METALINK INTERNATIONAL, MUMBAI V. THE INCOME TAX OFFICER, 24(3)-2, MUMBAI

ITA 2606/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7358 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 23-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRENDRA OJHA; S S RANA
• Assessee Lawyers: SHRIRAM BAJAJ
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.K.GUPTA, JM AND SHRI R.S.SYAL, AM ITA NO.2606/MUM/2009 : ASST.YEAR 2005-2006 M/S.METALINK INTERNATIONAL 106 COMMERCE CENTRE, OFF AAREY ROAD GOREGAON (EAST) MUMBAI 400 063. PA NO.AAFFM2877A. VS. THE INCOME TAX OFFICER WARD 24(3)-2 MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHRIRAM BAJAJ RESPONDENT BY : S/SHRI VIRENDRA OJHA & S.S.RANA O R D E R PER R.S.SYAL (AM) : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDE R PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 11.2.2009 I N RELATION TO THE ASSESSMENT YEAR 2005-2006. 2. THE FIRST GROUND IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF FOREIGN TRAVELLING EXPENSES AMOUNTING TO RS.3,94,604. BRIEF LY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE DERIVED INCOME FROM COMMISSIO N AGENCY OF EXPORTS AND IMPORTS OF METALS AND THEIR SCRAP. A SUM OF RS.3,9 4,604 WAS CLAIMED AS DEDUCTION TOWARDS FOREIGN TOUR UNDERTAKEN BY SHRI MANISH SHAH , PARTNER OF THE ASSESSEE-FIRM TO BANGKOK, HONG KONG ETC. IN THE PREVIOUS YEAR REL EVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER MADE DIS ALLOWANCE OF THE ENTIRE AMOUNT ON THE GROUND THAT NO BUSINESS WAS BROUGHT B Y THE PARTNER FROM THESE PLACES. IN THE FIRST APPEAL THE ASSESSEE FILED PHOT OCOPIES OF AGENCY AGREEMENTS WITH SOME FOREIGN PARTIES IN SUPPORT OF THE CONTENTION T HAT THE FOREIGN VISITS WERE MADE FOR THE PURPOSE OF BUSINESS. THE LEARNED CIT(A) UPH ELD THE DISALLOWANCE FOR THE SAME REASON AS ADVANCED BY THE ASSESSING OFFICER. ITA NO.2606/MUM/2009 M/S.METALINK INTERNATIONAL. 2 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS NOTED THAT THE NATURE OF THE ASSESSEE S BUSINESS INCOME IS FROM COMMISSION AGENCY OF EXPORTS AND IMPORTS OF METALS. FOREIGN TOUR WAS CONDUCTED DURING THE YEAR UNDER QUESTION IN THE FURTHERANCE O F BUSINESS AS IS APPARENT FROM THE COPIES OF AGENCY AGREEMENT DATED 8.12.2004 BETW EEN THE ASSESSEE TSING YI ENTERPRISES PTE LTD., SINGAPORE AND BETWEEN THE ASS ESSEE AND EVOTECH (ASIA) PTE. LTD. SINGAPORE ETC. THESE AGREEMENTS INDICATE THAT THE PARTNER OF THE ASSESSEE-FIRM WENT ABROAD TO BOOST ITS BUSINESS ACTIVITY. SIMPLE BECAUSE NO BUSINESS WAS IMMEDIATELY PROCURED, WOULD NOT DISENTITLE THE ASSE SSEE TO CLAIM DEDUCTION FOR EXPENSES WHICH WERE OTHERWISE INCURRED FOR THE PURP OSE OF BUSINESS. WE, THEREFORE, ORDER FOR THE DELETION OF THIS ADDITION. 4. THE SECOND GROUND IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF BUSINESS DEVELOPMENT EXPENSES OF RS.37,672. THE ASSESSEE REI MBURSED THE SAID AMOUNT TO SHRI MANISH SHAH, PARTNER OF THE ASSESSEE-FIRM, WHO WENT ABROAD AND INCURRED THIS EXPENDITURE FOR TAKING THE SUPPLIERS TO SITE SEEING PLACES DURING HIS VISIT TO CHINA. THE A.O. MADE THE DISALLOWANCE ON THE GROUND THAT T HE ASSESSEE FAILED TO PROVE THAT THE FOREIGN VISIT OF THE PARTNER WERE FOR THE PURPOSE OF BUSINESS. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS OBSERVED THAT THERE IS NO DISPUTE ABOU T THE INCURRING OF SUCH EXPENSES BY THE PARTNER OF THE ASSESSEE-FIRM. SINCE IT IS RE IMBURSEMENT OF EXPENDITURE INCURRED ABROAD AND IN THE LIGHT OF OUR DECISION ON GROUND NO.1 ACCEPTING THE FOREIGN TOUR AS FOR THE PURPOSE OF BUSINESS ALONE, WE ARE SATISFIED THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN SUSTAINING THIS DISALLOWANCE. THIS GROUND IS ALLOWED. 6. THE LAST GROUND IS AGAINST SUSTAINING OF DISALLO WANCE OF RS.7,912 OUT OF EXPENSES OF RS.12,069. THE A.O. MADE DISALLOWANCE O F RS.12,069. HOWEVER, THE ITA NO.2606/MUM/2009 M/S.METALINK INTERNATIONAL. 3 LEARNED CIT(A) RESTRICTED THE ADDITION TO RS.7,912 BEING EXPENDITURE CLAIMED TO HAVE BEEN INCURRED IN CONNECTION WITH THE FOREIGN V ISIT OF THE PARTNER. IN VIEW OF OUR FINDING GIVEN IN RESPECT OF GROUND NO.1, WE ARE SATISFIED THAT THE ASSESSEE DESERVES TO SUCCEED ON THIS GROUND AS WELL SINCE TH E FOREIGN VISIT HAS BEEN HELD TO BE MADE FOR THE PURPOSE OF BUSINESS AND THE SOLE RE ASON FOR THIS DISALLOWANCE IS THE TREATMENT GIVEN TO THE FOREIGN VISIT AS FOR NON-B USINESS PURPOSE. WE, THEREFORE, ORDER FOR THE DELETION OF THIS ADDITION. 7. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED ON THIS 26 TH DAY OF MARCH 2010. SD/- SD/- ( R.K.GUPTA ) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT M EMBER MUMBAI : 26 TH MARCH, 2010. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT - XXIV, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.