M/s Hi-Tech Gears Ltd, New Delhi V. DCIT, New Delhi

ITA 17/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4191 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 01-04-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 05-01-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK
• Assessee Lawyers: Y K SHARMA
• Keywords: Business expenditure; Additional evidence; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH C DELHI ] BEFORE SHRI R. P. TOLANI, JM AND SHRI K. D . RANJAN, AM I. T. APPEAL NO. 17 (DEL) OF 2009. ASSESSMENT YEAR : 2004-05. M/S. HI TECH GEARS LTD., DY. COMMISSIONER OF INCOME-TAX OFFICER, 344/3, OSHU HOUSE, LADO SARAI, VS . C I R C L E : 12 (1), N E W D E L H I 110 030. N E W D E L H I. PAN / GIR NO. AAA CH 0156 K. ( APPELLANT ) ( RESP ONDENT ) ASSESSEE BY : SHRI Y. K. SHARMA, C. A.; DEPARTMENT BY : MS. PRATIMA KAUSHIK, SR. D. R .; O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 200 4-05 ARISES OUT OF THE ORDER OF THE LD. CIT (APPEALS)-XII, NEW DELHI. 2. THE GROUNDS OF APPEAL, RAISED BY THE ASSESSEE, I S REPRODUCED AS UNDER :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE AND UNDER THE PROVISIONS OF THE ACT, THE COMMISSIONER HAS ERR ED IN UPHOLDING THE DISALLOWANCES OUT OF SALES PROVISION EXPENSES OF RS .11,62,351/- LAID OUT FOR BUSINESS PURPOSES. ' 2 I. T. APPEAL NO. 17 (DEL) OF 2009. 3. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT T HE ASSESSEE DEBITED A SUM OF RS.11,62,351/- UNDER THE HEAD 'OUT OF SALES PROMOTION EXPENSES'. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT PAYMENT OF RS.70, 230/- WAS MADE TO RAJ VILAS HOTEL, JAIPUR, WHICH WAS CLAIMED TO HAVE BEEN INCURRED FOR THE PUR POSE OF BUSINESS. AN AMOUNT OF RS.2,62,129/- WAS PAID TO WELCOME MARRIOTT; DELHI, RS.4,60,899/- TO MAURYA SHERATON ON 6/02/2004; AND RS.3,61,000/- TO GRAND HYATT DATED 9 /02/2004. IT WAS EXPLAINED BY THE ASSESSEE THAT PAYMENT TO RAJ VILAS HOTEL WAS MADE FOR THE PU RPOSE OF BUSINESS IN RESPECT OF SHRI KAPURIA. THE COMPANY WAS REGISTERED AT BHIWADI AND DEPARTMEN TAL HEAD OFFICES LIKE EXCISE, SALES TAX AND ROC WERE LOCATED AT JAIPUR AND, THEREFORE, THE VISI T MADE BY MR. KAPURIA WAS FOR OFFICIAL PURPOSES. AS REGARDS PAYMENT MADE TO MAURYA SHERAT ON AND GRAND HYATT HOTEL, IT WAS SUBMITTED THAT PART OF THE EXPENSES WERE INCURRED B Y SHRI KAPURIA PERSONALLY. MAJORITY OF THE GUESTS FOR THE MARRIAGE CEREMONY FUNCTION OF SON SH . KAPURIA WERE ACTUALLY BUSINESS ASSOCIATES AND, THEREFORE, PART OF THE EXPENSES WERE DEBITED T O COMPANY'S ACCOUNT AND PART EXPENSES WERE MET BY MD HIMSELF. THESE EXPENSES WERE INCURRED FO R THE MARRIAGE OF HIS SON. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION OFFERED BY T HE ASSESSEE. AS REGARDS THE STAY IN RAJ VILAS HOTEL, JAIPUR, NO SPECIFIC PURPOSE WAS GIVEN NOR WA S ANY EVIDENCE REGARDING BUSINESS PURPOSE OF HIS VISIT FURNISHED. THEREFORE, THE PAYMENT WAS TR EATED BY THE AO NOT FOR PURPOSES OF BUSINESS. AS REGARDS THE EXPENSES INCURRED ON STAY CHARGES AT WELCOME MARRIOT HOTEL, THE ASSESSEE HAD NOT GIVEN ANY EVIDENCE REGARDING THE NAME OF THE PERSON S, WHO HAD STAYED IN THE HOTEL NOR COULD IT BE RELATED TO THE BUSINESS REQUIREMENTS OF THE ASSE SSEE. THE AO MADE A SPECIFIC ENQUIRY ASKING THE ASSESSEE TO FILE SUPPORTING EVIDENCES. HOWEVER , THE ASSESSEE FAILED TO FILE ANY EVIDENCE TO JUSTIFY THE EXPENSES INCURRED IN RESPECT OF WELCOME MARRIOT HOTEL. AS REGARDS THE EXPENDITURE INCURRED IN RELATION TO BILLS OF MAURYA SHERATON AN D GRAND HYATT HOTEL, THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE IN SUPPORT OF HIS CONTENTION T HAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSES OF BUSINESS. THE AO ALSO NOTED THAT INFOR MATION WAS RECEIVED FROM ACIT, CIRCLE: 1, LUDHIANA, THAT SHRI DEEP KAPURIA, THE MANAGING DIRE CTOR HAD ORGANIZED FUNCTIONS FOR MARRIAGE OF HIS SON IN THE ABOVE HOTELS AND PART OF THE SUM WAS SHOWN TO BE PAID BY HIM AND THE BALANCE WAS PAID BY THE COMPANY. IN RESPONSE TO A QUERY RA ISED, IT WAS SUBMITTED BY THE ASSESSEE THAT FUNCTIONS AT MAURYA SHERATON AND GRAND HYATT WERE IN CONNECTION WITH THE MARRIAGE OF THE SON OF SHRI KAPURIA, THE MANAGING DIRECTOR. SINCE THE MAJORITY OF INVITEES WERE BUSINESS ASSOCIATES AND SOME WERE RELATIVES OF THE MD, THE EXPENSES REL ATED TO THE RELATIVES ON ESTIMATE BASIS WERE 3 I. T. APPEAL NO. 17 (DEL) OF 2009. BORNE BY THE MD AND EXPENSES RELATABLE TO BUSINESS ASSOCIATES WERE BORNE BY THE COMPANY. THEREFORE, THE EXPENSES WERE INCURRED FOR THE PURPO SE OF BUSINESS. THE AO, HOWEVER REJECTED THIS CONTENTION OF THE ASSESSEE AND ADDED THE AMOU NT OF RS.11,62,351/-, AS EXPENDITURE INCURRED NOT FOR THE PURPOSE OF BUSINESS. 4. BEFORE THE LD. CIT (APPEALS) THE ASSESSEE REITER ATED THE SAME ARGUMENTS. NO ADDITIONAL EVIDENCE WAS PROVIDED REGARDING THE WORK ALLEGEDLY ATTENDED BY SHRI KAPURIA WHILE STAYING AT HOTEL RAJ VILAS AT JAIPUR. NO DETAILS OF THE DEPAR TMENTS WITH WHICH HE HAD INTERACTED WERE GIVEN. THE ASSESSEE COULD NOT IDENTIFY WITH DOCUME NTARY PROOF OF MEETING WITH GOVT. OFFICIALS. IN THE ABSENCE OF EVIDENCE, THE LD. CIT (APPEALS) C AME TO THE CONCLUSION THAT THE EXPENDITURE IN RESPECT OF HOTEL RAJ VILAS WAS INCURRED FOR THE PER SONAL VISITS OF MR. KAPURIA, WHICH WAS NOT BUSINESS EXPENDITURE. AS REGARDS THE PAYMENT MADE TO WELCOME MARRIOT, MAURYA SHERATON AND GRAND HYATT, THESE EXPENSES WERE INCURRED FOR THE P URPOSE OF CEREMONY EXPENSES PERTAINING TO THE MARRIAGE OF THE SON. THE NATURE OF AMOUNT SPEN T WAS IN THE NATURE OF FAMILY FUNCTIONS, WHICH WAS ACCEPTED BY THE ASSESSEE TOO. THE PLEA THAT MO ST OF THE INVITEES WERE BUSINESS PEOPLE WOULD NOT MAKE THE PERSONAL EXPENSES OF THE MD AS PERTAIN ING TO THE BUSINESS PURPOSES. THE LD. CIT (APPEALS) FURTHER OBSERVED THAT BY NO STRETCH OF IM AGINATION IT COULD BE ACCEPTED THAT A FAMILY FUNCTION EXPENSES COULD BE DEBITED AS SALES PROMOTI ON EXPENSES. THE ASSESSEE WAS MANUFACTURING GEARS AND SHAFTS WHICH HAD REGULAR CO MMITTED CLIENTELE AND AS SUCH, THOSE EXPENSES COULD NOT BE DEBITED TO SALES PROMOTION EX PENSE WHEN ADMITTEDLY THE EXPENSES PERTAINED TO THE MARRIAGE OF HIS SON. THEREFORE, T HE LD. CIT (APPEALS) CONFIRMED THE DISALLOWANCE MADE BY THE AO. 5. BEFORE US SIMILAR ARGUMENTS WERE MADE. HOWEVER, NO DETAILS OF THE PERSONS, WHO ATTENDED THE FUNCTIONS AND HOW THE EXPENDITURE INCU RRED ON MARRIAGE OF HIS SON, WERE RELATED TO BUSINESS EXPENSES. MARRIAGE OF SON OF THE MANAG ING DIRECTOR IS A PRIVATE FUNCTION AND HAS NOTHING TO DO WITH THE BUSINESS OF THE COMPANY. TH EREFORE, SUCH EXPENDITURE CANNOT BE TREATED AS BUSINESS PROMOTION EXPENSES. THE PLEA THAT THE INVITEES WERE BUSINESS ASSOCIATES WOULD NOT CHANGE THE CHARACTER OF PERSONAL EXPENDITURE TO BUSINESS EXPENDITURE. ACCORDINGLY, IN VIEW 4 I. T. APPEAL NO. 17 (DEL) OF 2009. OF THESE FACTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (APPEALS) CONFIRMING THE DECISION. AS REGARDS THE EXPENDITUR E INCURRED BY SHRI KAPURIA, IN RESPECT OF RAJ VILAS HOTEL, JAIPUR, NO EVIDENCE HAS BEEN FURNI SHED BY THE ASSESSEE TO PROVE THAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSES OF BUSINE SS. IN THE ABSENCE OF ANY SUCH MATERIAL, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FIN DINGS OF THE LD. CIT (APPEALS). ACCORDINGLY, THE ORDER PASSED BY THE LD. CIT (APPEALS) IS UPHELD . 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 09 TH APRIL, 2010. SD/- SD/- [ R. P. TOLANI ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 09 TH APRIL, 2010. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT. 5 I. T. APPEAL NO. 17 (DEL) OF 2009. 6 I. T. APPEAL NO. 17 (DEL) OF 2009.