON THE COMPLETION OF HIS COURSE. IT HAS BEEN HELD BY ALLAH ABAD HIGH COURT IN THE CASE OF CIT VS. U.P ASBESTOS LTD (2012) 79 DTR 105 THAT EXPENDI TURE INCURRED BY THE ASSESSEE COMPANY ON FOREIGN EDUCATION AND TRAVELLING EXPENSE S OF THE SON OF THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY WHO HAD JOINED THE COMPANY AFTER COMING BACK FROM USA, CANNOT BE TREATED AS EXPENDITURE OF PERSONAL N ATURE AS THE COMPANY HAS BEEN BENEFITED BY HIS HIGHER EDUCATION AND TRAINING. IT HAS BEEN HELD BY KARNATAKA HIGH COURT IN KRISHNA FABRICATION VS. JCIT (2012) 343 IT R 126 THAT EXPENDITURE ON THE EDUCATION OF THE CHILDREN MANAGING DIRECTOR OF THE ASSESSEE COMPANY CANNOT BE DISALLOWED MERELY FOR THE REASON THAT THEY WERE CHI LDREN OF MANAGING DIRECTOR . HON 'BLE HIGH COURT IN THIS CASE HOWEVER REMANDED THE M ATTER FOR EXAMINING THE BUSINESS CONNECTION OF THE EXPENDITURE. 7 . IN THE LIGHT OF THE AFORESAID PRECEDENTS ON IDE NTICAL FACTS, WE ARE OF THE VIEW THAT THERE IS NO MERIT IN GROUND NO.1 RAISED BY THE REVE NUE AND THE SAME IS DISMISSED. 8. GROUND NO.2 RAISED BY THE REVENUE READS AS FOLLO WS :- 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 3,74,095/- MADE ON ACCOUNT OF BUSINESS PROMOTION, STAFF WELFARE, TRAVELLING & CONVEYANCE A ND OTHER EXPENSES. 4 ITA NO.1232/KOL/2016 M/S ALMAL INDUSTRIES PVT. LTD. A.YR.2010-11 4 9. AS FAR AS GROUND NO.2 RAISED BY THE REVENUE IS C ONCERNED THE AO MADE AN ADDITION OF RS.3,74,095/- TO THE TOTAL INCOME OF TH E ASSESSEE BY MAKING OBSERVATIONS THAT SOME OF THE EXPENSES OF BUSINESS PROMOTION, TRAVELL ING AND CONVEYANCE ETC. WERE EVIDENCED BY SELF MADE VOUCHERS. THE FOLLOWING WERE THE OBSERVATIONS OF THE AO IN THIS REGARD :- DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY DEBITED THE FOLLOWING EXPENDITURES : 1. BUSINESS PROMOTION RS.5,87,119/- 2. STAFF WEOLFARE EXPENSES RS.2,68,376/- 3. TRAVELLING & CONVEYANCE RS.18,87,615/- 4. REPAIRS TO OTHERS RS.9,97,842/- RS.37,40,952/- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AU THORISED REPRESENTATIVE OF THE ASSESSEE WAS ASKED TO PRODUCE SUPPORTING EVIDENCES ALONG WITH THE RELEVANT BILLS AND VOUCHERS. ON EXAMINATION OF THE SUPPORTING PAPE RS, IT IS REVEALED THAT THE SAID EXPENDITURES ARE ON THE BASIS OF SELF-MADE VOUCHERS AND EXCESSIVE IN NATURE. HENCE, 10% OF THE SAID EXPENDITURES I.E. 3,74,095/- IS DISALLOWED AND ADDED BACK WITH THE TOTAL EXPENDITURE. 10. BEFORE CIT(A) IT WAS SUBMITTED THAT BOOKS OF A CCOUNTS OF THE ASSESSEE WERE AUDITED AND ALL SUPPORTING VOUCHERS WERE PRODUCED B Y THE ASSESSEE TO SUBSTANTIATE THE CLAIM FOR DEDUCTION OF EXPENDITURE. IT WAS ALSO SUB MITTED THAT THE AO HAD NOT POINTED OUT WHICH ARE THE VOUCHERS WERE SELF MADE VOUCHERS. 11. THE CIT(A) CONSIDERING THE ABOVE SUBMISSIONS DE LETED THE ADDITION MADE BY THE AO WITH THE FOLLOWING OBSERVATIONS :- 5. GROUND NO.7 IS ON ACCOUNT OF ESTIMATED DISALLOW ANCE TOTALING TO RS.3,74,095/-. NO ADDITION CAN BE MADE ON ESTIMATE. IF THE A.O. FO UND ANY DISCREPANCY THEN HE SHOULD HAVE MADE SPECIFIC ADDITION. THEREFORE, ADDI TION OF RS.3,74,095/- MADE ON ESTIMATE IS DELETED AND THE GROUND OF THE ASSESSEE IS ALLOWED. 12. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENU E HAS RAISED GROUND NO.2 BEFORE THE TRIBUNAL. 5 ITA NO.1232/KOL/2016 M/S ALMAL INDUSTRIES PVT. LTD. A.YR.2010-11 5 13. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. D R, WHO RELIED ON THE ORDER OF THE AO. WE ARE OF THE VIEW THAT THE ORDER OF AO DOES NO T SPELL OUT AS TO WHAT IS THE QUANTUM OF EXPENSES WHICH WERE SUPPORTED ONLY BY SE LF MADE VOUCHERS. THE AO HAS ALSO NOT SPELT OUT HOW HE CAME TO THE CONCLUSION TH AT THE EXPENDITURE UNDER VARIOUS HEADS MENTIONED IN THE ORDER OF ASSESSMENT WERE EXC ESSIVE. IN SUCH CIRCUMSTANCES THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO ON THE GROUND THAT NO SPECIFIC DISCREPANCY WERE POINTED OUT BY THE AO. WE FIND NO GROUNDS TO INTERFERE WITH THE ORDER OF CIT(A). GROUND NO.2 RAISED BY THE REVE NUE IS ACCORDINGLY DISMISSED. 14. IN THE RESULT THE APPEAL BY THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 02.02.2018. SD/- SD/- [WASEEM AHMED] [ N.V.VAS UDEVAN ] ACCOUNTANT MEMBER JUDICI AL MEMBER DATED : 02.02.2018. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1.M/S ALMAL INDUSTRIES PVT. LTD., 24B, RAJA SANTOSH ROAD, ALIPORE, KOLKATA-700027. 2. J.C.I.T.,(OSD) CIR-11(1), KOLKATA. 3. CIT(A)-16, KOLKATA 4. C.I.T.-4, KOLKA TA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECR ETARY HEAD OF OFFICE/ D.D.O., ITAT KOLKATA BENCHES 6 ITA NO.1232/KOL/2016 M/S ALMAL INDUSTRIES PVT. LTD. A.YR.2010-11 6