Addl. CIT, New Delhi V. M/s. MMTC Ltd., New Delhi

ITA 3576/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1068 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 05-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 201; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI O.P. KANT, ACCOUNTANT MEMBER ITA . NO. 2207 /DEL/20 1 7 ASSESSMENT YEAR S 201 2 - 13 M/S. MMTC LIMITED, CORE-1, SCOPE COMPLEX, LODHI ROAD, 7, INSTITUTIONAL AREA, NEW DELHI - 110003 V. ADDL. CIT, SPL. RANGE-6, C.R. BUILDING, NEW DELHI-110003 TAN/PAN: AAACM1433E (A SSESSEE ) (REVENUE) ITA . NO. 3576/DEL/2017 ASSESSMENT YEARS 2012 - 13 ADDL. CIT, SPL. RANGE-6, C.R. BUILDING, NEW DELHI-110003 V. M/S. MMTC LIMITED, CORE-1, SCOPE COMPLEX, LODHI ROAD, 7, INSTITUTIONAL AREA, NEW DELHI - 110003 TAN/PAN: AAACM1433E (REVENUE) (A SSESSEE ) A SSESSEE BY: MS. DEEPASHREE RAO, CA SHRI VIBHU GUPTA, CA SHRI ROHIT JAIN, ADVOCATE RE VENUE BY: MS. RAKHI VIM AL, SR. DR DATE OF HEARING: 0 9 0 1 20 20 DATE OF PRONOUNCEMENT: 20 03 20 20 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID CROSS APPEAL HAS BEEN FILED BY THE AS SESSEE AS WELL AS BY THE REVENUE AGAINST IMPUGNED ORDER DA TED ITA NO.2207 & 3576/DEL/2017 2 28.03.2017 PASSED BY LD. CIT (APPEALS)-6, DELHI FOR THE QUANTUM ASSESSMENT PASSED U/S. 143(3) R.W.S 92CA(3) OF THE ACT FOR THE ASSESSMENT YEAR 2012-13. 2. IN ASSESSEES APPEAL, THE ASSESSEE HAS CHALLENGE D THE DISALLOWANCE OF RS.15,96,083/- TOWARDS TRAVELLING E XPENSES; WHEREAS, THE REVENUE HAS CHALLENGED THE DELETION OF DISALLOWANCE OF RS.13,44,93,968/- MADE U/S. 14A OF THE ACT READ WITH RULE 8D. 3. IN SO FAR AS, THE ASSESSEES APPEAL IS CONCERNED , THE FACTS IN BRIEF ARE THAT, THE ASSESSEE IS A PUBLIC LIMITED COMPANY AND GOVERNMENT OF INDIA PUBLIC SECTOR ENTERPRISES UNDER MINISTRY OF COMMERCE. IT IS INVOLVED IN TRADING AND IMPORT A ND EXPORT OF VARIOUS BULK COMMODITIES, SUCH AS METALS/MINERAL S, NON- FERROUS METALS, FERTILIZERS, AGRO PRODUCTS, GENERAL TRADE AND HYDROCARBONS, ETC. IT IS ALSO INTO IMPORT OF GOLD A ND SILVER UNDER OGL AND ALSO INTO MANUFACTURING OF GOLD AND S ILVER ITEMS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE DEBITED SUM OF RS.1,59,60,8 35/- ON ACCOUNT OF TRAVELLING EXPENSES. THE ASSESSEE WAS RE QUIRED TO FURNISH THE BIFURCATION AND DETAILS OF THESE EXPENS ES INCURRED BY THE DIRECTORS, WHICH AS PER THE AO, THE ASSESSEE HAS FAILED TO FURNISH THE SAME AND ACCORDINGLY, HE HELD THAT I N ORDER TO PREVENT THE LEAKAGE OF REVENUE, 10% OF THE SAID EXP ENSES ARE TO BE DISALLOWED. 4. THE ASSESSEE BEFORE THE CIT(A) REBUTTED THE FIND ING OF THE ASSESSING OFFICER AND SUBMITTED THAT DURING THE COURSE OF ITA NO.2207 & 3576/DEL/2017 3 ASSESSMENT PROCEEDING THE AO HAD ASKED ONLY TO FURN ISH THE DETAILS OF FOREIGN VISIT EXPENSES WHICH WERE DULLY SUBMITTED VIDE LETTER DATED 22.12.2015, WHICH INCLUDES EXPENS ES INCURRED BY THE EMPLOYEES AS WELL AS DIRECTORS. THE RELEVANT QUERY AND THE REPLY HAVE ALSO BEEN REPRODUCED IN IM PUGNED APPELLATE ORDER AT PAGES 12 AND 13. IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE COMPANY IS A GOVE RNMENT OF INDIA UNDERTAKING AND BUSINESS OF THE ASSESSEE B EING INTO INTERNATIONAL TRADE, IMPORT AND EXPORT, THEREFORE, FOREIGN TRAVELLING IS PART AND PARCEL OF THE ASSESSEES BUS INESS. NO SUCH DISALLOWANCE WAS EVER MADE IN THE EARLIER YEAR . ALL THE REQUISITE INFORMATION WAS AGAIN FILED BEFORE THE CI T (A). 5. HOWEVER, THE LD. CIT (A) HAS CONFIRMED THE A DDITION ON THE GROUND THAT THE DETAILS DO NOT CLARIFY THE PERI OD FOR WHICH THE PRESENCE OF AN OFFICIAL WAS REQUIRED FOR COMPAN Y RELATED WORK AND THE PERIOD THE OFFICIAL STAYED ON TOUR AFT ER COMPLETION OF OFFICIAL WORK. 6. BEFORE US LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT ENTIRE DETAILS WERE FURNISHED BEFORE THE AO AS WELL AS BEFORE THE LD. CIT (A) REGARDING FOREIGN TRAVEL OF THE DIR ECTORS AND EMPLOYEES AND DETAILED CHART WAS FURNISHED BEFORE T HE ASSESSING OFFICER, THE COPY OF WHICH IS APPEARING I N THE PAPER BOOK AT PAGES 52 TO 54. IN THE SAID CHART, THE ASSE SSEE HAS GIVEN THE DETAILS OF EMPLOYEES, LIKE NAMES AND DESI GNATIONS OF EMPLOYEES, COUNTRY VISITED, PERIOD OF VISIT, TA, DA PAID AND FURTHER DETAILS OF EXPENDITURE OF AIR FARE, MISCELL ANEOUS ITA NO.2207 & 3576/DEL/2017 4 EXPENSES, ETC. AFTER FURNISHING OF SUCH VOLUMINOUS DETAILS, SUCH KIND OF AD-HOC DISALLOWANCE CANNOT BE MADE. FU RTHER, IT WAS STATED THAT OUT OF RS.1,59,60,835/-, SUM OF RS.51,75,511/- WAS DOMESTIC TRAVELLING EXPENSES AND BALANCE FOR FOREIGN TRAVELLING. THE REASONING GIVEN BY THE LD. CIT (A) FOR CONFIRMING THE ADDITION IS PURELY VAGUE AND CAN NOT BE SUSTAINED. 7. ON THE OTHER HAND, THE LD. DR, SUBMITTED THAT, F IRST OF ALL, AS PER THE AO, NO PROPER DETAILS WERE GIVEN; A ND SECONDLY, THE LD. CIT (A) HAS SPECIFICALLY STATED THAT THE DE TAILS DO NOT CLARIFY THE PERIOD FOR WHICH THE PRESENCE OF THE OF FICIAL WAS REQUIRED FOR COMPANY RELATED WORK. IN THE ABSENCE O F SUCH DETAILS, AD-HOC DISALLOWANCE IS JUSTIFIED. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS STATED AB OVE, THE ASSESSEE COMPANY IS A PUBLIC SECTOR UNDERTAKING UND ER MINISTRY OF COMMERCE WHICH IS MAINLY A TRADING ORGA NISATION INVOLVED IN THE IMPORT AND EXPORT OF VARIOUS BULK C OMMODITIES INCLUDING EXPORT AND IMPORT OF GOLD AND SILVER ITEM S. SINCE, THE TRADE OF THE ASSESSEE IS BASICALLY FORMED OF IN TERNATIONAL TRADE; THEREFORE, ITS OFFICIALS WERE REQUIRED TO TR AVEL ABROAD FOR THE PURPOSE OF BUSINESS. BEING A PUBLIC SECTOR UNDE RTAKING, THE FOREIGN VISITS BY THE DIRECTORS AND ITS EMPLOYE ES CANNOT BE HELD TO BE FOR NON-BUSINESS PURPOSE, SPECIFICALLY, WHEN THE COMPANY IS UNDER THE ADMINISTRATIVE CONTROL OF MINI STRY OF COMMERCE, GOVT. OF INDIA. ON A PERUSAL OF THE DETAI LS FILED BEFORE THE AO, IT IS SEEN THAT THE ASSESSEE HAS GIV EN DETAILS OF ITA NO.2207 & 3576/DEL/2017 5 FOREIGN VISIT EXPENSES, WHICH INCLUDES NAME AND DES IGNATIONS, COUNTRY VISITED, TA-DA CLAIMED, MISCELLANEOUS EXPEN SES, AIR FARE, ETC. THESE FOREIGN TRAVELS HAVE BEEN FOR THE TRADING PURPOSE, CONFERENCES, TRAINING ETC. ONCE THE ASSESS EE HAS GIVEN VERY SPECIFIC DETAILS OF EACH AND EVERY EMPLO YEE, THEN WITHOUT POINTING OUT ANY SPECIFIC DISCREPANCY, NO DISALLOWANCE CAN BE MADE. APART FROM THAT, THE REAS ONING GIVEN BY THE LD. CIT (A), WHETHER THE PRESENCE OF O FFICIALS WAS REQUIRED OR NOT AND HOW MUCH THAT OFFICIAL HAS OVER STAYED AFTER COMPLETION OF THE OFFICIAL WORK IS ONLY BASED ON PRESUMPTION AND SURMISE WHICH CANNOT BE UPHELD WHEN THE EMPLOYEES AND DIRECTORS WERE GOING OFFICIAL PURPOSE . BEING A PSU AND UNDER AEGIS OF GOI, THERE CANNOT BE AN ELEM ENT OF PERSONAL USE OF THE COMPANY AND THEREFORE, SUCH AD- HOC DISALLOWANCE CANNOT BE MADE AND SAME IS DIRECTED TO BE DELETED. 9. IN THE REVENUES APPEAL, THE ONLY ISSUE INVOLVE D IS DISALLOWANCE U/S. 14A R.W.R 8D. THE FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY HAS SHOWN AN INVESTMENT OF RS.4606 .33 MILLION. THE LD. AO NOTED THAT THE ASSESSEE HAS NOT DONE ANY CALCULATION OF DISALLOWANCE U/S 14A. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT THE ASSES SEE COMPANY HAS NOT EARNED ANY EXEMPT INCOME DURING THE YEAR AND NO DEDUCTION OF EXPENSES OF WHATSOEVER NATURE H AS BEEN CLAIMED BY THE ASSESSEE IN ITS RETURN OF INCOME FIL ED DURING THE YEAR. THEREFORE, NO DISALLOWANCE COULD BE MADE. HOWEVER, THE LD. AO HAS MECHANICALLY INVOKED RULE-8D FOR MAK ING THE ITA NO.2207 & 3576/DEL/2017 6 DISALLOWANCE OF RS.13,44,93,986/-. 10. THE LD. CIT(A) RELYING UPON THE EARLIER ORDER O F AY 2011- 12 PASSED BY THE CIT(A) HAS DECIDED THIS ISSUE IN F AVOUR OF THE ASSESSEE. 11. BOTH THE PARTIES AGREED THAT THERE IS NO EXEMPT INCOME EARNED BY THE ASSESSEE. THE LD. COUNSEL SUBMITTED T HAT WHENCE THERE IS NO EXEMPT INCOME, THEN THERE IS NO QUESTION OF DISALLOWANCE OF U/S. 14A. NOW, IT IS A WELL SETT LED PROPOSITION UNDER THE JURISDICTION OF HONBLE JURIS DICTIONAL DELHI HIGH COURT IN VIEW OF CIT VS CHEMINVEST LTD. (2015) 378 ITR 33 (DEL.) AND CIT VS HOLCIM INDIA PVT, LTD. I N ITA NO.486/2014 , THAT WHEN ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME THEN NO DISALLOWANCE U/S 14A CAN BE TRIGGERED. THEREFORE, THE DISALLOWANCE U/S 14A MADE BY THE AO SANS ANY EXEMPT INCOME IS DELETED. 12. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. 13. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH MARCH, 2020. SD/- SD/ - [O. P. KANT] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 20.03.2020 F{X~{T? FA CF ITA NO.2207 & 3576/DEL/2017 7 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR