OM INTERCONTINENTAL, MUMBAI V. ADDL CIT CIR 18(3), MUMBAI

ITA 2311/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3695 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 25-04-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 09-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROOPAK KUMAR
• Section: 37(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C MUMBAI . . , / BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND . , SHRI D.KARUNAKAR RAO, ACCOUNTANT MEMBER . / ITA NO.2310/MUM/2012 ! ! ! ! ' ' ' ' / A.Y. 2007-08 . / ITA NO.2311/MUM/2012 ! ! ! ! ' ' ' ' / A.Y. 2006-07 OM INTERCONTINENTAL, C/O.SHANKARLAL JAIN & ASSOCIATES, 12, ENGINEER BLDG., 265, PRINCES STREET, MUMBAI - 400 002. ! ! ! ! / VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIR. 18(2), MUMBAI. # ./ $% ./ PAN/GIR NO. : AAEFA 4801B ( #& / APPELLANT ) .. ( '(#& / RESPONDENT ) #& ) / APPELLANT BY: SHRI S.L.JAIN '(#& * ) / RESPONDENT BY : SHRI ROOPAK KUMAR ! * + / DATE OF HEARING : 25/04/2013 ,-' * + / DATE OF PRONOUNCEMENT : 25/04/2013 . / O R D E R PER I.P.BANSAL, J.M: BOTH THESE APPEALS ARE FILED BY THE ASSESSEE. THE Y ARE DIRECTED AGAINST TWO SEPARATE ORDERS PASSED BY LD. CIT(A)-29, MUMBAI DATED 27/02/2012 FOR ASSESSMENT YEARS 2007-08 AND 2006-07 RESPECTIVELY. THE GROUNDS OF APPEAL FOR BOTH THE ASSESSMENT YEARS READ AS UNDER: . / ITA NO.2310 & 2311/MUM/2012 ! ! ! ! ' ' ' ' / A.Y. 2007-08 & 2006-07 2 GROUNDS OF APPEAL FOR ASSESSMENT YEAR-2007-08: 1. LD. CIT(A) ERRED IN UPHOLDING DISALLOWANCE OF RS .144562/- BEING 10% OF EXPENSES INCURRED UNDER THE HEAD TELEPHONE AND POST AGE WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE THAT SUCH EXPENS ES INCLUDED COST OF POSTAGE, COURIER CHARGES, COST OF TELEPHONES INSTAL LED AT OFFICE AND RESIDENTIAL PREMISES OF THE STAFF AND MOBILE TELEPH ONES AND ALL THE EXPENSES ARE INCURRED FOR THE BUSINESS OF THE FIRM. 2. LD. CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF R S.311300/- OUT OF FOREIGN TRAVELLING EXPENSES INCURRED BY THE APPELLA NT OF RS.6226005/- BEING 5% OF THE TOTAL EXPENSES INCURRED EXPENSES BE ING INCURRED IN THE DAY-TO-DAY BUSINESS OF THE APPELLANT, HENCE NO SUCH DISALLOWANCE IS CALLED FOR. 3. THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FAC T THAT EXPENSES ON TELEPHONE AS WELL AS FOREIGN TRAVELING ARE COVERED UNDER THE PROVISIONS OF FRINGE BENEFIT TAX WHICH HAS BEEN DULY PAID BY THE APPELLANT AND HENCE NO FURTHER DISALLOWANCE WAS CALLED FOR. 4. APPELLANT PRAY THAT DISALLOWANCES MADE BE DELETE D. GROUNDS OF APPEAL FOR ASSESSMENT YEAR-2006-07: 1. LD. CIT(A) ERRED IN UPHOLDING DISALLOWANCE OF RS .155438/- BEING 10% OF EXPENSES INCURRED UNDER THE HEAD TELEPHONE AND POST AGE WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE THAT SUCH EXPENS ES INCLUDED COST OF POSTAGE, COURIER CHARGES, COST OF TELEPHONES INSTAL LED AT OFFICE AND RESIDENTIAL PREMISES OF THE STAFF AND MOBILE TELEPH ONES AND ALL EXPENSES ARE INCURRED FOR THE PURPOSE OF BUSINESS. 2. LD. CIT(A) ERRED IN UPHOLDING DISALLOWANCE OUT O F FOREIGN TRAVELING EXPENSES OF RS.13,35,506 - MERELY ON THE GROUND THA T EXPENSES HAVE BEEN INCURRED ON FOREIGN TRAVELING OF THE LADY PARTNER W ITHOUT APPRECIATING THE FACT THAT EXPENSES HAVE BEEN INCURRED IN DAY-TO-DAY BUSINESS OF THE APPELLANT AS IN EARLIER YEARS AND HENCE NO DISALLOW ANCE WAS CALLED FOR. 3. THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FAC T THAT EXPENSES ON TELEPHONE AS WELL AS FOREIGN TRAVELING ARE COVERED UNDER THE PROVISIONS OF FRINGE BENEFIT TAX WHICH HAS BEEN DULY PAID BY THE APPELLANT AND HENCE NO FURTHER DISALLOWANCE WAS CALLED FOR. 4. APPELLANT PRAY THAT DISALLOWANCES MADE BE DELETE D. 2. FOR ASSESSMENT YEAR 2006-07 THE TOTAL TRAVELING EXPENSES INCURRED BY THE ASSESSEE WERE AT RS.97,20,250/-. FROM THE DETA ILS IT WAS NOTICED THAT THOSE EXPENSES INCLUDE AGGREGATE OF RS.26,71,011/-, WHICH WERE INCURRED BY SMT. SHUSHMA AGARWAL, PARTNER OF THE ASSESSEE FIRM WHO TRAVELLED TO FOREIGN . / ITA NO.2310 & 2311/MUM/2012 ! ! ! ! ' ' ' ' / A.Y. 2007-08 & 2006-07 3 COUNTRIES VIZ. U.K. SWITZERLAND AND CAMBODIA . ON THE GROUND THAT THESE MAY INVOLVE SOME PERSONAL EXPENDITURE THE AO DISALLOWED 50% THEREOF AND THUS HE MADE DISALLOWANCE OF RS.13,35,560/-. THE DISALLOWA NCE WAS CHALLENGED IN AN APPEAL FILED BEFORE LD. CIT(A). ONE OF THE GROUND S RAISED BEFORE LD. CIT(A) WAS THAT THESE WERE SUBJECTED TO FBT, THEREFORE, DISALL OWANCE COULD NOT BE MADE. HOWEVER, LD. CIT(A) HAS REJECTED SUCH SUBMISSIONS A ND HAS UPHELD THE ADDITION. THE ASSESSEE IS AGGRIEVE AND HENCE, HA S RAISED GROUND NO.1 IN RESPECT OF ASSESSMENT YEAR 2006-07. 3. SIMILARLY FOR ASSESSMENT YEAR 2007-08 TOTAL TRAV ELING EXPENSES WERE INCURRED AT RS.69,24,946/-, WHICH INCLUDE FOREIGN T RAVEL EXPENSES OF RS.62,26,005/-. THE AO MADE DISALLOWANCE OF 5% THE REOF AND ADDED A SUM OF RS.3,11,300/-. THE DISALLOWANCE WAS CHALLENGED IN A N APPEAL FILED BEFORE LD. CIT(A). SIMILAR ARGUMENTS WERE RAISED THAT THESE D ISALLOWANCE WAS COVERED BY FBT PROVISIONS HOWEVER, LD. CIT(A) HAS REJECTED SUC H CONTENTION. 4. SO FAR AS IT RELATES TO GROUND NO.2, IN A.Y 2006 -07 THE AO NOTICED THAT THE ASSESSEE HAD INCURRED TELEPHONE AND POSTAL CHA RGES AGGREGATING TO RS.15,54,382/-. THE AO DISALLOWED 1/5 TH THEREOF AT RS.3,10,876/-. FOR A.Y 2007-08 ADOPTING SIMILAR APPROACH A SUM OF RS. 2,89 ,124/- IS DISALLOWED. LD. CIT(A) HAS REDUCED THE SAME TO 5%. 5. AT THE OUTSET, IT IS THE SUBMISSION OF LD. A.R T HAT BOTH THE EXPENSES I.E. EXPENSES ON TRAVELING AND TELEPHONE ETC. WERE SUBJE CTED TO FBT PROVISIONS. HE SUBMITTED THAT THOUGH LD. CIT(A) HAS NOT ACCEPTED S UCH PROPOSITION OF THE ASSESSEE BUT MUMBAI TRIBUNAL IN THE CASE OF HANSR AJ MATHURADAS V. ITO VIDE DECISION DATED 16/09/2011 IN ITA NO.2379/MUM/2010 H AS HELD THAT WHERE THE EXPENDITURE WHICH ARE SUBJECTED TO FBT CANNOT BE DISALLOWED UNDER SECTION 37(1) OF THE INCOME TAX ACT, 1961(THE ACT) ON THE GROUND THAT THESE ARE NOT FOR THE PURPOSE OF BUSINESS. . / ITA NO.2310 & 2311/MUM/2012 ! ! ! ! ' ' ' ' / A.Y. 2007-08 & 2006-07 4 6. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER PASSED BY LD. CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. IN THE AFOREMENTIONED DECISION IN THE CASE OF HANSRAJ MATHURADAS(SUPRA), RELYING UPON CBDT CIRCULAR NO.8 /2005 DATED 29/8/2005 IT WAS HELD THAT ONCE FBT IS LEVIED ON EXPENSES IN CURRED, IT FOLLOWS THAT THE SAME ARE TREATED AS FRINGE BENEFIT PROVIDED BY THE ASSESSEE AS EMPLOYER TO ITS EMPLOYEES AND THE SAME HAVE TO BE APPROPRIATELY ALL OWED AS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. NO CONTRARY DECISION HAS BEEN BROUGHT TO OUR NOTICE IN THIS REGARD. THEREFORE, RESPECTFULLY FOLLOWING THE AFOREMENTIONED DECISION WE HOLD THAT IF THE AFOREMENTIONED EXPENDITURE WERE SUBJECTED TO FBT, T HEN DISALLOWANCE CANNOT BE MADE. HOWEVER, TO VERIFY THAT WHETHER OR NOT TH ESE EXPENDITURE WERE SUBJECTED TO FBT, WE RESTORE THE ISSUES RAISED IN T HESE APPEALS TO THE FILE OF AO WITH A DIRECTION TO VERIFY THE CONTENTION OF THE AS SESSEE THAT WHETHER OR NOT IMPUGNED EXPENDITURE WERE SUBJECTED TO FBT. IF T HOSE EXPENDITURE WERE SUBJECTED TO FBT THEN NO DISALLOWANCE CAN BE MADE A ND THE CLAIM OF THE ASSESSEE SHOULD BE ACCEPTED IN ITS ENTIRETY. WE DI RECT ACCORDINGLY. 8. IN THE RESULT, FOR STATISTICAL PURPOSES THESE AP PEALS FILED BY THE ASSESSEE ARE TREATED AS ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 25/04/2013 . * ,-' / 0!1 25 /04/2013 - * 2 3 SD/- SD/- ( . / D.KARUNAKAR RAO ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 0! DATED 25 /04/2013 . / ITA NO.2310 & 2311/MUM/2012 ! ! ! ! ' ' ' ' / A.Y. 2007-08 & 2006-07 5 . . . . * ** * '+45 '+45 '+45 '+45 65'+ 65'+ 65'+ 65'+ / COPY OF THE ORDER FORWARDED TO : 1. #& / THE APPELLANT 2. '(#& / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- 4. 7 / CIT 5. 582 '+! , , / DR, ITAT, MUMBAI 6. 2 9 / GUARD FILE. .! .! .! .! / BY ORDER, (5+ '+ //TRUE COPY// : :: : / ; ; ; ; $ $ $ $ (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . ! . ./ VM , SR. PS