LEMUIR EXPRESS, MUMBAI V. ACIT CIR 12(3), MUMBAI

ITA 1441/MUM/2010

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6164 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2006-2007
• Appeal Filed On: 22-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Keywords: Business expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'G' BENCH, MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 1441/MUM/2010 (ASSESSMENT YEAR: 2006-07) M/S. LEMUIR EXPRESS ACIT, CIRCLE 12(3) ORICON HOUSE, 2ND FLOOR ROOM NO. 135, 1ST FLOOR 12-K DUBHAS MARG, FORT VS. AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400023 MUMBAI 400020 PAN - AAAFL 2519 D APPELLANT RESPONDENT APPELLANT BY: MS. AARTI VISSANJI RESPONDENT BY: SHRI A.K. NAYAK O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)-XXIII, MUMBAI DATED 16.12.2009. 2. WHILE COMPLETING THE ASSESSMENT THE A.O. DISALLOWED VARIOUS EXPENDITURES CLAIMED BY THE ASSESSEE. THE A.O. DISA LLOWED 20% OF SALES PROMOTION EXPENSES, 20% OF TRAVEL EXPENSES AND 20% OF CONVEYANCE EXPENSES AS PERTAINING TO NON- BUSINESS/PERSONAL EX PENDITURE OF THE PARTNERS. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE CIT(A) HAS CONFIRMED THE DISALLOWANCE OF TRAVEL EXPENSES, SALE S PROMOTION EXPENSES WHILE RESTRICTING THE CONVEYANCE EXPENSES TO CASH P AYMENTS ALONE THEREBY GIVING PARTIAL RELIEF. 3. THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE HAS INCURRED A TOTAL AMOUNT OF ` 18,91,107/- TOWARDS TRAVEL EXPENSES WHICH INCLUDED AN AMOUNT OF ` 8,07,039/- EXCLUSIVELY FOR THE EMPLOYEES AND AN AMO UNT OF ` 1,78,063/- TOWARDS FOREIGN TRAVEL BY THE PARTNER WITH DEPUTY G ENERAL MANAGER AND AN AMOUNT OF ` 9,09,005/- ON PARTNERS BOTH INLAND AND FOREIGN TRAV ELS AND DISALLOWANCE OF 20% OF THE ENTIRE EXPENDITURE IS NO T REASONABLE. WITH REFERENCE TO CONVEYANCE AND BUSINESS PROMOTION EXPE NSES ALSO IT WAS ITA NO. 1441/MUM/2010 M/S. LEMUIR EXPRESS 2 SUBMITTED THAT THESE EXPENSES WERE FULLY VOUCHED AN D THERE IS NO NEED FOR DISALLOWING THE EXPENSES. IT WAS ALSO SUBMITTED THA T FBT WAS PAID ON THE ENTIRE TRAVEL AND SALE PROMOTION EXPENSES AND DISAL LOWANCE UNDER SECTION 37(1) IS NOT CORRECT. THE LEARNED COUNSEL ALSO FAI RLY SUBMITTED THAT IN THE EARLIER YEAR 10% OF THE FOREIGN TRAVEL EXPENDITURE WAS DISALLOWED WHICH WAS ACCEPTED BY THE ASSESSEE FIRM. 4. THE LEARNED D.R RELIED ON THE ORDERS OF THE A.O. AN D THE CIT(A). 5. WE HAVE CONSIDERED THE ISSUE. THE CIT(A) ALSO HAS C ONSIDERED THE ARGUMENTS OF THE ASSESSEE THAT DISALLOWANCE UNDER S ECTION 37(1) CAN BE MADE EVENTHOUGH THE AMOUNTS WERE CONSIDERED FOR FBT AS THE GENUINENESS OF THE EXPENDITURE TOWARDS BUSINESS IS TO BE EXAMIN ED AND NECESSARY RELIEF CAN BE GIVEN IN FBT PROCEEDINGS. BE IT AS IT MAY, W E ARE OF THE VIEW THAT THERE IS NO NEED FOR DISALLOWING 20% OF THE ENTIRE TRAVEL EXPENDITURE AS NON- BUSINESS EXPENDITURE ON ADHOC BASIS. AS RIGHTLY SUB MITTED, AN AMOUNT OF ` 8,07,039/- WAS SPENT ON EMPLOYEES, WHICH CANNOT BE CONSIDERED AS NON- BUSINESS EXPENDITURE. MOREOVER, AN AMOUNT OF ` 94,536/- WAS SPENT ON AIR TICKETS AND HOTEL CHARGES IN INDIA BY THE PARTNERS. KEEPING THESE IN MIND, WE DIRECT THE A.O. TO RESTRICT THE AMOUNT TO 10% OF THE FOREIGN TRAVEL EXPENDITURE SPENT ON PARTNERS ALONE KEEPING IN LINE WITH THE SIMILAR DISALLOWANCE MADE IN EARLIER YEAR. ACCORDINGLY GROU ND ON THE ISSUE OF DISALLOWANCE OF TRAVEL EXPENDITURE WAS PARTIALLY AL LOWED. A.O. IS DIRECTED TO RESTRICT TO 10% OF THE FOREIGN TRAVEL EXPENDITURE OF PARTNERS ALONE. 6. WITH REFERENCE TO CONVEYANCE EXPENSES THE CIT(A) IS HAS RIGHTLY RESTRICTED THE CASH EXPENSES INCURRED BY THE ASSESS EE WHICH COULD NOT BE VERIFIED. SINCE THE CIT(A) HAS ALREADY GIVEN RELIEF OUT OF THE TOTAL DISALLOWANCE OF ` 1,64,169/-, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT(A) IS REASONABLE AND ACCORDINGLY THE DISALLOWAN CE OF 20% OF OUT OF CASH VOUCHERS IS CONSIDERED REASONABLE. ACCORDINGLY THE SAME IS CONFIRMED. 7. NEXT ITEM IN GROUND NO. 3 IS WITH REFERENCE TO SALE S PROMOTION EXPENSE IN HOTEL AND THE ENTERTAINMENT EXPENSES OF ` 7,738/- CONSIDERED FOR DISALLOWANCE AT 20%. NEITHER THE A.O. NOR THE CIT(A ) HAS CONSIDERED HOW THERE COULD BE PERSONAL EXPENDITURE IN SALES PROMO TION EXPENSES. ASSESSING ITA NO. 1441/MUM/2010 M/S. LEMUIR EXPRESS 3 OFFICERS ORDER IS TOTALLY SILENT ON THE NATURE OF EXPENDITURE BUT CONSIDERED FOR DISALLOWANCE ONLY ON THE PRETEXT THAT THE EXPEN DITURE IS NOT SUPPORTED BY THIRD PARTY VOUCHERS. THE CIT(A), HOWEVER, MENTIONE D THE EXPENDITURE OF HOTEL AT ` 88,672/- AND ENTERTAINMENT EXPENDITURE AT ` 7,738/- FOR DISALLOWANCE, WHICH DO NOT TALLY WITH THE DISALLOWA NCE MADE BY THE A.O. AT ALL. WE ARE OF THE VIEW THAT THERE CANNOT BE ANY PE RSONAL EXPENDITURE AS FAR AS SALES PROMOTION EXPENDITURE IS CONCERNED. CONSID ERING THE QUANTUM AND NATURE OF THE EXPENDITURE, WE ARE OF THE VIEW THAT THERE IS NO NEED FOR DISALLOWING 20% OF SALES PROMOTION EXPENSES ON ADHO C BASIS. THE A.O. IS DIRECTED TO DELETE THE SAID ADDITION OF ` 19,282/- CONFIRMED BY THE CIT(A). GROUND 3 IS CONSIDERED ALLOWED. 8. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER 2010. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 30 TH NOVEMBER 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXII, MUMBAI 4. THE CIT XII, MUMBAI CITY 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.