DCIT, New Delhi V. M/s Sumitomo Corporation India Pvt. Ltd., New Delhi

ITA 1946/DEL/2011

• Counselvise Citation: 194620114 RSA 2011
• Duration Of Justice: 2 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 07-10-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 20-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y S KAKKAR
• Assessee Lawyers: C S AGGARWAL
• Keywords: Business expenditure
• Section: 43B; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G: NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI I. C. SUDHIR, JUDICIAL MEMBER ITA NO. 1946/DEL/2011 ASSESSMENT YEAR: 2006- 2007 DCIT, VS. SUM ITOMO CORPORATION INDIA PVT. LTD. CIRCLE-9(1), ROOM NO. 163 4 TH FLOOR, DLF CENTRE, C.R. BUILDING, SAN SAD MARG, NEW DELHI. NEW DELHI 110 001. (PAN NO. AABCS1887M) (APPELLANT) (RESP ONDENT) APPELLANT BY : MS. Y.S. KAKKA R, SR. DR RESPONDENT BY : SHRI C.S. AGGARWA L, ADVOCATE ORDER PER I.C. SUDHIR, JUDICIAL MEMBER THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) ERRED IN LAW AND MERIT OF THE CASE IN DELETING THE ADDITIO N OF RS. 2,93,517/- MADE BY THE AO UNDER LEGAL AND PROFESSIONAL CHARGES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) ERRED IN LAW AND MERIT OF THE CASE IN DIRECTING THE AS SESSING OFFICER TO VERIFY THE AMOUNT RS. 5,99,293/- SHOWN AS PROVISION UND ER THE HEAD RATES AND TAXES. ITA NO. 1946/DEL/2011 2 2. AT THE OUTSET OF HEARING THE LD. AR POINT ED OUT THAT THE ISSUE RAISED IN THE GROUNDS ARE COVERED BY THE DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF FOR THE ASSESSMENT YEAR 2007-08 IN ITA NO. 5095/D/2011 ORDER DATED 31.10.2013 SO FAR AS GROUN D NO. 1 IS CONCERNED AND GROUND NO. 2 IS COVERED BY THE DECISION OF FULL BENCH OF THE HONBLE DELHI HIGH COURT IN THE CASE OF J.T. (INDIA) EXPOR TS V. UNION OF INDIA [2003] 262 ITR 269 (DEL) (FB). 3. THE LD. DR DID NOT DISPUTE THE ABOVE SUBMISSI ON. SHE HOWEVER PLACED RELIANCE ON THE ASSESSMENT ORDER. SHE SUBMITTED THA T THE ASSESSEE COULD NOT ESTABLISH THAT THE CLAIMED EXPENDITURE WAS CONN ECTED WITH THE BUSINESS OF THE ASSESSEE COMPANY. HENCE THE AO WAS JUSTIFIED IN DISALLOWING THE CLAIMED AMOUNT OF RS. 2,93,517/- MADE ON ACCOUNT OF FOREIGN EMPLOYEE / CONSULTANT AS PERSONAL IN NATURE. 4. IN SUPPORT OF GROUND NO. 2 THE LD. DR TRIED TO JUSTIFY THE ASSESSMENT ORDER. SHE REFERRED CONTENTS OF PARA 1 & 5 OF THE A SSESSMENT ORDER. SHE SUBMITTED THAT DESPITE SUFFICIENT OPPORTUNITY GIVEN BY THE AO, THE ASSESSEE FAILED TO FURNISH THE DETAILS TO JUSTIFY THE CLAIME D PROVISION ON ACCOUNT OF UNUTILIZED INPUT CREDIT AMOUNTING TO RS. 2,81,932/- AND PROVISION FOR NON- UTILISATION OF INPUT CREDIT AMOUNTING TO RS. 3,17,3 61/- AGGREGATING TO RS. ITA NO. 1946/DEL/2011 3 5,99,293/-. SINCE IT WAS ONLY A PROVISION THE AO DI SALLOWED THE SAME AND ADDED IT BACK TO THE INCOME OF THE ASSESSEE. 5. HAVING GONE THROUGH THE ORDERS OF THE AUTH ORITIES BELOW ON THE ISSUE RAISED IN GROUND NO. 1 WE FIND THAT THE AO HAS DISA LLOWED THE CLAIMED EXPENSES OF RS. 2,93,517/- INCURRED ON FOREIGN EM PLOYEES / CONSULTANT WITH THIS OBSERVATION THAT THESE WERE PERSONAL IN N ATURE AND NOT CONNECTED WITH THE BUSINESS OF THE ASSESSEE COMPANY. THE LD. CIT(A) HAS DELETED THE SAME ACCEPTING THE CONTENTION OF THE ASSESSEE THAT AS A GENERAL POLICY OF THE ASSESSEE COMPANY AND THE MARKET WIDE PRACTICE THE ASSESSEE AT THE TIME OF DEPARTURE OF FOREIGN ASSIGNEES, AFTER COMPL ETION OF ASSIGNMENTS, BEARS THE COST OF THE RETURN JOURNEY TO THEIR RESPE CTIVE HOME COUNTRIES AND THEREFORE THESE EXPENDITURE ARE ALLOWABLE U/S 37 OF THE ACT. THE ASSESSEE COMPANY IS IN BUSINESS OF IMPORT AND EXPORT OF GOOD S FROM / TO OUTSIDE INDIA AND ITS EMPLOYEES INCLUDE FOREIGN NATIONALS A S PER THE REQUIREMENTS OF ITS BUSINESS. WE FIND THAT THE AO HAS NOT EXPRESSED HIS DOUBT ON THE GENUINENESS OF THE EXPENSES. ONLY OBJECTION OF THE AO REMAINED THAT THE CLAIMED EXPENDITURE WAS NOT INCURRED FOR THE PURPOS E OF BUSINESS. ON THE OTHER HAND THERE IS NO REASON TO DOUBT THE EXPLANAT ION OF THE ASSESSEE THAT THE CLAIMED EXPENDITURE WAS NOT FOR THE PURPOSE OF BUSINESS AS THE COMPANY AS ITS GENERAL POLICY AND THE MARKET WIDE P RACTICE BEARS THE COST OF RETURN JOURNEY TO THEIR RESPECTIVE HOME COUNTRIE S OF THE EMPLOYEES AT THE ITA NO. 1946/DEL/2011 4 TIME OF THEIR DEPARTURE AFTER COMPLETING THE ASSIGN MENTS. AN IDENTICAL ISSUE WAS RAISED IN THE CASE OF ASSESSEE ITSELF BEFORE TH E TRIBUNAL IN THE ASSESSMENT YEAR 2007-08 IN ITR NO. 5095/D/2011 AND THE TRIBUNAL VIDE ITS ORDER DATED 31.1.2013 HAS DECIDED THE ISSUE IN FAVO UR OF THE ASSESSEE. SIMILAR EXPENSE HAS ALSO BEEN ALLOWED BY THE DRP IN ASSTT. YEAR 2008-09. WE THUS DO NOT FIND INFIRMITY IN THE FIRST APPELLAT E ORDER IN THIS REGARD. THE SAME IS UPHELD. THE GROUND NO. 1 IS ACCORDINGLY REJ ECTED. 6. SO FAR AS ISSUE RAISED IN GROUND NO. 2 IS CONCERNED, WE FIND THAT THE AO HAS DISALLOWED THE CLAIMED RS. 5,99,293/- (RS. 2 ,81,932/- + RS. 3,17,361/-) CLAIMED ON ACCOUNT OF UNUTILIZED INPUT CREDIT ON THE BASIS THAT IT WAS ONLY A PROVISION. THE CONTENTION OF THE ASSESSE E ON THE OTHER HAND REMAINED THAT THOUGH THESE EXPENSES HAVE BEEN DEBIT ED UNDER THE HEAD PROVISION BUT THEY HAVE ACTUALLY BEEN PAID TO THE GOVERNMENT EXCHEQUER. THE ASSESSEE CONTENDED FURTHER THAT IT WAS NOT GIVE N OPPORTUNITY BEFORE THE AO TO FURNISH ANY EXPLANATION ON THIS ISSUE. CO NSIDERING THESE ASPECT OF THE MATTER WE ARE OF THE VIEW THAT THE LD. CIT(A) H AS RIGHTLY DIRECTED THE AO TO VERIFY WHETHER THE AMOUNT SHOWN AS PROVISION HAS ACTUALLY BEEN PAID TO THE GOVT. EXCHEQUER OR NOT AND IF THIS AMOUNT HAS ACTUALLY BEEN PAID THEN HE WILL ALLOW IT AS A BUSINESS EXPENDITURE U/S 43B OF THE ACT. THE FIRST APPELLATE ORDER ON THE ISSUE IS REASONED ONE HENCE WE ARE NOT INCLINED TO ITA NO. 1946/DEL/2011 5 INTERFERE THEREWITH. THE SAME IS UPHELD. GROUND NO. 2 IS ACCORDINGLY REJECTED. 7. IN THE RESULT THE APPEAL IS DISMISSED. 8. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 22 ND NOVEMBER, 2013. . SD/- SD/- (G.D. AGRAWAL) ( I.C. SUDHIR ) VICE PRESIDENT JUDICIAL MEMBER DATED 22 ND NOVEMBER, 2013 VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSISTANT REGISTRAR, ITAT