Windamere Hotel Pvt Ltd., Kolkata V. JCIT (OSD) Cir - 3,Siliguri., Siliguri

ITA 1856/KOL/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4904 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 16-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 17-12-2012
• Court: TRIBUNAL
• Department Lawyers: S ALONG YADEN
• Assessee Lawyers: TARUN KANTI DUTTA FCA LD
• Keywords: Business expenditure

Judgement Text

ITA NO. 1856/KOL/2012 A AM M/ S. WINDAMERE HOTEL PVT. LTD 1 IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, K OLKATA BEFORE : SHRI MAHAVIR SINGH, JUDICIAL MEMBER, AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. 1856/KOL/2012 A.Y : 2009-10 M/S. WINDAMERE HOTEL PVT. LTD VS. JCIT (OSD ), CIR-3, SILIGURI PAN: AAACW2667C (APPELLANT/ASSESSEE) (DEPARTMENT/RESPONDENT) FOR THE APPELLANT/AS SESSEE: SHRI TARUN KANTI DUTTA, FCA, LD.AR FOR THE RESPONDENT/DEPARTMENT: SHRI S ALONG YADEN, ADDL.CIT, LD.DR DATE OF HEARING: 16-03-2016 DATE OF PRONOUNCEMENT: 21 -03-2 016 ORDER SHRI M.BALAGANESH, AM : THIS APPEAL OF THE ASSESSEE ARISES OUT OF THE ORDE R OF THE LEARNED CIT(A), SILIGURI IN APPEAL NO. 147/CIT(A)/SLG/2011-12 DATED 12.9.2012 AGAINST THE ORDER OF ASSESSMENT FRAMED FOR THE ASST YEAR 2009-10 U/S 143 (3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. DURING THE COURSE OF HEARING, THE LEARNED AR ST ATED THAT HE IS NOT PRESSING GROUND NOS. 1 & 3 IN VIEW OF SMALLNESS OF THE AMOUN TS. HE FURTHER STATED THAT GROUND NO. 4 RAISED IS ALSO NOT PRESSED. THE SAME IS TAKEN AS A STATEMENT FROM THE BAR. ACCORDINGLY, THE GROUND NOS. 1 ,3 & 4 RAISED BY THE ASSESSEE ARE DISMISSED AS NOT PRESSED. ITA NO. 1856/KOL/2012 A AM M/ S. WINDAMERE HOTEL PVT. LTD 2 3. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER DISALLOWANCE OF RS. 15,33,146/- ON ACCOUNT OF TRAVELLING EXPENSES OF DI RECTORS COULD BE MADE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASS ESSEE IS ENGAGED IN THE HOTEL BUSINESS AND HAD CLAIMED A SUM OF RS. 15,33,146/- (WHICH IS UNDER DISPUTE BEFORE US) ON ACCOUNT OF TRAVELLING EXPENSES OF ITS DIRECTORS AS DEDUCTION . THE LEARNED AO CALLED FOR THE EVIDENCES TO PROVE THE BUSINESS NEXUS OF TH E INCURRENCE OF THE SAID TRAVELLING EXPENSES OF DIRECTORS. ACCORDING TO LEARNED AO, NO DETAILS WERE FILED IN THIS REGARD BY THE ASSESSEE. ACCORDINGLY, THE LEARNED AO DISAL LOWED THE SUM OF RS. 15,33,146/- AS INCURRED TOWARDS PERSONAL EXPENDITURE OF DIRECTO RS. ON FIRST APPEAL, THE ASSESSEE SUBMITTED TATHT THE TOTAL GROSS RECEIPTS FROM HOTEL BUSINESS FOR THE YEAR ENDING 31.3.2009 WAS RS. 3,06,33,381/- WHICH ARE MOSTLY FR OM FOREIGN TOURISTS AND ASSESSEE HAS INCURRED FOLLOWING TRAVELLING EXPENSES :- TRAVELLING EXPENSES FOR DIRECTORS RS. 29,19,592 TRAVELLING EXPENSES FOR OTHERS RS. 4,59,715 THE ASSESSEE ARGUED THAT THE LEARNED AO BY DISALLOW ING RS. 15,33,146/- HAD PRACTICALLY DISALLOWED 45.36% OF TOTAL TRAVELLING E XPENSES INCURRED BY THE ASSESSEE IGNORING THE FACT THAT ITS HOTEL BUSINESS IS FULLY DEPENDENT ON FOREIGN TOURISTS, FOR WHICH PUBLICITY IS REQUIRED BY PERSONAL REPRESENTATION BE FORE THE FOREIGN PEOPLE IN FOREIGN COUNTRIES AND NATURALLY ASSESSEE HAS TO SPEND FOREI GN TRAVEL EXPENSES FOR ITS DIRECTORS. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD MAINTAI NED PROPER VOUCHERS AND BILLS FOR THE SAME. THE LEARNED CITA NOT CONVINCED WITH THE ARGUMENTS CONFIRMED THE ORDER OF THE LEARNED AO AND ALSO HELD THAT THE MAJORITY O F THE TRAVELLING EXPENSES WERE SUBJECTED TO FRINGE BENEFIT TAX BY THE ASSESSEE WHI CH GOES TO PROVE THAT THE PERSONAL ELEMENT OF TRAVELLING EXPENSES CANNOT BE RULED OUT. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- ITA NO. 1856/KOL/2012 A AM M/ S. WINDAMERE HOTEL PVT. LTD 3 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE T HE LD. CIT(APPEAL) WAS UNJUSTIFIED IN CONFIRMING THE DISAL LOWANCE OF RS.15,33,146/- ON ACCOUNT OF TRAVELLING EXPENSES. 3.2. THE LEARNED AR REITERATED THE SUBMISSIONS MAD E BEFORE THE LEARNED CIT(A) AND ARGUED THAT JUST BECAUSE AN EXPENDITURE THAT HAS BE EN SUBJECTED TO FRINGE BENEFIT TAX ON ACCOUNT OF TRAVELLING EXPENSES WOULD NOT AUTOMATICA LLY LEAD TO A CONCLUSION THAT THEY ARE PERSONAL IN NATURE. INFACT THE EXPENDITURE TOW ARDS TRAVELLING WERE SUBJECTED TO FRINGE BENEFIT TAX BASED ON DEEMING PROVISIONS CONT EMPLATED IN THE STATUTE. ALTERNATIVELY, HE ARGUED THAT , IF THE CASE OF THE REVENUE IS TO BE ACCEPTED, THEN THE DISALLOWANCE ON ACCOUNT OF TRAVELLING EXPENSES ITSE LF COULD NOT BE MADE AS THE SAME HAS BEEN SUBJECTED TO FRINGE BENEFIT TAX. HE ARGU ED THAT THE ENTIRE TRAVEL EXPENSES HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE P URPOSE OF ITS HOTEL BUSINESS ONLY AND HENCE ALLOWABLE AS DEDUCTION. IN RESPONSE TO T HIS, THE LEARNED DR VEHEMENTLY RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 3.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. WE FIND FROM THE PAPER BOOK FILED BY THE A SSESSEE, THAT THERE ARE CERTAIN EVIDENCES FILED BY THE ASSESSEE IN THE FORM OF RBI APPROVALS FOR FOREIGN VISITS OF DIRECTORS OF ASSESSEE COMPANY WHICH WERE RELEVANT F OR THE YEAR 1991 & 1992. SIMILARLY CERTAIN EMAIL CORRESPONDENCE IS ALSO DATE D IN MAY 2014 WHEREIN THE ASSESSEE COMPANY HAS BEEN NOMINATED FOR THE PRESTIGIOUS INTE RNATIONAL BEST ENTERPRISE AWARD. BOTH THESE PAPERS ARE NOT RELEVANT FOR THE ASSESSME NT YEAR UNDER APPEAL. AT BEST, IT MIGHT ONLY SERVE AS AN EVIDENCE THAT THE ASSESSEE H AS INDEED GOT CERTAIN INTERNATIONAL CLIENTS IN ITS BUSINESS. WE AGREE WITH THE LEARNE D AR THAT THE TRAVELLING EXPENSES HAS BEEN SUBJECTED TO FRINGE BENEFIT TAX BASED ON THE D EEMING PROVISIONS OF THE ACT ONLY. WE HOLD THAT JUST BECAUSE A PARTICULAR EXPENDITURE HAS BEEN SUBJECTED TO FRINGE BENEFIT TAX, THAT WOULD NOT AUTOMATICALLY BE ELIGIBLE FOR D EDUCTION AS A GENUINE BUSINESS EXPENDITURE. ACCORDINGLY THE ALTERNATIVE PLEA OF THE LEARNED AR IN THIS REGARD IS REJECTED. WE FIND FROM THE PAPER BOOK, CERTAIN EV IDENCES IN THE FORM OF DETAILS OF ITA NO. 1856/KOL/2012 A AM M/ S. WINDAMERE HOTEL PVT. LTD 4 FOREIGN TRAVEL EXPENSES TOGETHER WITH CERTAIN VOUCH ERS AND BILLS ARE AVAILABLE. SINCE NO DETAILS WERE PRODUCED BEFORE THE LOWER AUTHORITIES BY THE ASSESSEE, THE EXPENSES ON ACCOUNT OF TRAVELLING EXPENSES OF DIRECTORS WERE DI SALLOWED. THE EVIDENCES SUBMITTED IN THE PAPER BOOK BEFORE US ARE ADMITTED AS ADDITIO NAL EVIDENCE IN THE INTEREST OF JUSTICE AND WE DEEM IT FIT AND APPROPRIATE TO SET A SIDE THIS ISSUE TO THE FILE OF THE LEARNED AO TO DECIDE THIS ISSUE AFRESH, IN ACCORDAN CE WITH LAW. NEEDLESS TO MENTION THAT THE ASSESSEE BE GIVEN REASONABLE OPPORTUNITY O F BEING HEARD. THE ASSESSEE IS AT LIBERTY TO PRODUCE FURTHER EVIDENCES IN SUPPORT OF ITS CLAIM OF DEDUCTION TO PROVE THE BUSINESS NEXUS OF THE VISITS OF THE DIRECTORS. AC CORDINGLY, THE GROUND NO. 2 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21 -03-201 6. SD/- SD/- ( MAHAVIR SINGH, JUDICIAL MEMBER ) ( M.BALAGANESH, ACCOUNTANT MEMBER) DATE : 21 -03-2016 ITA NO. 1856/KOL/2012 A AM M/ S. WINDAMERE HOTEL PVT. LTD 5 1. THE APPELLANT/ASSESSEE: M/S.WINDAMERE HOTEL PVT . LTD C/O GUPTA & MITRA, CHATTERED ACCOUNTANTS, 2 ND FL., ROOM NO.14 29 R.N MUKHERJEE ROAD, KOL-700 001. 2 THE RESPONDENT/DEPARTMENT; THE JCIT (OSD) CIR-3, SILIGURI CENTRAL REVENUE BUILDING, HAKIMPARA, SILIGURI. 3 /THE CIT, 4.THE CIT(A ) 5. DR, KOLKATA BENCH 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT REGISTRAR **PRADIP/SPS COPY OF THE ORDER FORWARDED TO: