Kanco Tea & Industries Limited, Kolkata V. ACIT, Circle - 4(1), Kolkata, Kolkata

ITA 2041/KOL/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9423 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 10-04-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 14-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CITA KOLKATA AY GROUND NOS; ARE REL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Rule 8D
• Section: 14A; 37(1)

Judgement Text

PAGE | 1 IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B, KOLKATA BEFORE SH. J.SUDHAKAR REDDY, ACCOUNTANT MEMBER & SH.S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.2041/KOL/2017 (ASSESSMENT YEAR-2014-15) ORDER PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER THIS APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 11.07.2017 PASSED BY CIT(A)-2, KOLKATA FOR AY 2014-15. 2. GROUND NOS. 1 & 2 ARE RELATING TO CONFIRMATION OF ADDITION MADE ON ACCOUNT OF FOREIGN TRAVEL EXPENSES IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. HEARD BOTH PARTIES AND PERUSED MATERIAL AVAILABLE ON RECORD. THE AO RAISED QUERY RELATING TO CLAIM OF FOREIGN TRAVEL EXPENDITURE. THE AR EXPLAINED THAT THE DIRECTORS OF THE ASSESSEE WERE ON TOUR TO DIFFERENT FOREIGN COUNTRIES IN THE PREVIOUS YEAR TO EXPLORE NEW AREAS OF BUSINESS. ACCORDING TO AO, THE AR ADMITTED THE INVOLVEMENT OF PERSONAL ELEMENTS OF DIRECTORS IN THIS TRAVELLING EXPENSES. CONSIDERING THE SAME, THE AO DISALLOWED 20% OF RS.72,65,546/- BEING RS.12,60,132/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. KANCO TEA & INDUSTRIES LTD., JASMINE TOWER, 3 RD FLOOR, 31, SHAKESPEARE SARANI, KOLKATA-700017. PAN-AABCD2065J VS ACIT, CIRCLE-4(1), P-7, CHOWRINGHEE SQUARE, KOLKATA-700069. (APPELLANT) (RESPONDENT) APPELLANT BY SH. MANISH TIWARI, FCA RESPONDENT BY SH. ROBIN CHOUDHURY, ADDL. CIT DR DATE OF HEARING 10.04.2019 DATE OF PRONOUNCEMENT 05.07.2019 ITA NO.2041/KOL/2017 (ASSESSMENT YEAR-2014-15) PAGE | 2 4. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED AS UNDER:- THIS GROUND REFERS TO DISALLOWANCE OF RS.12,60,132/- OUT OF FOREIGN TRAVEL EXPENSES ON AD-HOC BASIS @ 20%. THE ACTION OF LD. A.D. IS WRONG AND UNJUSTIFIED. 1) TOTAL TRAVELLING EXPENSES DEBITED IN PROFIT & LOSS A/C FOR RS. 72,65,546/- INCLUDED FOREIGN TRAVEL EXPENSES OF RS. 63,00,659/-. DETAILS OF SUCH EXPENSES WAS FURNISHED AS PER ANNEXURE-I OF FORWARDING LETTER IN COURSE OF ASSESSMENT PROCEEDING. COPY OF SAID FORWARDING LETTER AS WELL AS ANNEXURE-I ARE ATTACHED WITH THIS SUBMISSION FOR YOUR KIND PERUSAL. 2) THE APPELLANT ALSO FILED WRITTEN EXPLANATION TO PROVE THE NEXUS OF FOREIGN TRAVEL EXPENSES WITH BUSINESS ACTIVITIES AND DULY AUTHORISED BY BOARD OF DIRECTORS. WRITTEN EXPLANATION ALREADY ENCLOSED IN CONNECTION WITH DISALLOWANCE U/S 14A WILL SHOW EXPLANATION REGARDING FOREIGN TOUR EXPENSES. ATTENTION WAS ALSO INVITED TO THE DECISION OF SUPREME COURT IN THE CASE OF S. A. BUILDERS WHEREIN THEIR LORDSHIPS APPROVED THE VIEWS TAKEN BY DELHI HIGH COURT IN PHALTON SUGAR WORKS (P) LTD. 254 ITR 377. 3) THE VIEW OF LD. A.O. THAT INVOLVEMENT OF PERSONAL ELEMENTS CANNOT RULED OUT ALTOGETHER DOES NOT SUGGEST AD-HOC DISALLOWANCE @ 20%. IT IS HUMBLY SUBMITTED THAT ONCE THE CONDITIONS LAID DOWN IN SECTION 37(1) ARE FOUND SATISFIED IT IS NOT PROPER ON THE PART OF TAXING AUTHORITY TO PROVE INTO THE QUESTION AS TO WHETHER THE EXPENDITURE IS LEGITIMATE OR NECESSARY. RELIANCE IS PLACED TO THE DECISION IN HANSRAJ NEBHAMAL SONS - VS - CIT, 278 ITR 345 (MP) 4) THE A.O. HAS NOT BEEN ABLE TO PROVE THAT THE EXPENDITURE WAS NOT GENUINE OR WAS INCURRED FOR NON-BUSINESS PURPOSES. THE AD- HOC DISALLOWANCE MADE BY A.O. HAS NO BASIS. 5. ON PERUSAL OF THE ABOVE, IT IS NOTED THAT THE ASSESSEE CONTENDED ADHOC DISALLOWANCE @ 20% IS NOT MAINTAINABLE AND FILED WRITTEN EXPLANATION TO PROVE THE NEXUS OF FOREIGN TRAVEL EXPENSES WITH BUSINESS ACTIVITIES WHICH WERE DULY AUTHORIZED BY BOARD OF DIRECTORS. THE CIT(A) DID NOT ACCEPT THE SUBMISSIONS OF THE LD.AR AND CONFIRMED THE ORDER PASSED BY THE AO WHICH IS AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT AS WELL AS THE ASSESSMENT ORDER FRAMED IN THE LIGHT OF THE MATERIALS AVAILABLE ON RECORD BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS. THE AO HAS ALREADY DISCUSSED THE ISSUE IN DETAILS WHILE PASSING THE ORDER. I AGREE WITH THE VIEW AS TAKEN BY THE AO IN THE MATTER. THE AR OF THE APPELLATE DID NOT FILED ANY DETAILS/ JUSTIFICATIONS ABOUT BUSINESS PURPOSE OF THE EXPENDITURE AS CLAIMED. THE AO HAS FURTHER MENTIONED THAT IN THE COURSE OF HEARING IT WAS ADMITTED ITA NO.2041/KOL/2017 (ASSESSMENT YEAR-2014-15) PAGE | 3 THAT INVOLVEMENT OF THE PERSONAL ELEMENT WITH THIS TRAVELLING EXPENSES CANNOT BE RULED OUT ALTOGETHER. IN VIEW OF ABOVE, THE ORDER OF THE AO IS UPHELD. THIS GROUND OF APPEAL IS DISMISSED. 6. ACCORDING TO CIT(A), THE AO DISCUSSED THE ISSUE IN DETAIL. FURTHER, HE FOUND THAT THE ASSESSEE DID NOT FILE ANY DETAILS, JUSTIFICATIONS ABOUT THE BUSINESS PURPOSE OF EXPENDITURE. THE CIT(A) CONFIRMED THE ADDITION TAKING INTO CONSIDERATION THE ADMISSION MADE BY THE AR THAT THERE WERE INVOLVEMENT OF PERSONAL ELEMENTS IN THE TRAVELLING EXPENSES. 7. AS AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE CAME BEFORE US. 8. HEARD BOTH PARTIES AND PERUSED MATERIAL AVAILABLE ON RECORD. WE FIND NO EVIDENCE WHATSOEVER FIELD BEFORE US IN SUPPORT OF THE CONTENTIONS MADE BY THE LD.AR. FURTHER, AS DISCUSSED ABOVE, WE NOTE THAT THE AR HIMSELF ADMITTED ON BEHALF OF THE ASSESSEE THAT THERE WERE EXPENDITURE RELATING TO PERSONAL ELEMENT AND THERE WERE NO DETAILS JUSTIFYING THE BUSINESS PURPOSE OF THE EXPENDITURE. ACCORDING TO CIT(A) AS FOUND FROM HIS OBSERVATIONS, THE AO CONSIDERED ALL THE DETAILS AND MADE THE ADDITION TAKING INTO CONSIDERATION THE ADMISSION MADE BY THE AR. SINCE THERE IS NO EVIDENCE BEFORE US SUPPORTING THE CONTENTION OF LD.AR TO PROVE THE NEXUS OF FOREIGN EXPENSES WITH BUSINESS ACTIVITIES AND, THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) IN CONFIRMING THE ORDER OF AO. THUS, GROUND NOS. 1 & 2 RAISED BY THE ASSESSEE ARE DISMISSED. 9. GROUND NO.3 RELATING TO DISALLOWANCE MADE ON ACCOUNT OF SECTION 14A OF THE ACT. THE LD.DR SUBMITS THAT THE CIT(A) HAS NO JURISDICTION TO REMAND THE MATTER TO THE FILE OF AO. 10. HEARD BOTH PARTIES AND PERUSED MATERIAL AVAILABLE ON RECORD. IT IS NOTED FROM THE RECORD THAT THE ASSESSEE EARNED DIVIDEND INCOME OF RS.16,27,588/- AND THE AO MADE DISALLOWANCE OF RS.2,78,988/- BY ITA NO.2041/KOL/2017 (ASSESSMENT YEAR-2014-15) PAGE | 4 INVOKING RULE 8D(2) OF THE INCOME TAX RULES FOR THE PURPOSE OF SECTION 14A OF THE OF THE INCOME TAX ACT, 1961 (IN SHORT ACT). THE CIT(A) WHILE PLACING RELIANCE ON THE DECISION OF REI AGRO LTD. DIRECTED THE AO TO RE-CALCULATE THE DISALLOWANCE OF THOSE SHARES WHICH YIELDED DIVIDEND INCOME. BEFORE US, LD. DR DID NOT REPORT OBJECTION IN REMANDING THE MATTER TO THE FILE OF AO BY THIS TRIBUNAL AND TAKING INTO CONSIDERATION THE SAME, WE REGULARISE THE ORDER OF CIT(A) IN REMANDING THE MATTER TO THE FILE OF AO FOR RE-COMPUTATION OF DISALLOWANCE U/S 14A OF THE ACT. THUS, GROUND NO.3 RAISED BY THE ASSESSEE IS ALLOWED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 05.07.2019. SD/- SD/- (J.SUDHAKAR REDDY) (S.S.VISWANETHRA RAVI) ACCOUNANT MEMBER JUDICIAL MEMBER DATE:- 05.07.2019 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT- KANCO TEA & INDUSTRIES LTD., JASMINE TOWER, 3 RD FLOOR, 31, SHAKESPEARE SARANI, KOLKATA-700017. 2. RESPONDENT- ACIT, CIRCLE-4(1), P-7, CHOWRINGHEE SQUARE, KOLKATA-700069. 3. CIT-KOLKATA 4. CIT(APPEALS)-KOLKATA 5. DR: ITAT -KOLKATA BENCHES BY ORDER AR/H.O.O ITAT, KOLKATA