M/s Sag New Look, Moradabad V. DCIT, Moradabad

ITA 266/DEL/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9718 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 15-09-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 23-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T VASANTHAN
• Assessee Lawyers: P K MISHRA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G DELHI BEFORE SHRI K.G. BANSAL AND SHRI GEORGE MATHAN I.T.A. NO. 266(DEL)/2009 ASSESSMENT YEAR: 2005-06 M/S SAG NEW LOOK, D Y. COMMISSIONER OF INCOME IQBAL HOUSE, TAVELA STREET, VS. TAX, RANGE-II, MORADABAD. MORADABAD (U.P) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.K. MISHRA, C. A. RESPONDENT BY : SHRI T. VASANTHAN, SR. DR. ORDER PER K.G. BANSAL : AM THIS APPEAL OF THE ASSESSEE EMANATES FROM THE ORDER OF THE CIT(APPEALS), BAREILLY, PASSED ON 5.11.2008 IN APPEAL NO. 524/MBD/07-08 AND IT PERTAINS TO ASSESSMENT YEAR 2005-06. THE ASSESSEE HAD TAKEN UP THREE SUBSTANTIVE GRO UNDS IN THE APPEAL. HOWEVER, BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE PRESSED ONLY GROUND NO. 3, WHICH IS THAT THE LD. CIT(APPEALS) ACTED IN AN UNJUSTIFIED MANNER WHILE CONFIRMING THE DISALLOWANCE OF FOREIG N TOUR EXPENSES TO THE EXTENT OF 5% THEREOF. ITA NO. 266(DEL)/2009 2 2. BEFORE US, THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE HAS BEEN CONDUCTING EXPORT BUSINESS AND THE TURNOVER F OR THIS YEAR WAS ABOUT RS. 12.7 CRORE. THE ASSESSEE HAD INCURRED EXPENDI TURE ON FOREIGN VISITS. THE EXPENSES RELATED TO PURCHASE OF TICKETS AND THE EXPENDITURE INCURRED IN FOREIGN COUNTRY. THE AO DISALLOWED 10% OF THE E XPENDITURE INCURRED IN FOREIGN COUNTRY, WHICH WAS REDUCED TO 5% THEREOF BY THE LD. CIT(APPEALS). BOTH THESE ORDERS WERE FRAMED IN AN AD-HOC M ANNER. THEREFORE, IT WAS AGITATED THAT LOOKING TO OVERALL FACTS OF THE CASE, THE DISALLOWANCE SUSTAINED BY THE CIT(APPEALS) MAY BE DELETED . 3. IN REPLY, THE LEARNED DR REFERRED TO DISC USSION IN PARAGRAPH 5 OF THE ASSESSMENT ORDER, WHEREIN IT IS MENTIONED THA T THE EXPENDITURE ON FOREIGN TRAVELING AMOUNTED TO RS. 36,54,140/-. OUT OF THIS, A SUM OF RS. 7,17,699/- WAS IN RESPECT OF TRAVEL TICKETS AND THE BALANCE AMOUNT OF RS. 29,36,441/- WAS INCURRED IN FOREIGN COUNTRY I N FOREIGN EXCHANGE. THE ASSESSEE WAS NOT ABLE TO ESTABLISH THAT THE EXP ENDITURE IN FOREIGN CURRENCY WAS WHOLLY AND EXCLUSIVELY FOR THE PUR POSE OF BUSINESS. THUS, 10% OF SUCH EXPENDITURE WAS DISALLOWED. IT WAS ARGUED THAT SINCE THE ASSESSEE WAS NOT ABLE TO FULFILL THE REQUIREM ENT OF DEDUCTION OF EXPENDITURE CONTAINED IN SECTION 37(1), THE AO WAS RIGHT IN MAKING THE ITA NO. 266(DEL)/2009 3 DISALLOWANCE, WHICH WAS FURTHER REDUCED BY THE LD. CIT(APPEALS). THUS, THERE WAS NO SCOPE FOR GRANTING ANY FURTHER RELIEF TO THE ASSESSEE. 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND RIVAL SUBMISSIONS. THE RELEVANT PORTION OF THE ORDER OF THE LD. CI T(APPEALS) IN THIS REGARD READS AS UNDER:- I HAVE CAREFULLY CONSIDERED THE ISSUE. IT I S OBSERVED THAT A.O HAS MADE DISALLOWANCE OUT OF EXPENSES IN FO REIGN EXCHANGE DURING BUSINESS TRIPS AND THESE EXPENS ES ARE OVER AND ABOVE TICKET AND VISA ETC. IT IS UNTRU E THAT IN FOREIGN TRIPS CERTAIN EXPENSES WHICH ARE WHOLLY AND EXCLUSIVELY NOT RELATED TO BUSINESS, ARE BOUND TO BE INC URRED SUCH AS EXPENSES ON SITE SEEING, LOCAL VISITS, DINNER AND ENTERTAINMENT EXPENSES, MISCELLANEOUS PURCHASES. HONBLE COUR T AFTER EXAMINING CLAIM OF FOREIGN TOUR EXPENSES IN M ANY CASES HAVE HELD (AS QUOTED BY THE A.O) THAT IN SUCH C ASES, THE DISALLOWANCE IS JUSTIFIED. FOLLOWING THE SAME, I AM ALSO OF THE CONSIDERED VIEW THAT THE DISALLOWANCE MADE BY THE AO OUT OF EXPENSES INCURRED IN FOREIGN EXCHANG E DURING FOREIGN TOURS (EXCEPT FOR TICKET & VISA ETC.) I S TO BE SUSTAINED IN PRINCIPLE. HOWEVER, CONSIDERING TH E FACTS AND CIRCUMSTANCES OF CASE AND SEEING PAST HISTORY OF CASE I.E. A.Y. 03-04 AND A.Y. 04-05 IT IS CONSIDERED REASO NABLE TO RESTRICT THE DISALLOWANCE AT 5%. THE APPELLANT GETS RELIEF ACCORDINGLY. ON PERUSAL THEREOF, IT IS SEEN THAT NO PARTICUL AR REASON HAS BEEN ASSIGNED FOR SUSTAINING PART OF THE DISALLOWANC E EXCEPT THAT IT WAS JUSTIFIED ON THE BASIS OF PAST HISTORY. THE FAC TS OF EARLIER YEARS HAVE NOT ITA NO. 266(DEL)/2009 4 BEEN NARRATED. THEREFORE, IT CANNOT BE SAID T HAT THE DISALLOWANCE WAS SUSTAINED AFTER DUE DELIBERATION OF THE FACTS OF THIS YEAR AND THE EARLIER YEARS. IN SUCH A CIRCUMSTANCE, WE DO NOT FIND IT JUSTIFIABLE TO DISALLOW A PART OF THE EXPENDITURE, WHICH OTHERWISE WAS FAIR AND REASONABLE HAVING REGARD TO THE EXPORT TURNOVER OF THE ASS ESSEE. 5. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 1 5.09.2009 SOON AFTER THE COMPLETION OF THE HEARING. SD/- SD/- (GEORGE MATHAN) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 15.09.2009. SP SATIA COPY OF THE ORDER FORWARDED TO:- M/S SAG NEW LOOK, MORADABAD. DY.CIT, RANGE-II, MORADABAD. CIT CIT(A) THE DR, ITAT, NEW DELHI. ASSISTANT REGIST RAR.