M/s. Arex Industries Ltd., Gandhinagar V. The DCIT, Mehsana Circle, Mehsana

ITA 1877/AHD/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2538 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 11-08-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital expenditure
• Section: 37(1); 37

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI RIFAUR RAHMAN, ACCOUNTANT MEMBER ./ ITA NO.1877/AHD/2017 / ASSTT. YEAR: 2014-15 M/S.AREX INDUSTRIES LTD. 612, GIDC, CHHATRAL TAL. KALOL DIST. GANDHINAGAR 382 729. PAN : AADCA 0424 C VS. DCIT, MEHSANA CIR. MEHSANA. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SMT.SMITI SAMANT, SR.DR ! / DATE OF HEARING : 17/06/2019 '#$ ! / DATE OF PRONOUNCEMENT: 18 /06/2019 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: PRESENT APPEAL BY THE ASSESSEE IS AGAINST ORDER OF THE LD.CIT(A), GANDHINAGAR DATED 17.7.2017 PASSED FOR T HE ASSTT.YEAR 2014-15. 2. NONE HAS COME PRESENT ON BEHALF OF THE ASSESSEE. WITH THE ASSISTANCE OF THE LD.DR, WE HAVE GONE THROUGH THE R ECORD CAREFULLY AND PROCEEDED TO DISPOSE OF THE APPEAL EX PARTE QUA THE ASSESSEE. ITA NO.1877/AHD/2017 2 3. SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT THE L D.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.5,43,337/- W HICH WAS ADDED BY MAKING A DISALLOWANCE OUT OF FOREIGN TRAVEL EXPE NDITURE. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 15.11.2014 DECLARING TOTAL INCO ME AT RS.5,32,57,031/-. THE CASE OF THE ASSESSEE WAS SEL ECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE AT THE RELEVANT TIME WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF WOV EN LABELS AND TRADING IN WOVEN LABELS. IT IS ALSO IN GENERAT ION AND CONSUMPTION /SALES OF ELECTRIC POWER THROUGH WINDMI LLS. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THA T THE ASSESSEE HAS DEBITED A SUM OF RS.29,38,919/- ON ACCOUNT OF T RAVELLING EXPENDITURE. OUT OF THE TOTAL TRAVELING EXPENDITUR E A SUM OF RS.21,73,351/- WAS DEBITED TOWARDS FOREIGN TRAVELLI NG. IN ORDER TO VERIFY GENUINENESS OF SUCH EXPENDITURE, THE ASSESSE E WAS DIRECTED TO SUBMIT DETAILS SHOWING PURPOSE AND SOURCE OF SUC H VISIT. THE LD.AO THEREAFTER OBSERVED THAT THE ASSESSEE HAS PRO DUCED ONLY BILLS FOR FLIGHT BOOKING AND HOTEL BOOKING IN RESPE CT OF VISIT OF DIRECTORS. THE LD.AO OBSERVED THAT PERSONAL ELEMEN T OF EXPENDITURE COULD NOT BE RULED OUT. HENCE, HE DISA LLOWED 25% OF TOTAL FOREIGN TRAVELLING EXPENDITURE, AND MADE ADDI TION OF RS.5,41,337/-, APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 5. WITH THE ASSISTANCE OF THE LD.DR, WE HAVE GONE T HROUGH THE RECORD. A PERUSAL OF THE RECORD WOULD INDICATE THAT THERE WERE FOUR ITA NO.1877/AHD/2017 3 WORKING DIRECTORS VIZ. DINESH BILGI, NEEL D. BILGI, C HIRAG D. BILGI AND PRAGNESH K. SHAH. ACCORDING TO THE ASSESSEE, T HIS EXPENDITURE WERE INCURRED ON FOREIGN TRAVELLING OF THE ABOVE PERSONS, AND NOT EXPENDED OR INCURRED FOR THE RELAT IVES. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAS EXPORT SALE OF RS.1,00,23,387/-. 6. WITH THE ASSISTANCE OF THE LD.DR, WE HAVE GONE T HROUGH THE RECORD CAREFULLY. IT IS PERTINENT TO OBSERVE THAT IN ORDER TO CLAIM EXPENDITURE UNDER SECTION 37(1) OF THE INCOME TAX A CT, THE ASSESSEE REQUIRES TO FULFILL CERTAIN CONDITIONS VIZ . (A) THERE MUST BE EXPENDITURE, (B) SUCH EXPENDITURE MUST NOT BE OF TH E NATURE DESCRIBED IN SECTION 30 TO 36, (C) EXPENDITURE MUST NOT BE IN THE NATURE OF CAPITAL EXPENDITURE, OR PERSONAL EXPENDIT URE OF THE ASSESSEE, AND (D)EXPENDITURE MUST BE LAID OUT OR EX PENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. T HE EXPRESSION WHOLLY EMPLOYED IN SECTION 37 REFERS TO QUANTIFIC ATION OF EXPENDITURE, WHILE EXPRESSION EXCLUSIVELY REFERS TO MOTIVE, OBJECTS AND PURPOSE OF THE EXPENDITURE. 7. IN THE LIGHT OF THE ABOVE, LET US EXAMINE THE FA CTS ON HAND. IN ORDER TO CLAIM THE EXPENDITURE LAID OUT FOR THE PURPOSE OF THE BUSINESS, THE ASSESSEE SHOULD HAVE DEMONSTRATED MOT IVE OF THESE VISITS. IT SHOULD HAVE FILED SOME MATERIAL DEMONST RATING NEXUS BETWEEN INCURRENCE OF EXPENDITURE AND ACHIEVEMENT O F BUSINESS PURPOSE. IT HAS ONLY PRODUCED EVIDENCE SHOWING INC URRENCE OF EXPENDITURE, BUT FAILED TO PRODUCE OBJECT AND PURPO SE FOR INCURRING SUCH EXPENDITURE. THEREFORE, IN OUR OPINION, THE L D.REVENUE ITA NO.1877/AHD/2017 4 AUTHORITIES HAVE RIGHTLY DISALLOWED THE EXPENDITURE PARTLY. WE DO NOT FIND ANY MERIT IN THIS APPEAL OF THE ASSESSEE. IT IS DISMISSED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE COURT ON 18 TH JUNE, 2019. SD/- SD/- (RIFAUR RAHMAN) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER