SCIL CAPITAL INDIA P.LTD, MUMBAI V. DCIT (OSD)RG 3(1), MUMBAI

ITA 3642/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8661 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 01-08-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 12-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Assessee Lawyers: J D MISTRI
• Keywords: Gift; Corroborative evidences
• Section: 143(3); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH G, MU MBAI BEFORE SHRI P.K. BANSAL, VICE-PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 3642/MUM/2015 (ASSESSMENT YEAR-2010-11) SCIL CAPITAL INDIA LTD. 21, MITTAL CHAMBERS, 228, NARIMAN POINT, MUMBAI-400021. PAN: AAACS8065J VS. DCIT(OSD), CIRCLE-3(1), AAYAKAR BHAVAN, MAHARSHI KARVE MARG, MUMBAI- 400020. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI J.D. MISTRI SR. ADVOCATE REVENUE BY : SHRI V. JUSTIN (SR. DR) DATE OF HEARING : 23.10.2017 DATE OF PRONOUNCEMENT : 13.11.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF THE I NCOME-TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-8 , MUMBAI DATED 27.02.2016 FOR ASSESSMENT YEAR (AY) 2010-11. THE AS SESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1.1 THE LD. CIT (APPEALS) HAS ERRED IN CONFIRMING THE D ISALLOWANCE OF EXPENDITURE ON FOREIGN TRAVEL, BOARDING AND LODGING AMOUNTING TO RS.22,72,588/-. 1.2 THE LD. CIT (APPEALS) HAS ERRED IN CONFIRMING THE D ISALLOWANCE OF EXPENDITURE ON GIFTS AMOUNTING TO RS. 1,45,650/-. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A NON-BANKING FINANCE COMPANY, TRADING IN COTTON BALES & HERBS FILED ITS RETURN OF INCOME FOR ITA NO. 3642/M/2015- SCIL CAPITAL INDIA LTD. 2 RELEVANT AY ON 15.10.2010 DECLARING TOTAL INCOME OF RS. 1,24,19,812/-. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF TH E ACT ON 11.03.2013. THE ASSESSING OFFICER (AO) WHILE FRAMING THE ASSESS MENT ORDER BESIDES THE OTHER ADDITION AND DISALLOWANCE DISALLOWED A SUM OF RS. 22,72,588/- ON ACCOUNT OF EXPENDITURE ON FOREIGN TRAVEL BOARDING A ND LODGING AND EXPENDITURE ON GIFTS FOR RS. 1,45,650/-. ON APPEAL BEFORE THE LD. CIT(A), BOTH THE DISALLOWANCE WAS CONFIRMED. THUS, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE PRESENT APPEAL IS FILED BEFORE U S. 3. WE HAVE HEARD SH. J.D. MISTRI, LD. SR. ADVOCATE ( LD AR) FOR ASSESSEE A ND SH. V. JUSTINE LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FIRST GRO UND OF APPEAL RELATES TO DISALLOWANCE ON ACCOUNT OF EXPENDITURE ON FOREIGN T RAVEL EXPENSES OF RS.22,72,588/-. THE LD. AR OF THE ASSESSEE ARGUED T HAT AO MADE THE DISALLOWANCE ON ADHOC BASIS. IT WAS ARGUED THAT ASS ESSEE IS ENGAGED IN THE BUSINESS OF NON-BANKING FINANCE COMPANY AND TRADING IN COTTON BALES & HERBS. FOR EXPLORING BUSINESS REVENUE SOME OF THE DIRECTOR OF THE ASSESSEE-COMPANY VISITED VARIOUS COUNTRIES VIZ SOU TH AFRICA, MALASIA AND SINGAPORE. ON THE TOUR AND TRAVEL OF THE DIRECTORS THE ASSESSEE-COMPANY INCURRED EXPENDITURE OF RS. 3,59,551/- ON PURCHASE FOR FOREIGN CURRENCY, FLIGHT TICKET AND VISA CHARGES. THE ASSESSEE-COMPAN Y ALSO INCURRED HOTEL LODGING AND BOARDING OF RS. 19,13,037/-. THE EXPEND ITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE ASSESSEE PROVIDED ITA NO. 3642/M/2015- SCIL CAPITAL INDIA LTD. 3 ALL NECESSARY DETAILS CALLED FOR DURING THE ASSESSM ENT PROCEEDING ALONG WITH NECESSARY EVIDENCES. THE PURPOSE OF FOREIGN TOUR AN D TRAVEL WAS TO ENTER INTO BUSINESS CONTRACTS OF TRADING IN COTTON BALES & HERBS, BOTH DOMESTICALLY AND INTERNATIONAL MARKET. THOUGH, THER E WAS NO BUSINESS IN THE RELEVANT AY. INITIALLY FOREIGN TRIP FOR INTRODUCTIV E PURPOSE AND ULTIMATELY ASSESSEE RECEIVED SUFFICIENT BUSINESS IN SUBSEQUENT YEARS. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2003-04 IN ITA NO. 27 03/MUM/2011 DATED 31.08.2012. 4. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF AUTHORITIES BELOW. IT WAS ARGUED THAT ASSESSEE HAS FURNISHED SELF-SERVING DOCUMENT WHICH HAS NO RELEVANCY WITH THE CLAIM RELA TED WITH FOREIGN TRAVEL EXPENSES. THE ASSESSEE HAS MERELY FURNISHED THE COPY OF VISITING CARDS OF THE PERSONS TO WHOM THE DIRECTORS OF THE A SSESSEE ALLEGEDLY HELD MEETINGS. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE AO DUR ING THE ASSESSMENT PROCEEDING ASKED THE ASSESSEE TO PROVIDE COMPLETE D ETAILS AND EXPENSES OF FOREIGN TRAVEL WITH BILLS AND VOUCHERS AND JUSTIFIC ATION OF BUSINESS PURPOSES. THE ASSESSEE FURNISHED THE DETAILS OF EXP ENSES AS RECORDED BY AO IN PARAGRAPH 9.2 OF THE ASSESSMENT ORDER. THE AO NO T ACCEPTED THE CONTENTION OF ASSESSEE HOLDING THAT ASSESSEE HAS PR OVIDED ONLY BREAK UP OF ITA NO. 3642/M/2015- SCIL CAPITAL INDIA LTD. 4 EXPENSES AND NOT PROVIDED ANY EVIDENCE TO SUBSTANTI ATE THE EXPENSES INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOS E. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE HOLDING THAT ASSESSEE FA ILED TO PROVE THE CORROBORATIVE AND SUPPORTING EVIDENCE. WE HAVE SEEN THAT THE ASSESSEE HAS FURNISHED THE DETAILS OF EXPENDITURE RELATED WITH I TS DIRECTOR MR. MANISH MIRANI, NAYAN MIRANI & TANMAY MIRANI. THE ASSESSEE HAS ALSO PLACED ON RECORD THE DETAILS OF THE PERSONS WITH WHOM THE DIR ECTORS OF THE ASSESSEE- COMPANY HELD BUSINESS MEETING. WE HAVE FURTHER NOTE D THAT SIMILAR DISALLOWANCE ON ACCOUNT OF FOREIGN TRAVEL EXPENSES WAS MADE IN ASSESSEES OWN CASE FOR AY 2003-04 AND THE ASSESSEE FILED APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL ALLOWED THE SIMILAR EXPENDIT URE. CONSIDERING THE DOCUMENTARY EVIDENCES FURNISHED BY AO AND THE ASSES SEE IS MADE EXPORT SALE OF SUBSTANTIAL AMOUNT OF RS. 3,32,91,359/- IN SUBSEQUENT TO THE FOREIGN TRIP OF DIRECTORS OF THE ASSESSEE. THUS, CONSIDERIN G THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2003-04, THE LD. CIT( A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION/DISALLOWANCE. HENCE, THE AD DITION MADE ON ACCOUNT OF DISALLOWANCE OF FOREIGN TRAVEL EXPENSES IS DELET ED. 6. GROUND NO.2 RELATES TO DISALLOWANCE OF GIFT OF RS. 1,45,650/-. THE LD. AR OF THE ASSESSEE ARGUED THAT DURING THE RELEVANT PERIOD , THE REPRESENTATIVE OF ASSESSEE-COMPANY MADE A VARIOUS GIFT ARTICLE LIKE W RITING INSTRUMENT, WALLET ETC TO SENIOR OFFICIALS OF THE COMPANY. THE AO DISALLOWED THE EXPENDITURE INCURRED ON GIFT HOLDING THAT ASSESSEE FAILED TO PROVE THE ITA NO. 3642/M/2015- SCIL CAPITAL INDIA LTD. 5 BUSINESS JUSTIFICATION. THE GIFTS WERE DISTRIBUTED BY THE ASSESSEE-COMPANY TO ITS CUSTOMER, VENDOR TO BUILT HEALTHY BUSINESS RELA TIONSHIP AND THE EXPENSES MADE ON SUCH GIFTS ARE ALLOWABLE UNDER SECTION 37 O F THE ACT. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED U PON THE DECISION OF GARWARE SYNTHETICS (P) LTD. VS. ITO (1982) 2 ITD 17 6 (BOM). ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPORTED THE ORDE R OF AUTHORITIES BELOW. THE LD. DR FOR THE REVENUE FURTHER ARGUED THAT ASSE SSEE HAS NOT FURNISHED ANY RECORD TO PROVE THAT THE SO-CALLED GIFTS WERE G IVEN WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDER OF AUTHORITIES BELOW. THE AO DISA LLOWED THE EXPENSES ON GIFT HOLDING THAT ASSESSEE FAILED TO PROVE THE BUSI NESS JUSTIFICATION FOR SUCH EXPENSES. THE LD. CIT(A) CONFIRMED THE ACTION OF AO ON THE SIMILAR LINE. WE HAVE NOTED THAT THE ASSESSEE HAS FILED THE DETAI LED GIFT ALONG WITH TAX INVOICES OF ENTRACK INTERNATIONAL TRADING PVT. LTD. FOR PURCHASE OF LEATHER WALLET 4CC BLACK, LEATHER NITHT FLIGHT WALLET 4CC W ITH 8775, WRITING INSTRUMENTS GENERATION BP BLACK 13209, BELTS BOWED PALL MAT PIN 9797, BELTS STRUCTURE RUTHENIUM SHINY 38164 FOR RS. 30,00 0/- AND INVOICES OF THE ROSE INTERNATIONAL FOR LLADRO 01007049-ENDLESS LOV E (MRP 12,000/-), LLADRO 01006291-LOVE NEST (MRP 19,000/-), LLADRO 01 006475- HAPPY ANNIVERSARY (MRP RS. 22,000/-) FOR RS. 45,050 /-. ITA NO. 3642/M/2015- SCIL CAPITAL INDIA LTD. 6 8. WE HAVE SEEN THAT THE LOWER AUTHORITIES HAVE NOT DI SPUTED THE GENUINENITY OF PURCHASE OF GIFT. THE DOCUMENTARY EVIDENCES WERE PL ACED BEFORE US WERE FILED BEFORE THE LOWER AUTHORITIES. THE LOWER AUTHO RITIES HAVE NOT GIVEN ANY FINDING ON THE DOCUMENTARY EVIDENCES FURNISHED BY A SSESSEE. CONSIDERING THE NATURE OF GIFT AND OVERALL VALUE OF THE GIFTS. WHEN THE ASSESSEE HAS OFFERED A TAXABLE INCOME OF RS. 1,24,19,812/-,DURIN G THE YEAR THE CLAIM OF GIFTS OF THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH DAY OF NOVEMBER 2017. SD/- SD/- (P.K. BANSAL) (PAWAN SINGH) VICE-PRESIDENT JUDICIAL MEMBER MUMBAI; DATED 13/11/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //UE COPY/