Amreli Nagrik Sahakari Bank Ltd., AMRELI V. The Asst. Commr. Of Income Tax, Cir.-3(1), RAJKOT-GUJARAT

ITA 242/RJT/2022

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 9169 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-11-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 02-10-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 37; 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (Conducted Through Virtual Court) Before: Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Amreli Nagrik Sahakari Bank Ltd. 01, Nagrik Bhavan, Keriya Road, Amreli-365601, Gujarat PAN: AAATA3191J (Appellant) Vs The Asst. Commissioner of Income Tax, Circle-3(1), Rajkot (Respondent) Assessee Represented: Shri D.M. Rindani, A.R. Revenue Represented: Shri Shramdeep Sinha, CIT-DR Date of hearing : 22-11-2023 Date of pronouncement : 12-01-2024 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the appellate order dated 03.08.2022 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2012-13. ITA No. 242/Rjt/2022 Assessment Year 2012-13 I.T.A No. 242/Rjt/2022 A.Y. 2012-13 Page No Amreli Nagrik Sahakari Bank Ltd. vs. ACIT 2 2. The brief facts of the case is that the assessee is a Co-operative Bank carrying on business of banking activities. For the Assessment Year 2012-13, the assessee filed its Return of Income on 26.09.2012 declaring total income of Rs.1,85,48,669/-. The return was taken up for scrutiny assessment. The assessee claimed that Rs.7,00,000/- for Education Tour expenses for the Directors to attend seminar in Australia. The Assessing Officer asked for explanation as well as air tickets and other details. The assessee failed to substantiate its claim for the Directors Education Tour expenses and could not produce anything to prove beyond doubt that the tour actually happened for the business purpose. Hence the expenses claimed cannot be treated as an allowable business expenditure u/s. 37 of the Act and disallowed the same. 2.1. The Assessing Officer also found that the assessee has claimed Rs.12,01,000/- as Staff Recreation expenses and debited the same in the Profit and Loss account. When the assessee was asked to explain the same, the assessee submitted the bank employees were given target to achieve the deposits of the bank to Rs.100 crores. Those employees who achieved their targets were sent on tour to Thailand vide Special General Meeting of the bank in Resolution No. 7 dated 01.05.2011. It was also decided that LTC will not be given to the Staff travelling to Thailand. The assessee produced copies of the invoice bills and air tickets of the employees. It is seen that 37 employees including General Manager, Managing Director, Officers, Recurring Collectors, Clerks, Diver-cum-Peon, Record Keeper, Watchman and Sweeper are the entire Staffs who have gone to the Bangkok Trip. The Assessing Officer found that out of I.T.A No. 242/Rjt/2022 A.Y. 2012-13 Page No Amreli Nagrik Sahakari Bank Ltd. vs. ACIT 3 37 persons, five persons are of the Officers Grade while rest 32 are the Clerks, Peon, Drivers, Recurring Collectors, Watchman and Sweeper. Whereas the average annual salary was Rs.1,70,796/- and they were spended Rs.18,275/- on Flight Tickets other Tour expenses of Rs.32,460/-. Though the assessee claimed the foreign trip has been arranged, who have helped in achieving that the deposits of Rs.100 crores, but the assessee bank failed to explain how the Sweeper, Watchman, Peons and Clerks and Recurring Collectors who do not have any role in achieving the above deposit target for the bank. Therefore the above expenses was disallowed by the Assessing Officer and added as the income of the assessee. 3. Aggrieved against the same, the assessee filed an appeal before Commissioner of Income Tax (Appeals), NFAC. The Ld. CIT(A) confirmed the addition of Rs.7,00,000/- by observing as follows: “....6.3. Considered the facts of the ground, material available on record, assessment order and submission of the appellant. It is noted that the appellant wants to prove that this expenditure was for business purpose on the basis of document given by the secretary APMC and Section Officer, APMC. He further asked that since it was for business purpose there was no element of personal matter. On the other hand, AO argued that since the details of seminar and details of learning were not submitted by the appellant before him, the AO disallowed the expenses. I have gone through the submission of the appellant and arguments made by during the Video Conferencing held on 26.07.2022 but I am unable to agree with the Id. Counsels in so far as proof of actual expenses incurred are concerned. The 3 queries raised by the appellant were unanswered during the assessment stage and remained unanswered during the appellate stage also. In view of this, I am unable to agree with the contention of the Ld Counsel for the appellant and confirm the addition made by the AO.” 3.1. Similarly on the disallowance of Rs. 12,01,000/-, the Ld. CIT(A) confirmed the same by observing as follows: I.T.A No. 242/Rjt/2022 A.Y. 2012-13 Page No Amreli Nagrik Sahakari Bank Ltd. vs. ACIT 4 “...8.2 During the course of assessment proceedings, it is seen from the assessment order that the AO has made addition of Rs. 12,01,000/- on the ground that there was no business expediency. It was noticed by the AO during the assessment proceedings that a total of 40 staff employees went to Thailand for their own recreation purposes. An amount to the extent of Rs.30000/- per employee was reimbursed by the appellant and debited to the P & L account. The AO did not allow the expenses as incurred by the appellant as there was no business expediency involved. 8.3 I have gone through the submission of the appellant and various arguments made by him during the Video Conferencing. Apparently, these expenses are of personal in nature which were reimbursed by the appellant. The question arises as to whether it should be considered for deduction for business purposes or not. The appellant placed reliance on various case laws. In my humble opinion, the case laws relied by the appellant are not applicable in the instant case as the facts are distinguishable. In the present case, facts are that the employees are incurring expenses are on their own. They are moving on their own will. There is no control or direction by the appellant. Further, the appellant claims to have rewarded them for their efforts in the bank target but the important question that is there any nexus on tour of employees to Thailand and banking business of appellant. The appellant is completely silent on this aspect. Thus, in view of the detailed discussion above, I am unable to agree with the contention of the appellant that these expenses are in the nature of the staff welfare. Thus, in view of the detailed discussion above, I am not inclined to interfere with the observations of the A.O. The addition made is directed to be sustained. Appellant fails in this ground of appeal.” 4. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of Appeal: 1. The Learned Commissioner (Appeals), NIAC, erred in confirming action of assessing officer in disallowing Educational Tour expenses of Rs.7,00,000/-. 2. The Learned Commissioner (Appeals), NFAC, erred in confirming action of assessing officer in disallowing Staff Recreation Expenses of Rs.12,01,000/-. 3. The Learned Commissioner (Appeals), NAC failed to appreciate that impugned expenses were incurred for the purpose of business and that there cannot be element of personal nature involved in case of an incorporated body. 4. The appellant craves leave to add, amend, alter and withdraw any ground of appeal anytime up to the hearing of this appeal. I.T.A No. 242/Rjt/2022 A.Y. 2012-13 Page No Amreli Nagrik Sahakari Bank Ltd. vs. ACIT 5 5. Ld. Counsel Shri D.M. Rindani appearing for the assessee submitted that the Study Tour to Australia was arranged and conceived by Agricultural Produce Market Committee (APMC), an independent market regulator in law and not by the assessee bank. This tour was approved by Agriculture & Cooperation Department of Government of Gujarat vide letter dated 16.06.2011 with a condition that no Government employee will join this study tour. There was a resolution passed by the Board that a team of 8 persons will participate in which Rs.1,00,000/- will be provided to each persons by the bank and the remaining Rs.50,000/- will have to be deposited by that persons in the bank. Though the assessee was not in possession of the Air Tickets, hence travel agents (undated) letter confirmed the receipt of Rs.10,50,000/- received by a pay order no. 125149. 5.1. Similarly in the case of Staff Tour to Thailand was arranged by the assessee bank, as an employer for its employees of all cadres as an incentive welfare gesture to motivate them for good performance and to achieve the target to deposit of Rs.100 crores. Cost of tour up to Rs.30,000/- was borne by the assessee bank, as the balance amount by the employees themselves. The employees of all cadres were granted the benefit, which demonstrate a level field with no discrimination because all of them contributed to growth of the assessee bank. Thus Ld. Counsel pleaded that the disallowance made by the Lower Authorities is liable to be deleted. I.T.A No. 242/Rjt/2022 A.Y. 2012-13 Page No Amreli Nagrik Sahakari Bank Ltd. vs. ACIT 6 6. Per contra Ld. CIT-DR Shri Shramdeep Sinha appearing for the Revenue supported the orders passed by the Lower Authorities and requested to uphold the same. He also drawn our attention to clause (ii) of Explanation 3 to Section 37 of the Act namely to provide any benefit or perquisite, in whatever form, to a person whether or not carrying on a business or exercising a profession, and acceptance of such benefit or perquisite by such person is in violation of any law or rule or regulation or guideline, as the case may be, for the time being in force, governing the conduct of such person. Further the main Section 37(1) namely states that any expenditure not in the nature of personal expenses of the assessee be allowed. Thus the disallowance made by the Lower Authorities does not require any interference. 7. We have given our thoughtful consideration and perused the materials available on record. Looking into the provisions of Section 37(1) makes it very clear any expenditure not being in the nature of personal expenses of the assessee shall be allowed in computing the income chargeable under the head “Profits and gains of the business”. The above Tour expenses to Australia and Staff Tour expenses to Thailand are nothing but a benefit or perquisite given to its employees/staffs. Mere letter from APMC to the assessee for the seminar conducted at Australia is not sufficient proof to claim the above expenditure u/s. 37 of the Act. The assessee failed to prove that the Tour expenses are relating for the business purpose of the assessee. I.T.A No. 242/Rjt/2022 A.Y. 2012-13 Page No Amreli Nagrik Sahakari Bank Ltd. vs. ACIT 7 7.1. Similarly in the case of Staff Tour to Thailand, the same employees were denied Leave Travel Concession (LTC) in fact Leave Travel Concession is applicable only for travelling within India and not for travelling outside India. The assessee further could not establish how all the Staffs were entitled for this Tour programme to Thailand by achieving the deposits Rs.100 crores. In the absence of the same and expenses are not directly related to the business income of the assessee, the same is not allowable u/s. 37(1) of the Act. Thus the grounds raised by the Assessee are found to be devoid of merits and the same are hereby rejected. 8. In the result, the appeal filed by the Assessee is hereby dismissed. Order pronounced in the open court on 12 -01-2024 Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 12/01/2024 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, राजकोट