Ms. Devika Bhagat, New Delhi V. DCIT, New Delhi

ITA 3384/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4260 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 15-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 02-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Assessee Lawyers: S K CHATURVEDI
• Keywords: Business income; Depreciation; Business expenditure; Question of law; Assessment record

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH B, NEW DELHI BEFORE : SHRI H.S. SIDHU., JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO. 3384/DEL./2014 ASSESSMENT YEAR: 2010-11 MS. DEVIKA BHAGAT, 34 - H, ASHOKA AVENUE, SAINIK FARMS, NEW DELHI. PAN AAEPB6996N (APPELLANT) VS. DCIT, CIRCLE 32(1), NEW DELHI. (RESPONDENT) APPELLANT BY SH. S.K. CHATURVEDI, C.A. RESPONDENT BY MS. ASHIMA NEB, SR. DR ORDER PER T.S. KAPOOR, A.M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) DATED 11.03.2014. THE GROUNDS OF APPEAL TAKEN BY TH E ASSESSEE ARE REPRODUCED BELOW : 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX, (A PPEAL) - XXVI, NEW DELHI HAS ERRED, BOTH ON FACTS AND LAW IN CONFIRMIN G DISALLOWANCE OF VARIOUS EXPENSES AMOUNTING TO RS.1,23,007/- U/S 37/ 38 BEING L/5TH OF ALL EXPENSES EXCLUDING FOREIGN TRAVELLING STATING PERSON AL EXPENSES WITHOUT CONSIDERING THE FACT THAT ASSESSEE HAD ALREADY DEBI TED RS.5,29,177/- AS DRAWING AND RS. 1,73,159/-ON HER INCOME AND EXPENDI TURE ACCOUNT WHICH IS SEPARATE FROM EXPENSES CHARGED UNDER PROFIT AND LOSS ACCOUNT FROM BUSINESS INCOME. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX, (AP PEAL) - XXVI, NEW DELHI HAS ERRED, BOTH ON FACTS AND LAW IN CONFIRMIN G DISALLOWANCE OF DATE OF HEARING 03.01.2018 DATE OF PRONOUNCEMENT 03 .01.2018 ITA NO. 3384/DEL./2014 2 RS,70,865/- U/S 37 BEING L/4TH OF FOREIGN TRAVELLING EXPENSES AMOUNTING TO RS. 2,83,460/- AS PERSONAL ELEMENT. 3. THAT THE ORDER OF THE LEARNED COMMISSIONER OF INC OME TAX (APPEALS)-XXVI NEW DELHI, BEING NOT SUSTAINABLE, TH E APPEAL BE ALLOWED. 2. AT THE OUTSET, THE LD. AR SUBMITTED THAT THE ASSESS ING OFFICER HAD MADE DISALLOWANCE OUT OF EXPENSES ON ADHOC BASIS WITHOUT POINTING OUT ANY DEFICIENCIES AND THE LD. CIT(A) HAS ALSO WRONGLY UP HELD THE SAME, WHICH IS NOT IN ACCORDANCE WITH LAW, AS HAS BEEN HELD BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. GIVO LTD., ITA NO. 941/2010. THE LD . AR FURTHER RELIED ON THE DECISIONS IN THE CASE OF TRIPAT KAUR VS. ACIT, ITA NO. 3244/DEL./2012(DEL.) AND ACIT VS. RAJ KUMAR, ITA NO. 4165/DEL./2009(DEL. ) FOR THE PROPOSITION THAT NO ADHOC DISALLOWANCE COULD BE MADE BY THE AUT HORITIES BELOW WITHOUT POINTING OUT ANY COGENT BASIS AS TO WHY THE EXPENDI TURE WAS TO BE DISALLOWED. EXPLAINING THE FACTS OF THE CASE, THE LD. AR SUBMIT TED THAT THE ASSESSEE IS A SCRIPT WRITER AND HAD VISITED FOREIGN COUNTRIES AND HAD INCURRED EXPENSES TO THE TUNE OF RS.2,83,460/- WHEREAS THE AO DISALLOWED AN EXPENDITURE TO THE TUNE OF 1/3 RD OF SUCH EXPENDITURE WITHOUT ANY BASIS. THE LD. AR SUBMITTED THAT OUT OF OTHER EXPENSES INCURRED BY THE ASSESSEE, THE ASSESSING OFFICER AGAIN DISALLOWED 1/10 TH OF THE EXPENDITURE WITHOUT RECORDING ANY SATISFACT ION AS TO ON WHAT BASIS SUCH DISALLOWANCE WAS MADE. ITA NO. 3384/DEL./2014 3 3. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT TH E ASSESSEE HAD CLAIMED FOREIGN TRAVELING EXPENSES AND HAD VISITED EUROPE I NCLUDING U.K. AND TURKEY AND THE ASSESSING OFFICER HAD RIGHTLY HELD THAT THE ENTIRE TRAVELING/LODGING EXPENSES CANNOT BE SAID TO BE INCURRED FOR THE PURP OSE OF BUSINESS AND THEREFORE, HAD RIGHTLY DISALLOWED A PART OF THE SAM E, BEING NOT RELATING TO THE BUSINESS. AS REGARDS OTHER EXPENSES, THE LD. DR SUB MITTED THAT THE ASSESSEE WAS USING HER OWN RESIDENCE FOR RUNNING HER PROFESS ION AND THE EXPENSES CLAIMED BY THE ASSESSEE INCLUDED MEMBERSHIP FEE, DE PRECIATION ON AIR CONDITIONER, FOOD PROCESSOR, CELL PHONE AND LAPTOP ETC., WHICH ALWAYS HAS ELEMENT OF PERSONAL NATURE. THEREFORE, THE ASSESSIN G OFFICER HAS RIGHTLY MADE THE ADDITION AND THE LD. CIT(A) HAS RIGHTLY UPHELD THE SAME. 4. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. AS FAR AS THE FOREIGN EXPENSES AR E CONCERNED, WE FIND THAT THE ASSESSEE HAD INCURRED EXPENDITURE OF RS.2,83,46 0/- ON ACCOUNT OF FOREIGN TRAVELING EXPENSES AND ON A QUERY FROM THE ASSESSIN G OFFICER, THE ASSESSEE HAD FILED THE FOLLOWING REPLY : SINCE, ASSESSEE IS A SCRIPT WRITER BY PROFESSION, WHICH INVOLVES DEVELOPING IDEAS, CREATIVITY, KNOWLEDGE AND UNDERSTANDING ABOU T THE TOPIC WITH REGARD TO WHICH SHE WANTS DEVELOPING/WRITING SCRIPT OTHERWISE THE OUTCOME TOPIC WHICH SHE WANTS, WONT BE GOOD SO IN ORDER TO HAVE A BETTER SCRIPT. SHE REQUIRED TO ACTUALIZE HER EXPERIENCE AN D KNOWLEDGE ABOUT THE SAID TOPIC SAY FOR EXAMPLE IF SHE DEVELOPING A SCRI PT WHICH IS ABOUT THE LIFE OF A LONDON COUPLE FOR THAT SHE MUST NOT ONLY HAVE KNOWLEDGE ABOUT THEIR LOCAL CULTURE, BEHAVIOR ETC. BUT ALSO UNDERSTAND AN D FEEL THE LOCAL CULTURE, ITA NO. 3384/DEL./2014 4 BEHAVIOR OF THE SAME. OTHERWISE, THE SCRIPT WOULD B E WORST WHICH CAN ONLY BE DEVELOPED IF SHE HAVE A VISIT THERE AND GRAB KNO WLEDGE, UNDERSTAND ABOUT THE SAID CULTURE, BEHAVIOR ETC. AND ACTUALIZE HER EXPERIENCE IN HER SCRIPT. HENCE, FOREIGN TRAVELING DIRECTLY RELATES W ITH HER PROFESSION. SO THE SAID EXPENSES MUST BE ALLOWED. 5. WE FIND THAT THE ASSESSEE IS PROFESSIONAL AND IS A SCRIPT WRITER, WHICH INVOLVES DEVELOPING IDEAS, CREATIVITY, KNOWLEDGE AN D UNDERSTANDING OF THE TOPIC WITH REGARD TO DEVELOPING/WRITING OF SCRIPT A ND SHE WANTED TO WRITE A SCRIPT ON THE TOPIC LIFE OF A LONDON COUPLE AND THEREFORE, TRIP TO LONDON WAS NECESSARY AND THE EXPENDITURE INCURRED THEREON WAS A BUSINESS EXPENDITURE. ACCORDINGLY, THE AUTHORITIES BELOW SHOULD NOT HAVE DISALLOWED PART OF THE EXPENDITURE IN VIEW OF THE DECISION OF HONBLE DELH I HIGH COURT IN THE CASE OF CIT VS. GIVO LTD. (SUPRA) RELIED ON BY THE ASSESSEE , WHEREIN IT HAS BEEN HELD AS UNDER : 6. AS FAR AS THE ISSUE OF FOREIGN TRAVELLING EXPENS E IS CONCERNED, WE FIND THAT ITAT HAS OBSERVED AS UNDER :- '4.1...... A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE DISALLOWANCE HAD BEEN MADE BY THE ASSESSING AUTHORITY ON ACCOUNT OF NON-F ILING OF THE DETAILS OF TRAVEL. A PERUSAL OF THE ORDER OF THE LD. CIT(A) SHOWS THAT HE HAS VERIFIED THE ASSESSMENT RECORD AND HAS FOUND THAT SUBSTANTIAL DE TAILS HAD BEEN FILED. HOWEVER, IT IS NOTICED THAT THE LD. CIT(A) DREW A C ONCLUSION THAT THE TRAVEL OF THE MANAGING DIRECTOR TO PARIS, LONDON, AMSTERDAM A ND HONG KONG HAD APPARENTLY NO CONNECTION WITH THE BUSINESS OF THE A SSESSEE. IT IS NOTICED THAT THE ASSESSEE IS IN THE BUSINESS OF TEXTILE AND GARMENT M ANUFACTURING. THE DISALLOWANCE HAS BEEN MADE ON PRESUMPTION AND THE DI SALLOWANCE IS AN AD-HOC DISALLOWANCE. THE DETAILS OF THE EXPENDITURE HAVE BE EN FOUND TO HAVE BEEN PRODUCED BEFORE THE ASSESSING AUTHORITY. LD. CIT(A) NOT FOUND ANY DEFECT IN THE CLAIM OF EXPENSES., COULD NOT NOW MAKE A CHANGE IN THE STAND OF THE ASSESSING AUTHORITY TO SAY THAT APPARENTLY THE TRAVEL TO PARI S, LONDON, AMSTERDAM AND HONG KONG WAS NOT FOR BUSINESS PURPOSES. FURTHER, AS THE REVENUE HAS NOT BEEN ABLE TO POINT OUT AS TO WHICH EXPENSES OF FOREIGN TR AVEL AS CLAIMED BY THE ITA NO. 3384/DEL./2014 5 ASSESSEE IS NOT FOR THE BUSINESS PURPOSE AND AS THE ASSESSEE HAS PRODUCED THE EVIDENCES IN RELATION TO THE FOREIGN TRAVEL BEFORE T HE ASSESSING AUTHORITY AND THE SAME HAS ALSO BEEN ACCEPTED BY THE LD. CIT(A), THE ADDITION ON THIS ACCOUNT MORE SO ON AD-HOC BASIS IS UNJUSTIFIED AND THE SAME IS DELETED. IN THESE CIRCUMSTANCES, GROUND NO. 5 OF THE ASSESSEE 'S APPE AL STANDS ALLOWED. ' 7. KEEPING IN VIEW THE AFORESAID CONCLUSION O N FACTS BY ITAT, WHICH IS THE FINAL FACT FINDING AUTHORITY, WE ARE OF THE VIEW THAT NO SUBSTANTIAL QUESTION OF LAW ARISES IN THE PRESENT CASE. CONSEQUENTLY, PRESENT APPEAL IS DISMISSED IN LIMINE BUT WITH NO ORDER AS TO COSTS. IN VIEW OF THE ABOVE, WE ALLOW GROUND NO. 2 OF TH E APPEAL. 6. AS REGARDS THE DISALLOWANCE OUT OF OTHER EXPENSE S, WE FIND THAT THE EXPENSES INCURRED BY THE ASSESSEE ARE OF PROFESSION AL NATURE. FOR THE SAKE OF COMPLETENESS, THE EXPENSES CLAIMED BY THE ASSESSEE EXCLUDING THE FOREIGN TRAVELING EXPENSE, AS NOTED BY THE ASSESSING OFFICE R IN THE ASSESSMENT ORDER ARE REPRODUCED AS UNDER: SL. NO. PARTICULARS AMOUNT 1 BUSINESS PROMOTION 19,498 2 CONVEYANCE EXPENSES 65,055 3 DEPRECIATION 20,324 4 ELECTRICITY EXPENSES 50,560 5 INTERNET EXPENSES 23,259 6 PRINTING & STATIONERY 8,185 7 PROFESSIONAL & LEGAL CHARGES 27,000 8 SALARY PAID TO STAFF 2,58,000 9 NEWSPAPER CHARGES 2,775 10 TELEPHONE EXPENSES 85,089 11 TRAVELING EXPENSES 78,741 12 MEMBERSHIP FEES 10,000 13 COUNTER CHARGES 1,735 THE ASSESSING OFFICER WITHOUT POINTING OUT ANY EXPE NDITURE OF PERSONAL NATURE HAS DISALLOWED A PART OF EXPENDITURE WHICH IS NOT I N ACCORDANCE WITH LAW AS ITA NO. 3384/DEL./2014 6 HELD BY VARIOUS COURTS INCLUDING ITAT DELHI BENCH I N THE CASE OF TRIPAT KAUR VS. ACIT (SUPRA), WHEREIN IT HAS BEEN HELD AS UNDER : WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF TH E MATERIAL PRODUCED. WE FIND THAT THE ADDITION ON ACCOUNT OF TRAVELLING EXPENSES WAS TOTALLY BASED ON SURMISES AND CONJECTURES. ASSESSING OFFICER HAS NOT BROUGHT ON RE CORD ANY COGENT BASIS AS TO WHY THIS EXPENDITURE WAS TO BE DISALLOWED. IT IS NOT THE CASE THAT EXPENDITURE WAS CONSIDERED TO BE BOGUS OR ANY SHORTCOMING IN THE VOUC HERS IN THIS REGARD WAS OBSERVED BY THE REVENUE. UNDER THE CIRCUMSTANCES, WE HOLD TH AT ESTIMATED ADDITION WITHOUT ANY BASIS CANNOT BE SUSTAINED. IN THIS REGARD, THE CASE L AW RELIED UPON BY THE LD. COUNSEL OF THE ASSESSEE IN THE CASE OF THE ITO VS. LAKE PALACE HOTELS AND MOTELS (P) LTD. 13 TTJ (JP) 216 IS GERMANE. IN THIS CASE, IT WAS HELD THAT THE TRAVELLING EXPENSES AND SALARY EXPENSES, ADDITION MADE ON ESTIMATE BASIS CANNOT BE J USTIFIED. MOREOVER, DISALLOWANCE IS ALSO, NOT JUSTIFIED MERELY ON THE GROUND THAT SI MILAR DISALLOWANCE WAS MADE IN THE PREVIOUS YEAR. ACCORDINGLY, IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENT, WE HOLD THAT THE ADDITION ON ACCOUNT OF TRAVELLING EXPENSES IS LIABLE TO BE DELETED AND HENCE, WE SET ASIDE THE ITA NO. 3244/DE L/2012 ORDERS OF THE AUTHORITIES BELOW AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSE E. IN VIEW OF THE ABOVE DISCUSSION, WE ALLOW THIS GROU ND OF APPEAL ALSO. 7. IN NUTSHELL, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JAN., 2018 SD/- SD/- (H.S. SIDHU) (T.S. KAPOO R) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: JAN., 2018 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI