The ACIT, Circle-1, JAMNAGAR V. M/s. Peshawariya Exports Pvt. Ltd., JAMNAGAR

ITA 360/RJT/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9521 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 16-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 31-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Keywords: Earning of tax free income; Proportionate interest

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBULAL , RAJKOT BENCH: RAJKOT . . , , BEFORE SHRI N.S.SAINI , A CCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER . / ITA . NO . 360 /RJT/201 2 WITH CONO.24/ RJT /2012 ( / ASS TT YEAR : 200 9 - 20 1 0 ) ACIT, CIR.1 JAMNAGAR. / VS. PESHAVARIYA EXPORTS P. LTD. SHED NO.B - 15, GIDC, STU JAMNAGAR. / APPELLANT BY : SHRI AVINASH KUMAR, DR / RESPONDENT BY : SHRI MEHUL RANPURA, CA / DATE OF HEARING 16 - 2 - 2015 / DATE OF PRONOUNCEMENT 18 - 2 - 2015 / O R D E R PER BENCH TH IS APPEAL FILED BY THE REVENUE AND CROSS - OBJECTION BY THE ASSESSEE ARE AGAINST THE ORDER OF THE CIT(A), JAMNAGAR DATED 26.3.2012. 2. SOLE GROUND OF APPEAL TAKEN BY THE REVENUE IN THE APPEAL IS THAT THE CIT(A)ERRED IN DELETING THE ADDITION OF RS.15,73,710/ - ON ACCOUNT OF DISALLOWANCE U/S.14A FOR INTEREST EXPENSES. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AU THORITIES, AND MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE AO DISALLOWED PROPORTIONATE INTEREST OF RS.15,37,310/ - UNDER SECTION 14A, AS THE ASSESSEE HAD SHOWN EXEMPT INCOME OF RS.1,27,553/ - BEING DIVIDEND INCOME OF RS.53,519/ - , UTI INTEREST INC OME OF RS.65,611/ - AND SHORT TERM CAPITAL GAIN OF R S.8,423/ - , AND THE INVESTMENT IN EXEMPTED INCOME ASSETS AT RS.545.53 LAKHS. 4 . ON APPEAL, THE CIT(A) DELETED THE ABOV E ADDITION BY OBSERVING THAT THE INTEREST FREE OWN FUNDS AVAILABLE WITH THE ASSESSEE WA S RS. 1444.69 LAKHS WHICH WAS MORE THAN INVESTMENT IN EXEMPTED INCOME ASSETS, AND NO NEXUS BETWEEN THE INTEREST BEARING BORROWED FUNDS AND INVESTMENT IN EXEMPTED INCOME ASSETS WAS BROUGHT ON RECORD. 5 . THE DR COULD NOT POINTED OUT ANY SPECIFIC ERROR IN THE ORDER OF THE CIT(A). 6 . WE FIND THAT THE ORDER OF THE CIT(A) IS IN CONSONANCE WITH THE RECENT DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CIT VS. SUZLON ENERGY LTD. IN TAX APPEAL NO.2 2 3 OF 2013 ORDER DATED 3.4.2013, AND ALSO THE DECISION IN THE CASE OF CIT VS. GUJARAT STATE FERTILIZERS AND CHEMICALS LTD., (2013) 3 58 ITR 325 AS WELL AS IN THE CASE OF CIT VS. GUJARAT NARMADA VALLEY FERTILIZERS COMPANY LTD., (2014) 221 T AXMANN 47 9 . WE, THEREFORE, DO NOT FIND ANY GOOD REASON TO INTERFERE WITH TH E O R DER OF THE C IT(A). ACCORDINGLY, THIS GROUND OF THE APPEAL OF THE REVENUE IS DISMISSED. CO NO. 24/RJT/2012 (ASSERSSEE S CO) 7 . IN THE CROSS OBJECTION FILED BY THE ASSESSEE, THE SOLE GROUND OF THE CROSS OBJECTION IS THAT THE CIT(A) IS ERRED IN CONFIRM ING THE DISALLOWANCE OF FOREIGN TOUR EXPENSES OF RS.1,46,302/ - MADE BY THE AO ALLEGING THAT PERSONAL ELEMENT IS INVOLVED. 8 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE OR D ERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THA T THE ASSESSEE CLAIMED FOREIGN TOUR EXPENSES OF RS.6,94,719/ - IN THE PROFIT & LOSS ACCOUNT, AND THE AO ASKED THE ASSESSEE TO FURNISH THE DETAILS OF TOURS, PERSONS, PURPOSE OF TOUR ETC., THE ASSESSEE EXPLAINED THAT THEY EXPORT GOODS TO EUROPEAN COUNTRIES AND FOREIGN TOUR EXPENSES WERE NECESSITATED FOR PRE AND POST EXPORT BUSINESS FOR OBTAINING AND EX E CUTING VARIOUS ORDERS AND THE EXPENSES RELATED TO TRAVELING AIR FAR E PAID FOR THE SENIOR EXECUTIVES AND TECHNICAL STAFF. THE AO ON EXAMINING THE DETAILS FOUND THAT THE TOUR WAS CARRIED OUT BY THE DIRECTORS WITH FAMILY MEMBERS AND PERSONAL ELEMENT IN THE EXPENDITURE, THEREFORE, CANNOT BE RULED OUT. HE OBSERVED THAT THE A SSESSEE COULD NOT FURNISH EVIDENCE TO SUBSTANTIATE ITS CLAIM OF EXC LUSIVE BUSINES S TOU R , AND THE ASSESSEE ALSO DID NOT PRODUCE ANY FURTHER PAPERS/DOCUMENTS, IN SUP PORT OF ITS CLAIM THAT IT WAS EXCLUSIVELY FOR BUSINESS PURPOSE. HE, THEREFORE, OBSERVED THAT PERSONAL ELEM E NT IN THE EXPENDITURE WAS INVOLVED AND ESTIMATED THE EXPENDITURE ON ACCOUNT OF PERSONAL ELEM E NT AT 1/3 RD OF THE TOTAL EXPENSES INCURRED ON FOREIGN TOUR EXPENSES, AND THEREBY ADDED A SUM OF RS.1,46,302/ - TO THE INCOME OF THE ASSESSEE. 9 . ON APPEAL, THE CIT(A) OBSERVED THAT THE ASSESSEE HAS NOT DENIED THAT THE PERSON S FOR WHOM FOREIGN TRAVEL EXPENDITURE HAS BEEN INCURRED ARE NEI T HER DIRECTORS NOR ITS EMPLOYEES. HE OBSERVED THAT THE DISALLOWANCE WAS MADE BY THE AO ON ACCOUNT OF PERSONAL ELEM E N T IN THE EXPENDITURE AS FOREIGN TOUR WAS CARRIED OUT BY THE DIRECTORS WITH FAMILY MEMBERS. THE ASSESSEE COULD NOT PRODUCE EVIDENCE TO SUBSTANTIATE ITS CLAIM FOR EXCLUSIVE BUSINESS TOUR. HE OBSERVED THAT TAKING FAMILY MEMBERS ON FOREIGN TOUR, WHO HAD NO EXPERIENCE IN THE FIELD, CLEARLY SHOWED THAT THE EXPENDITURE WAS NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSE SSEE. HE ALSO OBSERVED THAT IN THE CASE OF M/S.JAY INDUSTRIES FOR THE ASSTT.YEAR 2005 - 06, HIS PREDECESSOR CIT(A) VIDE ORDER NO.CIT(A)/JAM/165/07 - 08 DATED 21.6.2010 HAS CONFIRMED DISALLOWANCE OF FOREIGN TRAVEL EXPENSES MADE BY THE AO, AND THE RAJKOT BENCH OF THE TRIBUNAL IN ITA NO.1116 & 1241/RJT/2010 FOR A.Y.2005 - 06 & 2006 - 07 CONFIRMED THE ORDER OF THE CIT(A). HE, THEREFORE, DISMISSED THE GROUND OF THE APPEAL OF THE ASSESSEE. 1 0 . WE FIND THAT NO SPECIFIC ERROR COULD BE POINTED OUT BY THE AR OF THE ASSESSEE IN THE ORDER OF THE CIT(A(). FURTHER, NO EVIDENCE WAS PRODUCED BEFORE US TO DEMONSTRATE THAT THE EXPENDITURE CLAIMED ON ACCOUNT OF FOREIGN TOUR EXPENSES WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BU S IN E SS OF THE ASSESSEE. FURTH E R, NO MATERIAL WAS ALSO BROUGHT ON RECORD TO SHOW THAT TH E DISALLOWANCE OF R S.1,46,302/ - WAS MORE THAN THE ACTUAL EXPENDITURE INCURRED ON FOREIG N TOUR OF FAMILY MEMBERS. THEREFORE, WE FIND NO GOOD REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), WHICH IS HEREBY CONFIRMED AND THE GRO U ND OF THE CROSS OBJECTION O F THE ASSESSEE IS DISMISSED. 11 . IN THE RESULT, APPEAL OF THE REVENUE AS WELL AS CROSS OBJECTION OF THE ASSESSEE, BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON WEDNESDAY THE 18 TH DAY OF FEBRUARY, 2015 AT RAJKOT. SD/ - SD/ - ( ) / ( KUL BHARAT ) / JUDICIAL MEMBER ( . . ) ( N.S. SAINI ) / ACCOUNTANT MEMBER RAJKOT; DATED 18 / 0 2 /20 1 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - 5. , , /DR,ITAT, RAJKOT 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, RAJKOT