Genesis Organics Pvt.Ltd., Baroda V. The Dy.CIT.,Circle-1(1), Baroda

ITA 3160/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76904 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 24-06-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 29-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS SRDR
• Assessee Lawyers: S N SOPARKAR
• Keywords: Business expenditure

Judgement Text

, , , , D, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH . .. . . .. . , !' !' !' !', , , , #$ %&'( #$ %&'( #$ %&'( #$ %&'(, , , , )* + ) ' )* + ) ' )* + ) ' )* + ) ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.3160 AND 3472/AHD/2010 [ASSTT.YEAR : 2005-2006 AND 2006-2007] GENESIS ORGANICS P. LTD. TORAN COMPLEX, 1 ST FLOOR, VIKAS NAGAR, OLD PADRA ROAD BARODA. PAN : AABCG 5635 R /VS. DCIT, CIR.1(1) BARODA. ( (( ( -. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) 1& 2 3 )/ ASSESSEE BY : SHRI S.N. SOPARKAR + 2 3 )/ REVENUE BY : SHRI K.C. MATHEWS, SR.DR 5 2 &(*/ DATE OF HEARING : 24 TH JUNE, 2014 678 2 &(*/ DATE OF PRONOUNCEMENT : 04-07-2014 )9 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THESE TWO APPEALS BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2005-2006 AND 200 6-2007 ARE DIRECTED AGAINST THE ORDERS OF THE CIT(A). THESE ARE BEING DISPOSED OF WITH THIS CONSOLIDATED ORDER. ITA NO.3160 / AHD /2010 (ASSTT.YEAR 2005-2006) ITA NO.3160 AND 3472/AHD/2013 -2- 2. THE GROUND NO.1 OF THE APPEAL OF THE ASSESSEE IS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF RS.28,48,709/- MADE BY AO ON ACCOUN T OF RESEARCH & DEVELOPMENT EXPENSES. THE DISALLOWANCE MADE BY A O AND CONFIRMED BY THE LD.CIT(A) IS WHOLLY UNSUSTAINABLE IN LAW AND ON FACTS ESPECIALLY WHEN THE APPELLANT (DSIR APPROVED R&D UNIT) HAS ESTABLISHED THE GENUINENESS OF SUCH EXPENSES FOR TH E PURPOSE OF DEVELOPING NEW PRODUCTS FOR THE EXPORT MARKET. THE DISALLOWANCE OF GENUINE BUSINESS EXPENDITURE WITHOUT ANY MERITS AND JUSTIFICATION REQUIRES TO BE ALLOWED AND ORDER OF LD.CIT(A) OUGHT TO BE QUASHED. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ITAT, AHMEDABAD BENCH IN ASSESSEES OWN CASE FOR THE IMME DIATE PRECEDING ASSESSMENT YEAR 2004-05 HAS RESTORED THIS ISSUE TO THE FILE OF THE AO IN ITA NO.233/AHD/2009 DATED 25.6.2012, AND THIS MAY A LSO BE RESTORED TO THE FILE OF THE AO WITH SIMILAR DIRECTION. THE LEA RNED DR HAS RELIED ON THE ORDERS OF THE AO AND THE CIT(A). 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS. THE ISSUE IN THIS GROUND OF THE ASSESSEE BEING IDENTICAL WITH THE ISSUE IN THE APPEAL OF THE ASSESSEE FOR THE IMMEDIATE PRECEDING ASSTT.YEAR 2004-05, WHEREIN THE SAME WAS RESTORED BY THE TRIBUNAL TO THE FILE OF THE AO VIDE ORDER DATED 25.6.2012 (SUPRA), AND WE BEING IN AGREEMENT WITH THE ORDER O F THE TRIBUNAL, RESTORE THIS ISSUE TO THE FILE OF THE AO FOR DE NOVO DECISION AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE W ITH SIMILAR DIRECTIONS FOR VERIFICATION AS CONTAINED IN THE ORDER OF THE T RIBUNAL DATED 25.6.2012 (SUPRA) FOR THE EARLIER ASSTT.YEAR 2004-05. WE DIR ECT ACCORDINGLY. 5. THE GROUND NO.2 OF THE ASSESSEES APPEAL IS AS U NDER: 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF RS.4,82,310/- OUT OF TOTAL DISALLOW ANCE OF RS.10,15,800/- MADE BY AO OUT OF FOREIGN TRAVELING EXPENSES. THE ITA NO.3160 AND 3472/AHD/2013 -3- LD.CIT(A) HAS FAILED TO APPRECIATE THAT ALL THE EXP ENSES WERE INCURRED FOR THE PURPOSE OF BUSINESS ONLY AND THERE FORE NO DISALLOWANCE IS CALLED FOR. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE HAS FILED FULL DETAILS OF THE FOREIGN TRAVEL EXPENSES A LONG WITH COPY OF THE LEDGER ACCOUNT, AND THEREFORE, THE EXPENSES BEING F OR BUSINESS PURPOSE SHOULD HAVE BEEN ALLOWED AS ALLOWABLE DEDUCTION TO THE ASSESSEE. THE LEARNED DR SUBMITTED THAT THE ASSESSEE COULD NOT PR OVE ANY BUSINESS PURPOSE FOR THE FOREIGN TRAVELING EXPENSES DISALLOW ED BY THE AO AND CONFIRMED BY THE CIT(A) AND EVEN IN ANNEXURE-II FIL ED BY THE ASSESSEE, THE COLUMN BENEFIT DERIVED HAS NOT BEEN ANSWERED. 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND VARIOUS DETAILS OF FOREIGN TR AVELING EXPENSES FILED BY THE ASSESSEE IN THE COMPILATION BEFORE US. WE F IND THAT THE ASSESSEE COULD NOT PROVE THE BUSINESS PURPOSE OF THE SAID EX PENDITURE ON FOREIGN TRAVEL. IN ANNEXURE-II COPY FILED AT PAGE NO.129 O F THE COMPILATION BEFORE US, THE LAST COLUMN BENEFIT DERIVED, THE ASSESSEE COULD NOT GIVE ANY DETAILS OF THE BUSINESS PURPOSE OF THE FOREIGN TRIP S. THE SO-CALLED DETAILS OF THE FOREIGN TRAVEL EXPENSES FILED BY THE ASSESSEE B EFORE THE REVENUE AUTHORITIES AND COPY FILED IN THE COMPILATION BEFOR E US, SHOWS THAT THE DETAILS CONSISTED OF AMOUNT SPENT ON AIR-TICKET, ME DI-CLAIM CHARGES, HOTEL, TAXI AND OTHER EXPENSES HAVE BEEN MENTIONED. THERE IS NO DETAIL OF PLACES OR NAME OF CITIES VISITED BY THE DIRECTOR OF THE AS SESSEE-COMPANY, NOR ANY DETAIL OF THE PERSONS OR BUSINESS CONCERNS VISITED, WAS GIVEN. THE ONUS TO ESTABLISH THAT THE FOREIGN TRIP WAS UNDERTAKEN FOR BUSINESS PURPOSE IS WITH THE ASSESSEE, WHICH THE ASSESSEE HAS FAILED TO DISC HARGE IN THIS CASE. MERE MENTIONING THE NAME OF THE COUNTRY VISITED ALONG WI TH MENTIONING OF THE TOTAL AMOUNT OF EXPENDITURE UNDER VARIOUS HEADS OF THE EXPENSES LIKE, HOTEL ITA NO.3160 AND 3472/AHD/2013 -4- BILLS, AIR-TICKET ETC. DOES NOT INDICATE OR ESTABLI SH THE BUSINESS PURPOSE OF THE FOREIGN TRAVEL EXPENSES INCURRED BY THE ASSESSE E-COMPANY. IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE ASSESSEE, WE H OLD THAT IN THE ABSENCE OF EVEN ELEMENTARY EVIDENCE TO PROVE THE BUSINESS P URPOSE OF THE FOREIGN TRAVEL UNDERTAKEN BY THE DIRECTORS OF THE ASSESSEE PRIVATE LTD. COMPANY, THE EXPENDITURE WAS RIGHTLY DISALLOWED BY THE LD. CIT(A ), AND ACCORDINGLY, THE ORDER OF THE CIT(A) ON THIS ISSUE IS CONFIRMED AND THE GROUND NO.2 OF THE ASSESSEE IS DISMISSED. ITA NO.3472/AHD/2010 (ASSTT.YEAR 2006-2007) 8. THE GROUND NO.1 OF THE ASSESSEES APPEAL IS AS U NDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO ALLOW THE EXPENSES OF RS.30,168/- DISALLOWED BY AO U/S.40(A)(IA) OF THE ACT IN THE SUBSEQUENT YEAR WITHOUT APPRECIATING THE FACT THAT TAX WAS DEDUCTED AT SOURCE AND DEPOSITED BY THE APPELLA NT FROM THE IMPUGNED PAYMENT BEFORE DUE DATE OF FILING OF RETUR N. BOTH THE LOWER AUTHORITIES FAILED TO TAKE COGNIZANCE OF THE AMENDMENT BROUGHT BY FINANCE ACT, 2010 THAT IS HELD TO BE RET ROSPECTIVE IN NATURE ALLOWING ADDITIONAL TIME TO THE APPELLANT FO R DEPOSIT OF TDS BEFORE DUE DATE OF FILING OF RETURN. LD.CIT(A) OUG HT TO HAVE DELETED THE DISALLOWANCE RATHER THAN DIRECTING AO TO ALLOW THE EXPENSES IN THE SUBSEQUENT YEAR. 9. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE HAD DEPOSITED THE AMOUNT BEFORE THE DUE DATE OF FILING OF THE RETURN, AND THEREFORE, THE SAME WAS ALLOWABLE AND THE PROVISION S OF SECTION 40(A)(IA) DOES NOT APPLY TO THE FACTS OF THE CASE OF THE ASSE SSEE. THE LEARNED DR HAS RELIED ON THE ORDERS OF THE AO AND THE CIT(A). ITA NO.3160 AND 3472/AHD/2013 -5- 10. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE DATE OF PAYMEN T OF TDS AMOUNT HAS BEEN MENTIONED BY THE AO IN PARA 5(A) OF THE ASSESS MENT ORDER, AND THESE DATES ARE PRIOR TO THE DUE DATE OF FILING OF THE RE TURN, AND ACCORDINGLY, THE PROVISION OF SECTION 40(A)(IA) HAS NOT HIT THE CASE OF THE ASSESSEE, AND THE GROUND NO.1 OF THE ASSESSEE IS ALLOWED. 11. THE GROUND NO.2 OF THE ASSESSEE IS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF RS.25,48,883/- MADE BY AO ON ACCOUN T OF RESEARCH & DEVELOPMENT EXPENSES. THE DISALLOWANCE MADE BY A O AND CONFIRMED BY THE LD.CIT(A) IS WHOLLY UNSUSTAINABLE IN LAW AND ON FACTS ESPECIALLY WHEN THE APPELLANT (DSIR APPROVED R&D UNIT) HAS ESTABLISHED THE GENUINENESS OF SUCH EXPENSES FOR TH E PURPOSE OF DEVELOPING NEW PRODUCTS FOR THE EXPORT MARKET. THE DISALLOWANCE OF GENUINE BUSINESS EXPENDITURE WITHOUT ANY MERITS AND JUSTIFICATION REQUIRES TO BE QUASHED. 12. BOTH PARTIES BEFORE US SUBMITTED THAT THE ISSUE IN THE GROUND NO.2 OF THE ASSESSEE IS IDENTICAL WITH THE ISSUE IN THE GRO UND NO.1 OF THE APPEAL OF THE ASSESSEE FOR EARLIER ASSTT.YEAR 2005-2006. 13. WE HAVE CONSIDERED RIVALS SUBMISSIONS. THE ISS UE IN THIS GROUND OF THE APPEAL OF THE ASSESSEE BEING IDENTICAL WITH THE ISSUE IN THE GROUND NO.1 OF THE APPEAL OF THE ASSESSEE FOR THE EARLIER ASSTT .YEAR 2005-06, WE FOR THE REASONS RECORDED WHILE DISPOSING OF THE APPEAL OF T HE ASSESSEE FOR THE EARLIER ASSTT.YEAR 2005-06, IN THE FOREGOING PARAS OF THIS ORDER, RESTORE THIS ISSUE TO THE FILE OF THE AO WITH DIRECTION TO DECID E THE SAME DE NOVO IN ACCORDANCE WITH LAW, AFTER PROVING REASONABLE OPPOR TUNITY OF HEARING TO THE ASSESSEE, WITH SIMILAR DIRECTIONS, AS CONTAINED IN THE ORDER OF THE ITA NO.3160 AND 3472/AHD/2013 -6- TRIBUNAL FOR THE ASSTT.YEAR 2004-05 IN THE CASE OF THE ASSESSEE DATED 25.6.2012, IN ITA NO.233/AHD/2009. WE DIRECT ACCOR DINGLY. 14. IN THE RESULT, APPEAL FOR THE ASSTT.YEAR 2005-0 6 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND THE APPEAL FOR THE ASST.YEA R 2006-07 IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %&'( %&'( %&'( %&'( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD