Cosmique Global, V. DCIT circle 27 (1),

ITA 3489/DEL/2007

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7045 (ITAT-DELHI)
• Duration Of Justice: 8 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 09-06-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 03-08-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V R SONBHA DRA SENIOR
• Assessee Lawyers: P K BAHL
• Keywords: Business income; Retrospective amendment
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH B BB B : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT AND AND AND AND SHRI KULDIP SINGH SHRI KULDIP SINGH SHRI KULDIP SINGH SHRI KULDIP SINGH, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NO . .. . 3489/DEL/2007 3489/DEL/2007 3489/DEL/2007 3489/DEL/2007 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2004 2004 2004 2004 - -- - 095 095 095 095 M/S COSMIQUE GLOBAL, M/S COSMIQUE GLOBAL, M/S COSMIQUE GLOBAL, M/S COSMIQUE GLOBAL, A AA A- -- -17, NARAINA INDUSTRIAL 17, NARAINA INDUSTRIAL 17, NARAINA INDUSTRIAL 17, NARAINA INDUSTRIAL AREA, PHA AREA, PHA AREA, PHA AREA, PHASE SESE SE- -- -II, II,II, II, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. PAN : AAEFC0230A. PAN : AAEFC0230A. PAN : AAEFC0230A. PAN : AAEFC0230A. VS. VS. VS. VS. DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -27(1), 27(1), 27(1), 27(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.K. BAHL, CA. RESPONDENT BY : SHRI V.R. SONBHADRA, SENIOR DR. DATE OF HEARING : 09.06.2016 09.06.2016 09.06.2016 09.06.2016 DATE OF PRONOUNCEMENT : 29.06.2016 29.06.2016 29.06.2016 29.06.2016 ORDER ORDER ORDER ORDER PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP : :: :- -- - THIS APPEAL BY THE ASSESSEE FOR THE ASSESSMENT YEA R 2004-05 IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-XXIV, NEW DELHI DATED 3 RD MAY, 2007. 2. GROUND NO.1 OF THE ASSESSEES APPEAL READS AS UN DER:- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(APPEALS) ERRED IN LAW BY REJECTING THE ASSESSEES CONTENTION THAT THE FOREIGN TRAVELLING EXPENDITURE OF SHRI TILAK RAJ MANAKTALA & SMT. DIVI YA MANAKTALA WERE TO BE ALLOWED AS BUSINESS EXPENDITUR E. THIS PLEA HAS BEEN REJECTED INSPITE OF THE FACT THA T DOCUMENTARY EVIDENCE IN SUPPORT OF THE ASSESSEES C LAIM WAS PLACED ON RECORD AT THE TIME OF THE APPEAL. ITA-3489/DEL/2007 2 3. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED COUNSEL THAT THE ASSESSEE DERIVES INCOME FROM MANUF ACTURING AND EXPORT OF HANDICRAFTS. THAT FOR THE PURPOSE OF SAL E/EXPORT OF HANDICRAFTS, THE ASSESSEE PARTICIPATES IN THE TRADE FAIRS. THAT IN SUCH TRADE FAIRS, SMT. DIVIYA MANAKTALA, WIFE OF THE PAR TNER OF THE ASSESSEE FIRM ASSISTS THE PARTNER/EMPLOYEES OF THE ASSESSEE FIRM. SIMILARLY, SHRI TILAK RAJ MANAKTALA, FATHER OF THE PARTNER OF THE A SSESSEE FIRM ALSO VISITED ABROAD TO ASSIST AND HELP THE PARTNER/EMPLO YEES OF THE ASSESSEE FIRM IN RESPECT OF SUCH TRADE FAIRS. THER EFORE, THE FOREIGN VISIT OF SMT. DIVIYA MANAKTALA AND SHRI TILAK RAJ MANAKTA LA WAS FOR THE PURPOSE OF BUSINESS AND THE ASSESSING OFFICER AS WE LL AS LEARNED CIT(A) DISALLOWED THE EXPENSES UNJUSTIFIABLY. IN SUPPORT OF THIS CONTENTION, HE REFERRED TO THE DETAILS OF FOREIGN TRAVEL BY THESE TWO PERSONS. 4. LEARNED DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF AUTHORITIES BELOW AND STATED THAT EXCEPT THE SUBMIS SION OF THE LEARNED COUNSEL THAT THE FOREIGN VISIT OF SMT. DIVIYA MANAK TALA AND SHRI TILAK RAJ MANAKTALA WAS FOR THE PURPOSE OF BUSINESS, NO D OCUMENTARY EVIDENCE IN SUPPORT OF THE SAID CLAIM HAS BEEN FURN ISHED. HE, THEREFORE, SUBMITTED THAT THE ORDER OF LEARNED CIT( A) SHOULD BE SUSTAINED. 5. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AND HAVE PERUSED THE MATERIAL PLACED BEFORE US. TH E RELEVANT FACTS HAVE BEEN NOTED BY THE ASSESSING OFFICER IN PAGE 2 OF HIS ORDER WHICH ARE REPRODUCED BELOW FOR READY REFERENCE :- IN THE PROFIT AND LOSS ACCOUNT FILED ALONGWITH THE RETURN OF INCOME, THE ASSESSEE HAS DEBITED A SUM OF RS.43,05, 769/- TOWARDS TRAVELLING EXPENSES. FROM THE DETAILS FILE D, IT REVEALS THAT THE ASSESSEE HAS INCURRED A SUM OF RS.37,36,401/- TOWARDS FOREIGN TOUR AND TRAVELS. D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ITA-3489/DEL/2007 3 ASKED TO FURNISH THE DETAILS OF FOREIGN TRAVEL MADE WITH SUPPORTING DOCUMENTARY EVIDENCES. FROM THE DETAILS FILED, IT IS SEEN THAT THE ASSESSEE HAS INCURRED A SUM OF RS.5,31,313/- TOWARDS FOREIGN TRAVEL EXPENSES OF MR S. DIVIYA MANAKTALA, WIFE OF SHRI VIKASH MANAKTALA PAR TNER OF THE FIRM FROM 01.06.2003 TO 16.06.2003 FOR HER FORE IGN TRAVELING FROM NEW DELHI TO PARIS AND A SUM OF RS.1,46,943/- TOWARDS FOREIGN TRAVEL EXPENSES OF SH . TILAK RAJ MANAKTALA, FATHER OF SH. VIKASH MANAKTALA PARTN ER OF THE FIRM FROM 21.07.2003 TO 28.07.2003 FOR FOREIGN TRAVELLING FROM NEW DELHI TO BANGKOK, HONGKONG ETC. IT IS FURTHER SEEN THAT MRS. DIVIYA MANAKTALA AND SH. TIL AK RAJ MANAKTALA ARE NEITHER AN EMPLOYEE NOR ASSOCIATED CL OSELY WITH THE ASSESSEES BUSINESS. IT WAS ALSO NOT DOCU MENTARY PROVED THAT THEY HAVE ANY ACTIVE ROLE OF ASSESSEES BUSINESS. THE FOREIGN VISIT OF MRS. DIVIYA MANAKTA LA AND SH. TILAK RAJ MANAKTALA TO PARIS AND BANGKOK, HONGK ONG HAS NO BUSINESS RELATION WITH THE ASSESSEE. IT WAS ALSO NOT PROVED WITH ANY DOCUMENTARY EVIDENCES ABOUT THE BUSINESS GENERATED BY MRS. DIVIYA MANAKTALA AND SH. TILAK RAJ MANAKTALA FROM PARIS, BANGKOK AND HONGKONG DURI NG HER VISIT. AS THE BUSINESS EXIGENCY WAS NOT PROVED IN RELATION TO THE EXPENSES INCURRED, THE FOREIGN TRAV ELLING OF MRS. DIVIYA MANAKTALA AND SH. TILAK RAJ MANAKTALA D EBITED AT RS.6,78,256/- UNDER THE HEAD TRAVELLING EXPENSES IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE IS DISALLOW ED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 6. THE ABOVE ORDER OF THE ASSESSING OFFICER HAS BEE N UPHELD BY THE LEARNED CIT(A). AT THE TIME OF HEARING BEFORE US A LSO, THE ASSESSEE HAS NOT PRODUCED ANY DOCUMENTARY EVIDENCE TO ESTABLISH THAT SMT. DIVIYA MANAKTALA AND SHRI TILAK RAJ MANAKTALA PARTICIPATED IN THE TRADE FAIRS AND ASSISTED THE EMPLOYEES OF THE ASSESSEE IN SUCH TRADE FAIRS. THE DETAILS OF THE FOREIGN TRAVEL EXPENSES IS A CHART P REPARED BY THE ASSESSEE ITSELF IN WHICH PURPOSE OF THE VISIT IS ME NTIONED AS BUSINESS. HOWEVER, HOW IT IS FOR THE PURPOSE OF BUSINESS IS N OWHERE ESTABLISHED. MERELY BECAUSE IN A CHART WHICH GIVES THE DETAILS O F THE NAME OF THE PERSON, THE COUNTRY WHERE TRAVELLED, DATE OF TRAVEL LING AND THE AMOUNT OF EXPENDITURE INCURRED, THE PURPOSE OF VISIT IS ME NTIONED AS BUSINESS, WILL NOT ESTABLISH THAT THE VISIT WAS FOR THE PURPO SE OF BUSINESS. THE ITA-3489/DEL/2007 4 ASSESSEE HAS TO ESTABLISH THE SAME BY INDEPENDENT E VIDENCE WHICH HAS NOT BEEN PRODUCED. THEREFORE, WE UPHOLD THE OR DERS OF AUTHORITIES BELOW ON THIS POINT AND REJECT GROUND NO.1 OF THE A SSESSEES APPEAL. 7. GROUND NO.2 OF THE ASSESSEES APPEAL READS AS UN DER:- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(APPEALS) ERRED IN LAW IN UPHOLDING THE FINDINGS OF THE ASSESSING OFFICER THAT INTEREST INCOME TOTAL ING RS.14,23,983/- EARNED ON FDRS AS INCOME FROM OTHER SOURCES AS AGAINST THE CLAIM OF THE ASSESSEE THAT I T IS A BUSINESS INCOME AND CONSEQUENTLY THE CLAIM OF DEDUC TION U/S 80HHC ON THIS INCOME HAS WRONGLY BEEN DISALLOWE D. 8. AT THE TIME OF HEARING BEFORE US, LEARNED COUNSE L FOR THE ASSESSEE REQUESTED FOR WITHDRAWAL OF THIS GROUND. THE SAME IS PERMITTED AND GROUND NO.2 OF THE ASSESSEES APPEAL IS REJECTED AS WITHDRAWN. 9. GROUND NOS.3, 4 & 5 OF THE ASSESSEES APPEAL REA D AS UNDER:- 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED CIT(APPEALS) ERRED IN LAW BY REJECTING THE ASSESSEES PLEA THAT THE AMENDMENT OF THE TAXATION LAWS (SECOND AMENDMENT) BILL NO.155 OF 2005 WITH RETROSPECTIVE EFFECT AND CUT OFF WITH RESPECT TO EX PORT TURNOVER EXEMPTION LIMIT OF RS.10 CRORES IS UNCONST ITUTIONAL AND THEREFORE BAD IN LAW. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE TAXATION LAWS (SECOND AMENDMENT) BILL NO.155 OF 200 5 HAS WRONGLY BROUGHT ON RECORD THE DIFFERENTIATION U NDER THE HEAD EXPORT BENEFITS BETWEEN DEPB SCHEME AND DU TY DRAWBACK SCHEME. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) ERRED IN LAW BY REJECTING THE ASSESSEES PLEA THAT DEDUCTION U/S 80HHC HAS WRONGL Y BEEN REDUCED BY RS.37,25,652/- IN VIEW OF TAXATION LAWS ITA-3489/DEL/2007 5 (SECOND AMENDMENT) BILL NO.155 OF 2005 WHICH HAS BE EN BROUGHT ON STATUE RETROSPECTIVELY. 10. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE SIDES AND WE FIND THESE GROUNDS TO BE COVERED IN FAVOUR OF THE ASSESS EE BY THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2003-04 VIDE W.P. (C) 612/2008, WHE REIN HON'BLE HIGH COURT HELD AS UNDER:- 1. LEARNED COUNSEL FOR THE REVENUE STATES THAT IN VIEW OF THE ORDER DATED 30 TH MARCH, 2015 PASSED BY THE SUPREME COURT IN SLP (CIVIL) 9273/2013 COMMISSIONER OF INCOME TAX-5 V. M/S AVNI EXPORTS THE EXEMPTION UNDE R SECTION 80 HHC OF THE INCOME TAX ACT 1961 (ACT) C ANNOT BE DENIED TO THE PETITIONER FOR ASSESSMENT YEAR (AY ) 2003- 04 IN TERMS OF THE 3 RD AND 4 TH PROVISOS TO SUB-SECTION (3) THEREOF ON THE GROUND THAT THE PETITIONERS EXPORT TURNOVER FOR THE SAID AY EXCEEDED RS.10 CRORES. 2. IN THAT VIEW OF THE MATTER, THE WRIT PETITION IS ALLOWED AS PRAYED FOR. CONSEQUENT THERETO, THE ASSESSING O FFICER IS DIRECTED TO GRANT APPROPRIATE RELIEF IN TERMS OF SE CTION 80 HHC OF THE ACT TO THE PETITIONER FOR THE AY 2003-04 . 11. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF HO N'BLE JURISDICTIONAL HIGH COURT, WE DIRECT THE ASSESSING OFFICER TO GRAN T APPROPRIATE RELIEF IN TERMS OF SECTION 80HHC OF THE ACT TO THE ASSESSE E FOR THE YEAR UNDER APPEAL AS DIRECTED BY HON'BLE JURISDICTIONAL HIGH COURT IN ASSESSMENT YEAR 2003-04. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 29.06.2016 . SD/- SD/- (KULDIP SINGH (KULDIP SINGH (KULDIP SINGH (KULDIP SINGH ) )) ) ( (( ( G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VK. ITA-3489/DEL/2007 6 COPY FORWARDED TO: - 1. APPELLANT : M/S COSMIQUE GLOBAL, M/S COSMIQUE GLOBAL, M/S COSMIQUE GLOBAL, M/S COSMIQUE GLOBAL, A AA A- -- -17, NARAINA INDUSTRIAL AREA, PHASE 17, NARAINA INDUSTRIAL AREA, PHASE 17, NARAINA INDUSTRIAL AREA, PHASE 17, NARAINA INDUSTRIAL AREA, PHASE- -- -II IIII II, ,, , NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. 2. RESPONDENT : DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -27(1), NEW DELHI. 27(1), NEW DELHI. 27(1), NEW DELHI. 27(1), NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR