M/s Vardhman Polytex Ltd., Ludhiana V. Addl. CIT, Ludhiana

ITA 385/CHANDI/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68489 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 09-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Assessee Lawyers: SUBHASH AGGARWAL; APJIT ARORA
• Keywords: Revenue expenditure; Capital expenditure
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 385/CHD/2013 ASSESSMENT YEAR:2006-07 M/S VARDHMAN POLYTEX LTD., VS THE ADDL.CIT, 341-K-1, MUNDIAN KHURD, RANGE-1, P.O. SAHABANA, LUDHIANA. CHANDIGARH ROAD, LUDHIANA. PAN NO. AAACV-5821H (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SUBHASH AGGARWAL & SHRI APJIT ARORA RESPONDENT BY : SH J.S.NAGAR DATE OF HEARING : 02.09.2013 DATE OF PRONOUNCEMENT : 20.09.2013 O R D E R PER SUSHMA CHOWLA, J.M. THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDER OF THE CIT(APPEALS)-II, LUDHIANA DATED 13.02.2013 RELATING TO ASSESSMENT YEAR 2006-07 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 ( 'THE ACT' FOR SHORT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LEARNED CIT(A)-LI HAS ERRED IN DISALLO WING A SUM OF RS. 9798/- BY INVOKING PROVISIONS OF SECTION 14 - A OF THE INCO ME TAX ACT. 2. THAT THE LEARNED CIT(A)-II HAS ERRED IN WRONGLY TRE ATING THE FOREIGN TRAVELING EXPENSES OF RS. 3,56,594/- IN THE NAT URE OF CAPITAL EXPENDITURE AS AGAINST REVENUE EXPENDITURE CLAIMED BY APPELLANT. 3. THAT ALTERNATIVELY, THE LEARNED CIT(A)- II HAS ERR ED IN NOT ALLOWING DEPRECATION ON THE CAPITALIZED EXPENDITURE. 2 4. THAT, THE LEARNED CIT(A)- II HAS ERRED IN CONFIR MING THE LEVY OF INTEREST U/S 234 B & 234 C OF THE INCOME TAX ACT. 5. THE APPELLANT CRAVES LEAVE FOR THE PERMISSION TO ADD, AMEND OR ALTER ANY GROUND OF APPEAL AT THE TIME OF HEARING. 3. THE GROUND NO.1 RAISED BY THE ASSESSEE IS NOT PR ESSED. HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 4. THE ISSUE IN GROUND NO.2 RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE OF FOREIGN TRAVELING EXPENSES OF RS. 3 56,594/-. 5. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT D URING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAD DEBIT ED FOREIGN TRAVELING EXPENSES ON ACCOUNT OF FOREIGN TRAVEL UND ERTAKEN BY THE CHAIRMAN-CUM-MANAGING DIRECTOR OF THE ASSESSEE COMP ANY SHRI ASHOK OSWAL. THE ASSESSING OFFICER UNDER PARA 5 AT PAGE 4 OF THE ASSESSMENT ORDER NOTED THAT THE FOREIGN TRAVEL WAS MADE TO DUBAI AND NEPAL. HOWEVER, WHILE REFERRING TO THE DETAILS FIL ED BY THE ASSESSEE, THE TRAVEL IS SHOWN TO BE TO JAPAN, ITALY AND SINGA PORE. THE ASSESSING OFFICER, REJECTING THE EXPLANATION OF THE ASSESSEE THAT THE VISITS WERE MADE IN CONNECTION WITH THE REPLACEMENT OF MACHINERY FOR THE EXISTING BUSINESS, DISALLOWED THE CLAIM OF EXPE NDITURE HOLDING IT TO BE CAPITAL IN NATURE. THE CIT(APPEALS) UPHELD T HE ORDER OF THE ASSESSING OFFICER. 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF T HE CIT(APPEALS). THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE SA ID TRAVELING EXPENSES WERE INCURRED BY THE MANAGING DIRECTOR IN RELATION TO REPLACEMENT OF MACHINERY FOR EXISTING BUSINESS AND WAS DULY ALLOWABLE AS REVENUE EXPENDITURE. THE LD. AR FURTH ER POINTED OUT THAT VISIT TO SINGAPORE WAS MADE FOR TAKING PART IN TEXTILE ASIA MACHINERY EXHIBITION AT SINGAPORE ORGANIZED BY I.T. M.A. 3 7. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON TH E ORDER OF THE CIT(APPEALS). 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING VIDE GROUND NO.2 IS IN RELATION T O CAPITALIZATION OF FOREIGN TRAVEL EXPENSES. THE CMD OF THE ASSESSEE C OMPANY SHRI ASHOK OSWAL HAD VISITED JAPAN BETWEEN 18.04.2005 TO 20.04.2005 AND THE EXPENDITURE INCURRED WAS RS. 145,764/-. FU RTHER, THE VISIT TO ITALY WAS BETWEEN 13.07.2005 TO 17.07.2005 AND THE COST OF EXPENDITURE WAS RS. 81,933/-. THE TWO VISITS WERE MADE IN ORDER TO PURCHASE MACHINERY AS REPLACEMENT TO THE EXISTING M ACHINERY BUT THESE TWO VISITS DID NOT RESULT IN PURCHASE OF THE MACHINERY. WE ARE OF THE VIEW THAT THE SAID EXPENDITURE INCURRED BY T HE ASSESSEE IS IN RELATION TO CARRYING ON OF THE BUSINESS AND IS DULY ALLOWABLE AS REVENUE EXPENDITURE. IN ANY CASE, THERE IS NO MERIT IN CAPITALIZING THE SAID EXPENDITURE AS NO MACHINERY HAS BEEN PURCHASED BY THE ASSESSEE. THE EXPENDITURE HAVING BEEN INCURRED IN DAY-TODAY R UNNING OF THE BUSINESS IS DULY ALLOWABLE AS REVENUE EXPENDITURE. 9. THE LAST ITEM OF EXPENDITURE WAS IN RELATION TO EXPENDITURE AT SINGAPORE BETWEEN 16.10.2005 TO 18.10.2005 AND EXPE NDITURE OF RS. 129,250/- INCURRED FOR THE SAME IS DULY ALLOWABLE A S REVENUE EXPENDITURE. ACCORDINGLY, WE DIRECT THE ASSESSING O FFICER TO ALLOW THE EXPENDITURE OF RS. 356,594/-. THE GROUND NO. 2 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 10. THE GROUND NO. 3 RAISED BY THE ASSESSEE IS AN A LTERNATE TO GROUND NO. 2 AND IN VIEW OF OUR ALLOWING THE GROUND NO.2, THE GROUND OF APPEAL NO. 3 RAISED BY THE ASSESSEE IS DI SMISSED. 4 11. THE GROUND NO. 4 RAISED BY THE ASSESSEE IS AGAI NST CHARGING OF INTEREST UNDER SECTION 234B AND 234C OF THE ACT AND THE SAME BEING CONSEQUENTIAL, THE GROUND OF APPEAL NO. 4 IS DISMIS SED. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF SEPTEMBER, 2013. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 20 TH SEPTEMBER,2013 POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH