Mr. Bhawan Mohan Garg, New Delhi V. DCIT, New Delhi

ITA 3918/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5235 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 08-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R C DANDAY
• Keywords: Capital asset; Depreciation; Business expenditure; Principle of natural justice; Revenue expenditure; Capital expenditure
• Section: 194C

Judgement Text

1 ITA NO. 3918/DEL/2014 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEM BER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A .NO. 3918/DEL/2 014 (A.Y .2008-09) BHAWAN MOHAN GARG C-16, GREEN PARK EXTENSION NEW DELHI AAHPG2084K (APPELLANT) VS DCIT CIRCLE-24(1) NEW DELHI (RESPONDENT) APPELLANT BY SH. VINOD KUMAR BINDAL, CA & SMT. SWEETY KOTHARI. RESPONDENT BY SH. R.C. DANDAY, SR. DR ORDER PER SUCHITRA KAMBLE, JM THE APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 23/05/2014 PASSED BY THE CIT(A)-XXVIII, NEW DELHI. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THE CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ESTIMATED DISALLOWANCE OF INTEREST ON THE NEGATIVE BALANCE OF THE CAPITAL ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S GARG IN DUSTRIES, A DATE OF HEARING 12.06.2017 DATE OF PRONOUNCEMENT 07.08.2017 2 ITA NO. 3918/DEL/2014 PROPRIETARY CONCERN OF THE ASSESSEE IGNORING THE FA CTS AND SUBMISSIONS PLACED ON RECORD TO PROVE THAT (A) INTEREST BEARING FUNDS WERE USED FOR THE PURPOS E OF BUSINESS (B) THAT VARIOUS REAL ESTATE ADVANCES WERE GIVEN TH ROUGH PERSONAL STATEMENT OF AFFAIRS. THUS THE ADDITION SO MADE SHOULD BE DELETED. 2. THE CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMI NG THE DISALLOWANCE OF RS.17,29,436/- OUT OF FOREIGN TRAVEL EXPENSES IG NORING THE FACTS AND EVIDENCES PLACED ON RECORD TO SHOW THAT THE ASS ESSEE IS ENGAGED IN THE BUSINESS OF EXPORT AND THE SAID FORE IGN TRAVEL WERE UNDERTAKEN FOR THE PURPOSE OF BUSINESS. THUS THE A DDITION SO CONFIRMED SHOULD BE DELETED. 3. THE CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMI NG THE DISALLOWANCE OF RS. 78,075/- U/S 40(A)(IA) BEING AMOUNT PAID TOW ARDS TRADE FAIR EXPENSES IGNORING THAT THE SAID AMOUNT WAS NOT LIAB LE TO TAX DEDUCTION AT SOURCE. THUS THE DISALLOWANCE SHOULD BE DELETED. 4. THE CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMI NG THE DISALLOWANCE OF RS. 10,56,025/- PAID TOWARDS THE CERTIFICATION F EES OVER A PERIOD OF 5 YEARS BY HOLDING THAT THE BENEFIT OF THE SA ME SPREADS OVER A PERIOD OF FIVE YEARS IGNORING THE FACTS, EVIDENCES AND SUBMISSIONS PLACED ON RECORD THAT THE SAME IS A REVENUE EXPENSE WHICH HAS TO BE ALLOWED IN THE YEAR OF INCURRENCE I.E. THIS YEAR . THUS THE ADDITION SO MADE SHOULD BE DELETED. 3. THE ASSESSEE IS AN INDIVIDUAL AND CARRYING ON MA NUFACTURING AND EXPORT BUSINESS OF BUILDING HARDWARE & TRADING OF DOOR HIN GES UNDER THE NAME AND STYLE OF PROPRIETORSHIP CONCERNS NAMELY M/S. GARG I NDUSTRIES AND M/S D.P. 3 ITA NO. 3918/DEL/2014 GARG & SONS RESPECTIVELY. DURING THE YEAR THE ASSE SSEE HAS DECLARED TAXABLE INCOME UNDER THE HEAD PROFIT & GAINS FROM BUSINESS AND PROFESSION AND INCOME FROM OTHER SOURCES. ON GOING THROUGH THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT FOR THE ASSESSMENT YEAR UNDER REFERENC E AND FOR IMMEDIATE PRECEDING YEAR IT IS NOTICED THAT THE TOTAL TURNOVE R OF M/S. GARG INDUSTRIES WAS SHOWN FOR ASSESSMENT YEAR 2007-08 AT RS.18,26,26,45 3/- WHICH HAS BEEN INCREASED IN ASSESSMENT YEAR 2008-09 TO RS.19,71,50 ,240/-. THE INCREASE, SHOWN IN TURNOVER AS COMPARED TO THE IMMEDIATE PREC EDING ASSESSMENT YEAR IS 7.95% WHEREAS A PERUSAL OF P & L A/C SHOWS THAT THE ASSESSEE HAS PAID INTEREST AT RS.19,49,889/- IN ASSESSMENT YEAR 2007- 08 WHICH HAS INCREASED TO RS.86,09,999/- IN ASSESSMENT YEAR 2008-09. TOTAL I NCREASE IN INTEREST EXPENDITURE AS COMPARED TO IMMEDIATE PRECEDING YEAR WORKS OUT AT 341.56%. IT IS NOTED THAT THE PROPRIETORS CAPITAL ACCOUNT A S ON 31/3/2008 WAS NEGATIVE BY RS.(-) 1,36,21,274/-, WHEREAS IT WAS AT RS.69,32 ,998/- AS ON 31 ST MARCH 2007. SIMILARLY, SECURED LOAN WAS SHOWN AT RS.9,38 ,87,705/- AS ON 31/3/2007 WHICH HAS INCREASED TO RS.12,38,66,891/- AS ON 31/3/2008. THE ASSESSING OFFICER OBSERVED THAT THE FUNDS OWNED BY THE ASSESSEE WERE INTEREST BEARING FUNDS. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE TRIED TO ESTABLISH THAT INTEREST PAID AT RS. 86,09,999/- IS JUSTIFIED AS THE ASSESSEE HIMSELF DISALLOWED THE INTEREST OF RS. 36,45,862/-. THE ASSESSEE WAS CATEGORICALLY REQUIRED TO EXPLAIN THE BASIS OF ARRI VING AT THE FIGURE OF DISALLOWANCE OF RS. 36,45,862/- ON ACCOUNT OF INTER EST PERTAINING TO THE INTEREST BEARING FUNDS DIVERTED TOWARDS THE SISTER CONCERNS. IN RESPONSE, VIDE REPLY DATED 15.12.2010, THE ASSESSEE FURNISHED PART Y-WISE DETAILS ABOUT THE INTEREST DISALLOWED. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE DID NOT FURNISH ANY EXPLANATION REGARDING THE BASIS OF SUCH DISALLOWANCE. THUS, THE AO DID NOT ACCEPT THE SAME. THE ASSESSING OFFICER FURT HER OBSERVED THAT SINCE THE ASSESSEE FAILED TO ESTABLISH THE BUSINESS EXPEDIENC Y OF INTEREST PAID ABNORMALLY IN EXCESS DURING THE YEAR, THE SAME CANNOT BE ALLOW ED AS BUSINESS EXPENDITURE. THE ABNORMAL INCREASE IN INTEREST EXPE NDITURE IS NOT ON ACCOUNT OF INCREASE IN BUSINESS TURNOVER BUT IT IS AS A RES ULT OF DIVERSION OF HUGE 4 ITA NO. 3918/DEL/2014 INTEREST BEARING FUNDS DURING THE YEAR AND IN PRECE DING YEARS. HOWEVER, THE ASSESSING OFFICER FURTHER HELD THAT FOR THE SAKE OF NATURAL JUSTICE INCREASE IN PAYMENT OF INTEREST IN PROPORTION TO THE INCREASE I N TURNOVER OF THE BUSINESS WAS ALLOWABLE AND THE BALANCE OF INTEREST PAID WAS DISALLOWED. IN THE IMMEDIATE PRECEDING YEAR INTEREST EXPENDITURE WAS S HOWN AT RS. 19,49,889/- AGAINST THE TURNOVER OF RS.18,26,26,453/-. IN THE Y EAR UNDER REFERENCE, TOTAL TURNOVER OF THE BUSINESS WAS INCREASED TO RS. 19,71 ,50,240/-. ACCORDINGLY, INTEREST ALLOWABLE IN PROPORTION TO THE INCREASE IN TURNOVER OF THE BUSINESS WAS WORKED OUT BY THE ASSESSING OFFICER AS UNDER:- RS.19,49,889 X 19,71,50,240 / 18,26,26,453 = RS. 21 ,04,905/- BALANCE OF INTEREST OF RS. 65,05,094 WAS ADDED BACK TO THE TOTAL INCOME BY THE ASSESSING OFFICER. 4. THE ASSESSEE DEBITED TRAVELING EXPENDITURE OF RS . 42,72,862/-. THE ASSESSING OFFICER DISALLOWED THE FOREIGN TOUR EXPEN SES TO THE EXTENT OF RS. 33,50,176/-. AS RELATES TO TDS THE ASSESSING OFFICE R DISALLOWED RS. 78,075/- AND AS RELATES TO ASSESSEES CLAIM UNDER THE HEAD TRADEMARK EXPENSES, THE ASSESSING OFFICER DISALLOWED RS. 9,24,810/-. 5. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING O FFICER, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 6. THE LD. AR SUBMITTED THAT GROUND NO. 1 IS NOT PR ESSED. AS RELATES TO GROUND NO. 2, THE LD. AR SUBMITTED THAT THE ASSESSI NG OFFICER DISALLOWED AN AMOUNT OF RS. 33,50,716 BY HOLDING THAT BUSINESS PU RPOSE OF SOME TRAVELS WAS NOT PROVED AND CIT(A) SUSTAINED THE DISALLOWANCE OF RS. 17,29,436/- FOR THE EXPENSES INCURRED TOWARDS THE FOREIGN TRAVEL TO UK BY ARSHIA GARG, RAMA GARG, VARUN GARG AND ADIYA SINGH AS WELL AS RS. 6,57,593/ - FOR FOREIGN TRAVEL TO USA BY THE ASSESSEE AND MR. RAKESH JINDAL TO USA STATIN G THAT THE ASSESSEE FAILED TO PROVE THE BUSINESS RELATION WITH USA. THE LD. AR SUBMITTED THAT THE CIT(A) HAS ALLOWED THE FOREIGN TRAVEL EXPENSES INCURRED IN CASE OF MR. VARUN GARG 5 ITA NO. 3918/DEL/2014 (TRAVEL 1, 2 AND 5 AS STATED IN CIT(A) ORDER) AND R AMA GARG (TRAVEL 5) FOR THEIR OTHER VISITS TO UK WHEN THEY ACCOMPANIED THE ASSESS EE WHICH SHOWS THAT THIS IS ACCEPTED THAT THEY WERE LOOKING AFTER THE BUSINE SS OF THE ASSESSEE. ALL THESE WERE QUALIFIED TO LOOK AFTER THE BUSINESS. EVIDENCE S REGARDING EDUCATIONAL QUALIFICATION PLACED ON PAGES 199, 200-201 AND 202. FOLLOWING THE SAME COROLLARY THE EXPENSES INCURRED BY THEM TO TRAVEL U K (TRAVEL 3) SHOULD BE ALLOWED. THE LD. AR FURTHER SUBMITTED THAT ARSHIYA GARG HAS A POSTGRADUATE DIPLOMA IN BUSINESS MANAGEMENT AND WAS ALSO LOOKING AFTER THE BUSINESS OF THE ASSESSEE. SHE HAS TO CARRY HER CHILD ADHYA SING H WITH HER TO FULFILL HER RESPONSIBILITIES. CONFIRMATION FROM ALL THE THREE M EMBERS WAS PLACED ON RECORD TO SHOW THAT THEY WERE LOOKING AFTER THE BUSINESS O F THE ASSESSEE DURING THE YEAR. (PAGES 184 -186). THUS THE EXPENSES SHOULD BE ALLOWED IN FULL. AS REL ATES TO TRAVEL EXPENSES OF RS. 6,57,593/- TO USA T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF HINGES. THE ASSESSEE DID NOT EXPORT ANY GOODS TO USA DURING THE YEAR. THE ASSESSEE IS AN EXPORTER AND TH EREFORE HAS TO EXPLORE NEW MARKETS (DETAILS OF EXPORTS GIVE N ON PAGE 187). THE ASSESSEE VISITED USA TO EXPLORE THE MARKET AND PROSPECTIVE BUYERS. COPY OF EMAIL FROM JOHN ABERNETHIE REGARDING MEETING FOR NE W BUSINESS OPPORTUNITIES AT ABBEY TRADING USA ON 08-09/10/2007 IS ENCLOSED A T PAGE 190 OF THE PB. OTHER EMAILS TO SHOW PARTICIPATION OF RAKESH JINDAL IN BUSINESS WITH USA ARE ENCLOSED AT PAGES 197-198 OF THE PB. THESE EVIDENCE S CLEARLY PROVE THAT THE ASSESSEE VISITED USA WITH MR. RAKESH JINDAL TO EXPL ORE NEW BUSINESS AND PROSPECTIVE CLIENTS. IT IS NOT NECESSARY FOR ALLOWA NCE OF FOREIGN TRAVEL EXPENSES THAT IT SHOULD RESULT IN BUSINESS. SOMETIMES THE BU SINESS MEETINGS ARE FRUITFUL AND SOMETIMES NOT. HOWEVER, IN THIS CASE, THE ASSES SEE EXPORTED GOODS TO USA IN FY 2011-12 ONWARDS AS PER DETAILS GIVEN ON PAGE 24 OF CIT(A) ORDER WHICH SHOWS THAT THE MEETING WITH PROSPECTIVE BUYERS IN U SA RESULTED INTO BUSINESS THOUGH IN SUBSEQUENT YEARS. THUS FOREIGN TRAVEL EX PENSES TO VISIT USA WERE INCURRED FOR THE PURPOSE OF BUSINESS AND THEREFORE THE SAME SHOULD BE ALLOWED IN FULL. AS RELATES TO GROUND NO. 3 DISALLOWANCE OF RS. 78,075/- U/S 40(A)(IA) FOR AMOUNT PAID TOWARDS TRADE FAIR EXPENSES, THE LD. AR SUBMITTED THAT A N 6 ITA NO. 3918/DEL/2014 AMOUNT OF RS. 78,075/- WAS PAID TO M/S R.E. ROGERS INDIA (P) LTD. WITHOUT DEDUCTION OF TDS. THE ASSESSING OFFICER HELD THAT T HE SAME WAS LIABLE TO TDS AND DISALLOWED THE SAME U/S 40(A)(IA). (PARA 5 PAGE 8 OF ASSTT. ORDER). THE CIT(A) IGNORED THE SUBMISSIONS OF THE ASSESSEE AND HELD THAT ALL THE EXPENSES ARE COVERED UNDER THE DEFINITION OF HANDLING EXPENS ES AND THEREFORE LIABLE TO TDS. (PARA 7.1 PAGE 31 OF CIT(A) ORDER) THESE EXPENSES WERE INCURRED TOWARDS CARGO EXPENSES FOR SENDING SAMPLES FOR AN E XHIBITION PRACTICAL WORLD 2008 IN COLOGNE GERMANY. THIS AMOUNT INCLUDED REIMB URSEMENT OF AIR FREIGHT CHARGES AND OTHER EXPENSES INCURRED IN CLEARING THE GOODS IN GERMANY WHICH DOES NOT CONSTITUTE PART OF HIS HANDLING CHARGES. C OPIES OF BILLS ARE AT PAGES 207 AND 211 IN PB. COPY OF AIRWAY BILL FOR RS. 37,9 68/- IS ON PAGE 208 WHICH PROVES THAT THE SAID AMOUNT WAS PAID BY R.E.R OGERS ON BEHALF OF THE ASSESSEE AND INCLUDED THE SAID AMOUNT IN ITS BILL F OR REIMBURSEMENT OF THE SAME. PAGE 209 IS THE BILL FOR TERMINAL CHARGES. SI MILARLY, BILL AT PAGE 211 SHOWS THAT THE AMOUNT OF RS. 37,475/- IS TOWARDS RE IMBURSEMENT OF EXPENSES IN FOREIGN CURRENCY. NO TDS IS REQUIRED TO BE DEDUC TED ON REIMBURSEMENT OF EXPENSES. RELIANCE IS PLACED ON THE JUDGMENT IN THE CASE OF CIT VS. DLF COMMERCIAL PROJECT CORPORATION 12015-TIQL-1609-HC-D EL-IT1 DOD; 15/07/15 WHEREIN IT HAS BEEN HELD THAT THE OBLIGATION TO DED UCT TDS IS ONLY WITH RESPECT TO INCOME. AS AMOUNTS PAID AS REIMB URSEMENT OF EXPENSES DO NOT HAVE THE CHARACTER OF INCOME, THERE IS NO OBLIG ATION TO DEDUCT TDS. THUS THE EFFECTIVE AMOUNT PAID TOWARDS HANDLING CHARGES IS RS. 4,477/- INCLUDING TAXES WHICH ARE MUCH BELOW THE THRESHOLD LIMIT OF T DS SPECIFIED IN SECTION 194C. THEREFORE THIS AMOUNT WAS NOT LIABLE TO TDS A ND NO 'DISALLOWANCE U/S 40(A)(IA) CAN BE MADE. AS RELATES TO GROUND NO. 4 D ISALLOWANCE OF RS. 8,45,540/ (80% OF RS. 10,56,925/-) BY ALLOWING THE CERTIFICATION FEES OVER A PERIOD OF 5 YEARS, THE LD. AR SUBMITTED THAT T HE ASSESSEE CLAIMED RS. 10,56,925/- UNDER THE HEAD TRADEMARK EXPENSES. TH E ASSESSING OFFICER HELD THAT TRADEMARK EXPENSES ARE CAPITAL IN NATURE BEING TANGIBLE ASSET WITHOUT APPRECIATING THE NATURE OF EXPENSES. THEREFORE HE H ELD THE SAME AS CAPITAL ASSET AND ALLOWED DEPRECIATION @ 25% THEREON. THE C IT(A) HELD THAT THIS 7 ITA NO. 3918/DEL/2014 AMOUNT PAID FOR CE CERTIFICATION WHICH IS VALID FIV E YEARS. THIS EXPENSE HAS LONG TERM BENEFIT AND THEREFORE DIRECTED TO ALLOW 2 0% OF THE SAID EXPENSE IN EACH OF THE FIVE YEARS FOR WHICH THE CERTIFICATE IS VALID. THIS SHOWS THAT CIT(A) ACCEPTED THE SAID EXPENSE TO BE REVENUE IN NATURE. ANY EXPENSE CAN BE EITHER CAPITAL OR REVENUE. IF IT IS A CAPITAL EXPENDITURE THEN DEPRECIATION HAS TO BE ALLOWED THEREON. HOWEVER, IF IT IS REVENUE EXPENDIT URE THEN THE SAME SHOULD BE ALLOWED IN FULL IN THE YEAR OF INCURRENCE EVEN THOU GH IT PROVIDES LONG TERM BENEFIT. THERE IS NO PROVISION OF DEFERRED REVENUE EXPENDITURE UNDER THE INCOME-TAX ACT. THE ASSESSEE EXPORTED GOODS TO UK. AS PER UK STANDARD REQUIREMENTS, THE PRODUCTS REQUIRED CE CERTIFICATIO N. (REFER PAGES 215-216 FOR EMAILS FROM BUYERS) THE ASSESSEE GOT ITS PRODUCTS CE CERTIFIED FROM BODYCOTE TESTING LTD. AND PAID THIS AMOUNT TOWARDS CE CERTIFICATION CHARGES. (REFER PAGES 217, 219-220 FOR BILLS OF THE SAID PAR TY). PHOTOCOPIES OF CE CERTIFICATES ARE PLACED ON PAGES 222-223 WHICH SHOWS THE CERTIFICATE ISSUED ON 03/03/08 IS VALID UPTO 03/03/13 I.E. FOR FIVE YEARS . THESE EVIDENCES PROVE BEYOND DOUBT THAT IT IS NOT A CAPITAL EXPENDITURE I N ANY MANNER. THIS IS A REVENUE EXPENSE FOR CERTIFICATION OF ITS FINISHED G OODS TO ENABLE IT TO SELL IN THE UK MARKET. THEREFORE, THE LD. AR SUBMITTED THAT THE SAME IS ALLOWABLE IN FULL IN THIS YEAR EVEN THOUGH CERTIFICATION HAS BEEN PRO VIDED FOR 5 YEARS. THUS, THE LD. AR PRAYED THAT THE DISALLOWANCE OF RS. 8,45,540 /- BEING 80% OF RS. 10,56,925/- AS SUSTAINED BY THE CIT(A) SHOULD BE DE LETED AND THE ENTIRE EXPENSE OF RS.10,56,925 SHOULD BE ALLOWED IN THIS Y EAR. 7. THE LD. DR SUBMITTED THAT THE CIT(A) HAS RIGHTLY MADE AN ADDITION ON ACCOUNT OF TRAVEL EXPENSES INCURRED TOWARDS TWO FOR EIGN TRAVEL. THE CIT(A) ALSO HAS ANALYZED WHILE DISALLOWING THE SAID EXPENS ES. THE CIT(A) HAS ANALYZED THOSE FOREIGN TRIPS OF THOSE PARTICULAR PE RSONS AND FOUND THAT THERE IS NO DIRECT CONNECTION/NEXUS WITH THE BUSINESS OF THE ASSESSEE. IN-FACT, THE ASSESSEE HAS ALSO NOT GIVEN ANY DOCUMENTARY PROOF A S RELATED TO THE SAID FOREIGN TRAVELS IN RESPECT OF BUSINESS ACTIVITIES. THE LD. DR FURTHER SUBMITTED THAT THE CIT(A) HAS RIGHTLY HELD THAT DISALLOWANCE OF RS.8,45,540/- WHICH IS 8 ITA NO. 3918/DEL/2014 80% OF RS.10,56,925/- BY ALLOWING AS THE CERTIFICAT ION WAS VALID ONLY FOR 5 YEARS. THUS, THE CIT(A) HAS RIGHTLY DIRECTED TO AL LOW 20% OF THE SAID EXPENSE IN EACH OF THE 5 YEARS FOR WHICH THE CERTIFICATE IS VA LID. THUS, THE CIT(A) HAS ACCEPTED THE SAID EXPENSE TO BE REVENUE IN NATURE. THE LD. DR FURTHER SUBMITTED THAT DISALLOWANCE OF 78,075/- U/S 40(A) ( IA) FOR AMOUNT PAID TOWARDS TRADE FAIR EXPENSES HAS ALSO BEEN PROPERLY DETERMIN E THAT ALL THE EXPENSES ARE COVERED UNDER THE DEFINITION OF HANDLING EXPENSES AND, THEREFORE, LIABLE TO TDS. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT DOCUMENTS/RECORDS. AS GROUND NO. 1 IS NOT PRESSED BY THE ASSESSEE, THEREFORE, THE SAME IS DISMISSED. AS RELATED TO GR OUND NO.2, THE CIT(A) AFTER VERIFYING ALL THE EVIDENCES HAS DISALLOWED RS.70,29 ,436/- FOR THE EXPENSES INCURRED TOWARDS THE TWO FOREIGN TRAVELS (A) RS.10 ,71,843/- FOR FOREIGN TRAVEL TO UK BY ARSHIYA GARG, RAMA GARG, VARUN GARG & ADHYA S INGH (B) RS.6,57,593/- FOR FOREIGN TRAVEL TO USA BY THE ASSESSEE AND MR. R AKESH JINDAL TO USA. THE SAID TRAVELS TOOK PLACE DURING THE PERIOD OF 21/7/2 007 TO 12/8/2007 (UK) AND 9/10/2007 TO 15/10/2007 (USA) RESPECTIVELY. AS REL ATED TO THE VISIT IN UK BY ARSHIYA GARG, RAMA GARG, VARUN GARG & ADHYA SINGH, THE LD. AR SUBMITTED THAT THE DOCUMENTS WHICH WERE PRODUCED BY THE ASSES SEE WERE QUALIFICATIONS WHO WERE COMPETENT TO DO BUSINESS AND LOOK AFTER TH E PROFITABILITY OF THE BUSINESS. THE SAID PERSONS ARE THE RELATIVES OF TH E ASSESSEE AND BEING A FAMILY CONCERN THE SAID PERSONS WERE NOT GIVEN REMUNERATIO NS. BUT IT IS ESTABLISHED BY THE ASSESSEE IN PAGE NO. 187 OF THE PAPER BOOK T HAT THE COUNTRY VISE EXPORT FOR THREE FINANCIAL YEARS 2005-06, 2006-07 & 2007-0 8 WHICH WERE CONSTANTLY INCREASING. THEREFORE, THIS EXPENSES HAS TO BE ALL OWED. THE SUBMISSIONS MADE BY THE LD. AR THAT THE ASSESSEE HAS SHOWN THE EVIDE NCE BY WAY OF COPY OF E- MAIL FROM JOHN ABERNETHIE REGARDING MEETING TO NEW BUSINESS OPPORTUNITIES AT ABERNETHIE TRADING, USA ON 8-9/10/2007 WHICH WAS EN CLOSED AT PAGE 190 OF THE PAPER BOOK AND THE OTHER E-MAILS SHOWS THE PART ICIPATION OF RAKESH JINDAL IN RESPECT OF FUTURE/PROSPECTIVE BUSINESS WITH USA WHICH WAS ENCLOSED AT 9 ITA NO. 3918/DEL/2014 PAGES 197 TO 198 OF THE PAPER BOOK. THE SAID EVIDE NCE WAS PRODUCED BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE CIT(A). THE SAID E-MAIL WAS ADDRESSED TO B M GARG BY STATING INITIAL B M. AT P AGE 197 & 198 OF THE PAPER BOOK IT IS CLEARLY MENTIONED THAT THE PARTIES IN TH E US WAS COMMUNICATING FOR THE NEW BUSINESS AND FOR NEW PRODUCTS AND RANGE DEV ELOPMENT WITH SHRI RAKESH JINDAL WHO WAS REPRESENTING GARG INDUSTRIES. THESE DOCUMENTS WERE THOUGH ON RECORD NOT TAKEN INTO COGNIZANCE BY BOTH THE REVENUE AUTHORITIES. THUS, THE TRAVEL EXPENSES AS RELATED TO RAKESH JIND AL AMOUNTING TO RS.6,56,593/- HAS TO BE CONSIDERED AS THE EXPENSES TOWERS THE BUSINESS EXPANSION. 9. AS RELATED TO TRADE FAIR EXPENSES, NO TDS IS REQ UIRED TO BE DEDUCTED ON REIMBURSEMENT OF EXPENSES FOR WHICH THE LD. AR RELI ED UPON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN CASE OF CIT VS. DLF COMMERCIAL PROJECT CORPORATION (2015-TIOL-1609-HC-DEL-IT ORDER DATED 1 5.07.2015) WHEREIN IT HAS BEEN HELD THAT OBLIGATION TO DEDUCT TDS IS ONLY WITH RESPECT TO INCOME AS AMOUNTS PAID AS REIMBURSEMENT OF EXPENSES DO NOT HA VE THE CHARACTER OF INCOME. IN-FACT, THE EFFECTIVE AMOUNT PAID TOWARDS HANDLING CHARGES WAS ONLY RS.4,477/- INCLUDING TAXES WHICH IS MUCH BELOW THE THRESHOLD LIMIT OF TDS SPECIFIED IN SECTION 194C OF THE ACT. THEREFORE, T HE LD. ARS CONTENTION THAT THIS AMOUNT WAS NOT LIABLE TO TDS AND NO DISALLOWAN CE UNDER SECTION 40(A)(IA) CAN BE MADE IS ACCEPTED. 10. AS RELATES TO DISALLOWANCE OF RS.8,45,540/- FO R ALLOWING THE CERTIFICATION FEES OVER A PERIOD OF 5 YEARS, THE CIT(A)S FINDING THAT THE CC CERTIFICATION WAS VALID FOR 5 YEARS BUT IN THE MANNER WHICH THE CIT(A ) HAS DIRECTED TO ALLOW 20% OF THE SAID EXPENSES IN EACH OF THE 5 YEARS BY STAT ING THAT THE EXPENSES ARE REVENUE IN NATURE IS NOT PROPER. IF IT IS REVENUE EXPENSE THEN THE SAME SHOULD BE ALLOWED IN FULL IN THE YEAR OF INCURRENCE EVEN T HOUGH IT PROVIDES LONG TERM BENEFIT. ONCE, IT IS STATED THAT IT IS A REVENUE E XPENDITURE THE ASSESSEE IS 10 ITA NO. 3918/DEL/2014 ENTITLED FOR THE SAID CLAIM. THEREFORE, THE SAME I S ALLOWABLE IN FULL IN THIS YEAR EVEN THOUGH CERTIFICATION HAS BEEN PROVIDED FOR 5 Y EARS. 11. IN RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH AUGUST, 2017 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 07/08/2017 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 12/06/2017 & 02/08/2017 PS 2. DRAFT PLACED BEFORE AUTHOR 12/06/2017 PS 3. DRAFT PROPOSED & PLACED BEFORE .2017 JM/AM 11 ITA NO. 3918/DEL/2014 THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 07.08.2017 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 0 7 .0 8 .2017 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.