M/S BIDASARIA EXPORTS P.LTD., V. THE DCIT 4(1),

ITA 272/IND/2008

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6045 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-01-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 19-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: C P RAWKA
• Keywords: Business expenditure

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM AND SHRI V.K. GUPTA, AM ITA NO.272/IND/2008 AY: 2004-05 M/S. BIDASARIA EXPORT PVT. LTD. BHAGIRATHPURA INDUSTRIAL AREA, INDORE (PAN AAACB 7110 R) APPELLANT VS. DCIT-4(1), INDORE RESPONDENT FOR ASSESSEE : SHRI C.P. RAWKA, FCA FOR DEPARTMENT : SMT. APARNA KARAN, SR. DR ORDER PER V.K. GUPTA, A.M. THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF ORD ER OF THE LD. CIT(A)-II, INDORE, DATED 17.3.2008, FOR THE ASSESSMENT YEAR 20 04-05. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PER USED THE MATERIAL AVAILABLE ON RECORD. 3. GROUND NO.1 READS AS UNDER: THAT THE LD. CIT(A) ERRED IN LAW AND FACTS OF THE C ASE AND CONFIRMED THE DISALLOWANCE MADE BY AO OUT OF FOREIGN TRAVELLI NG EXPENSES AT RS.3,64,096/- AS A NON-BUSINESS EXPENDITURE WITHOUT CONSIDERING FULL FACTS AND LEGAL POSITION. 4. THE FACTS, IN BRIEF, ARE THAT ASSESSEE IS ENGAGE D IN THE BUSINESS OF MANUFACTURING AND EXPORT OF READYMADE GARMENTS. DUR ING THE YEAR UNDER CONSIDERATION, ASSESSEE CLAIMED FOREIGN TRAVELING E XPENSES AT RS.10,14,566/- WHICH 2 WERE SUBSTANTIALLY HIGHER FROM THE AMOUNT SPENT UND ER THE SAME HEAD IN EARLIER TWO YEARS. THE AO REQUIRED THE ASSESSEE TO SUBMIT THE D ETAILS THEREOF AND ON PERUSAL OF SUCH DETAILS FOUND THAT THE EXPENDITURE INCLUDED FO REIGN TRIP UNDERTAKEN BY THE DIRECTORS WIFE ALSO. THE TOTAL EXPENDITURE ON THE TRIP OF FOREIGN TOUR OF DIRECTOR SHRI ASHOK BIDASARIA AND HIS WIFE AMOUNTED TO RS.7,28,19 3/-. THE AO HELD THAT THE EXPENDITURE INCURRED ON DIRECTORS WIFE TRAVELING CO ULD NOT BE SAID TO HAVE BEEN INCURRED FOR BUSINESS PURPOSES,. HENCE, HE DISALLOW ED 15% OF SUCH EXPENDITURE AND MADE AN ADDITION OF RS.3,64,096/-. 5. AGGRIEVED BY THIS, THE ASSESSEE PREFERRED AN AP PEAL BEFORE THE LD. CIT(A) WHEREIN IT WAS SUBMITTED THAT SMT. ANJU BIDASARIA W IFE OF THE DIRECTOR WAS ALSO A DIRECTOR OF THE CO. AND BOTH OF THEM VISITED TO THE COUNTRIES WHERE EXPORT OF GOODS WERE MADE, HENCE, AOS ACTION WAS NOT JUSTIFIED IN LAW. THE LD. CIT(A), HOWEVER, CONFIRMED THE ACTION OF THE AO FOR THE REASON THAT THE ASSESSEE HAD NOT BROUGHT ANY INDEPENDENT EVIDENCE ON RECORD TO JUSTIFY AND ESTAB LISH THAT THE FOREIGN VISIT OF SMT. ANJU BIDASARIA WAS FOR BUSINESS PURPOSES. THE LD. C IT(A) ALSO HELD THAT THE ASSESSEE ALSO FAILED TO JUSTIFY THAT BOTH THE DIRECTORS WERE REQUIRED TO VISIT SUCH PLACES FOR THE PURPOSES OF THE BUSINESS OF THE ASSESSEE. 6. AGGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEF ORE US. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SMT. ANJU BIDASARIA WAS ALS O A QUALIFIED PERSON HAVING GOOD KNOWLEDGE OF DESIGNING AND HAD BEEN INDEBTED AS A D IRECTOR OF THE CO. FROM 17.11.98, HENCE, THE VIEW OF THE LD. CIT(A) THAT THE ASSESSEE SHOULD HAVE SHOWN JUSTIFICATION FOR HER VISIT WAS NOT BASED ON CORRECT FACTS. HE FURTHE R CONTENDED THAT IT WAS THE PREROGATIVE OF THE BUSINESSMAN SO AS TO HOW HE SHOU LD CONDUCT THE BUSINESS. HE 3 FURTHER CONTENDED THAT NECESSARY DETAILS WERE GIVEN BEFORE BOTH THE REVENUE AUTHORITIES. HE FURTHER CONTENDED THAT IN CANADA, T HE VISIT HAD BEEN MADE FOR PARTICIPATING IN AN EVENT ORGANIZED BY APPAREL EXPO RT PROMOTION COUNCIL IN SEPTEMBER 2003 AND DREW OUR ATTENTION TO PAGE NO.9 OF THE PAPER BOOK TO SUBSTANTIATE THIS FACT. HE FURTHER CONTENDED THAT NO SUCH DISALL OWANCE HAD BEEN MADE EARLIER AND IN SUBSEQUENT YEARS. 7. THE LD. SR. AR, HOWEVER, CONTENDED THAT BOTH THE PERSONS HAD ALSO VISITED KOPENHEGAN, DENMARK IN THE MONTH OF JANUARY 2004 WH ERE NO EXPORTS WERE MADE AND THE ASSESSEE ALSO DID NOT PRODUCE ANY DOCUMENTARY E VIDENCE AS REGARD TO ESTABLISH THE FACT OF ANY BUSINESS NECESSITY IN CONNECTION WITH S UCH TRIP. SHE FURTHER PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(A). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IT IS NOTED THAT ASSE SSEE IS ENGAGED IN EXPORT OF READYMADE GARMENTS. IT IS ALSO NOTED THAT ASSESSEE S WIFE IS ALSO A DIRECTOR OF THE CO. SINCE 1998. IT IS ALSO OBSERVED THAT MAJORITY OF TH E TRIPS HAVE BEEN MADE TO THE PLACES WHERE THE ASSESSEE ALREADY EXPORTING THE GOODS AND FOR FURTHER EXPLORATION OF POSSIBILITIES OF MAKING EXPORTS. IT IS ALSO NOTED T HAT ALL THE DETAILS OF EXPENDITURE HAVE BEEN FURNISHED. IN THIS FACTUAL BACKGROUND, WE ARE OF THE VIEW THAT MERELY BECAUSE SMT. ANJU BIDASARIA IS THE WIFE OF THE DIRECTOR, TH E EXPENDITURE ON HER TRIP CANNOT BE CONSIDERED AS FOR NON-BUSINESS PURPOSE, PARTICULARL Y WHEN IT IS NOT A CASE OF ANY SPECIFIC DISALLOWANCE FOR A SPECIFIC TRIP WHICH WAS FOUND TO BE NON-BUSINESS PURPOSE BY BOTH THE PERSONS AS GENERAL @15% HAD BEEN MADE. ACCORDINGLY, WE HOLD THAT SUCH 4 DISALLOWANCE IS UNWARRANTED AND, THEREFORE, WE DELE TE THE SAME. THUS, THIS GROUND OF THE ASSESSEE IS ACCEPTED. 9. GROUND NO.2 READS AS UNDER: THAT THE LD. CIT(A) ERRED IN LAW AND FACTS OF THE CASE AND CONFIRMED THE DISALLOWANCE MADE BY THE AO OUT OF INLAND TRAVE LLING EXPENSES AT RS.75,000/- WITHOUT CONSIDERING FULL FACTS AND LEGA L POSITION. 10. THE FACTS, IN BRIEF, ARE THAT THE AO FOUND THAT ASSESSEE HAD CLAIMED INLAND TRAVELING EXPENSES AT RS.6,63,858/- AS AGAINST RS.3 ,33,531/- SPENT IN THE IMMEDIATELY PRECEDING YEAR. THE AO DISALLOWED A SUM OF RS.75,00 0/- OUT OF SUCH EXPENSES ON ADHOC BASIS AS HE WAS OF THE VIEW THAT ALL THESE EX PENSES COULD NOT BE CONSIDERED AS INCURRED EXCLUSIVELY FOR THE BUSINESS PURPOSES. 11. AGGRIEVED BY THIS, THE ASSESSEE PREFERRED AN AP PEAL BEFORE THE LD. CIT(A) WHEREIN IT WAS CONTENDED THAT NO SPECIFIC DEFECT WA S POINTED OUT BY THE AO NOR THE GENUINENESS OF EXPENSE WAS IN DISPUTE, HENCE, SUCH DISALLOWANCE WAS LIABLE TO BE DELETED. THE LD. CIT(A) HELD THAT ENTIRE TURNOVER O F THE ASSESSEE WAS FROM EXPORT AND NO JUSTIFICATION FOR TRAVELING EXPENSES ON THE TRAV ELS UNDERTAKEN BY THE DIRECTOR HAD BEEN GIVEN, HENCE, DIRECTION OF THE AO WAS LIABLE T O BE CONFIRMED. 12. AGGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BE FORE US. THE LD. COUNSEL FOR THE ASSESSEE NARRATED THE FACTS AND REITERATED THE SUBM ISSIONS BEFORE THE REVENUE AUTHORITIES. THE LD. SR. AR, HOWEVER, PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(A). 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IT IS NOTED THAT ASSE SSEE, THOUGH, ENGAGED IN EXPORT, HOWEVER, THE RAW MATERIAL PROCURED DOMESTICALLY. IT IS ALSO NOTEWORTHY THAT THE AO 5 HAS NOT GIVEN ANY SPECIFIC REASON FOR ARRIVING AT S UCH CONCLUSION. THUS, IN OUR VIEW, SUCH DISALLOWANCE HAS BEEN MADE IN ADHOC MANNER AND ON DOUBT ONLY AND, THEREFORE, THE SAME CANNOT BE SUSTAINED. ACCORDINGLY, WE DELET E THE SAME. THUS, THIS GROUND OF THE ASSESSEE IS ALSO ACCEPTED. 14. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25.2.2010. SD/- SD/- (JOGINDER SINGH) (V.K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25.2.2010 {VYAS} COPY TO: APPELLANT/RESPONDENT/CIT/CIT(A)/DR/GUARD F ILE