Amakan Overseas Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 3938/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3875 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 05-07-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Corroborative evidences; Commercial expediency
• Section: 143(3)

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A: NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.:-3938/DEL/2016 ASSESSMENT YEAR: 2012-13 O R D E R PER AMIT SHUKLA, J.M. THE AFORESAID APPEAL HAS BEEN FILED BY TH E ASSESSEE AGAINST ORDER DATED 21.04.2016, PASSED BY LD. CIT (APPEALS) I, NEW DELHI U/S 143(3) FOR THE ASSESSMENT YEAR 2012-13. THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS. 9,45,841/- ON ACCOUNT OF DISALLOWA NCE OF FOREIGN TRAVELLING EXPENSES OF DIRECTORS. AMAKAN OVERSEAS PVT. LTD. K-185, 2 ND FLOOR, SURYA PLAZA, SARAI JULENA, NEW FRIENDS COLONY NEW DELHI 110 025 PAN AAACA0106A VS. DCIT CIRCLE-2(2) NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI R.B. MATHUR, CA DEPARTMENT BY : SHRI RAVI KANT GUPTA, SR.DR DATE OF HEARING 24/01/2018 DATE OF PRONOUNCEMENT 30/01/2018 ITA NO. 3938/DEL/2016 ADMAKAN OVERSEAS PVT. LTD. VS. DCIT 2 2. THE BRIEF FACTS ARE THAT ASSESSEE COMPANY IS E NGAGED IN THE BUSINESS OF MARKETING AND SELLING OF CHEMICALS MANUF ACTURED BY ITS PRINCIPAL COMPANY, M/S. HENKEL CA AND ALSO DERIVED INCOME FROM OPERATIONS OF WIND ENERGY PROJECT. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE AO NOTED THAT OUT OF THE AM OUNT OF RS. 48,41,277/- DEBITED UNDER THE HEAD TRAVELLING AND CONV EYANCE EXPENSES, SUM OF RS. 9,45,841/- HAS BEEN INCURRED O N LONDON VISIT BY THE DIRECTORS, SHRI INDER LAL OBEROI AND SMT. ASHA OBE ROI. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE HAD SU BMITTED AND STATED AS UNDER:- DETAILS OF FOREIGN TRAVELLING IN THE FORMAT AS CAL LED FOR IS ATTACHED. DURING THE FOREIGN TRAVELLING, MEETINGS W ERE HELD WITH THE CUSTOMERS AND ORDERS WORTH USD 340206.20 ( APP RS. 1,70,10,310/-) WERE PROCURED AND FORWARDED TO PRINCIPALS. COPY OF COMMISSION ACCOUNT (RELATED ENT RIES DULY HIGHLIGHTED) AND INVOICES RAISED BY A AND PRINCIP ALS FOR SUCH EXPORT ORDERS ARE ENCLOSED. DURING THIS TRIP, THE POSSIBILITY OF GETTING PATIENTS FOR MEDICAL TREATME NT TO INDIA TO PROMOTE THE GLOBAL PATIENT IN UK WAS EXPLORED AFTER WHICH PATIENTS STARTED TO COME FOR TREATMENT TO IND IA FROM DIFFERENT COUNTRIES, WHO WERE REFERRED TO VARIOUS H OSPITALS AND A EARNED COMMISSION FROM THEM AMOUNTING TO RS . ITA NO. 3938/DEL/2016 ADMAKAN OVERSEAS PVT. LTD. VS. DCIT 3 54,194/- SHOWN UNDER THE HEAD OTHER INCOME (NOTE 15) IN P & L A/C. 3. HOWEVER THE LD. AO HELD THAT ASSESSEE HAS FAI LED TO PROVE ANY EVIDENCE AS TO WHAT WAS THE EXACT PURPOSE OF FOREIGN VI SIT AND NO EVIDENCE WITH REGARD TO ATTENDING OF MEETINGS, SIGNING O F CONTRACTS OR PROCURING OF ORDERS FOR THE PRINCIPALS HAVE BEEN PRO DUCED DESPITE GIVING SPECIFIC OPPORTUNITY TO THE ASSESSEE TO PROVE THE CLAIM. ACCORDINGLY, HE DISALLOWED THE SAID AMOUNT AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 4. BEFORE LD. CIT (A) THE ASSESSEE CONTENDED TH AT IN THE EARLIER YEAR THE ASSESSEE HAD COMMENCED A NEW BUSINESS CALLE D THE GLOBAL PATIENT WHICH WAS MAINLY THE BUSINESS OF MEDICAL TO URISM WHEREIN THE ASSESSEE COMPANY ARRANGED PATIENTS FROM ABROAD TO I NDIA FOR VARIOUS MEDICAL PROCEDURES AT A SUBSTANTIALLY REDUCED COST AS COMPARED TO THE COST OF SUCH PROCEDURES IN OTHER COUNTRI ES. IT WAS SUBMITTED THAT ASSESSEE HAD SIGNED AN AGREEMENT WITH VAR IOUS MEDICAL ESTABLISHMENTS IN DELHI AND NCR REGION AND AL SO FILED COPY OF SUCH AGREEMENTS. A BRIEF WRITE UP OF A NEW BUSINESS AND ALSO THE COPIES OF INVOICES OF EXPENSES INCURRED IN FOREIGN TRAVEL WAS ALSO FILED. IT WAS FURTHER SUBMITTED THAT THE COMPANY HAS EARNED SUM O F RS. 54,194/- OUT OF THE REFERRAL FEE FROM THE NEW BUSINE SS WHICH HAS ITA NO. 3938/DEL/2016 ADMAKAN OVERSEAS PVT. LTD. VS. DCIT 4 BEEN OFFERED TO TAX UNDER THE HEAD MISCELLANEOUS INCO ME. HOWEVER, LD. CIT(A) CONFIRMED THE ACTION OF THE AO ON THE GRO UND THAT THE ASSESSEE HAS FAILED TO GIVE ANY PURPOSE AND ANY KIND OF EVIDENCE FOR UNDERTAKING THE VISIT BY THE DIRECTORS TO LONDON AND ALSO SIMILAR DISALLOWANCES WERE MADE IN ASSESSMENT YEAR 2011-12 W HICH HAS BEEN ACCEPTED BY THE ASSESSEE. 5. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT, PRIOR TO THE YEAR UNDER CONSIDERATION ASSESSEE HAS C OMMENCED A NEW LINE OF BUSINESS OF MEDICAL TOURISM AND IN PURSUANCE OF WHICH, ASSESSEE HAD ALSO SIGNED AGREEMENTS WITH VARIOUS MED ICAL ESTABLISHMENTS IN NCR REGION, THE COPIES OF WHICH HAV E ALSO BEEN PLACED IN THE PAPER BOOK. HE ALSO PRODUCED PROMOTION AL BROCHURE AS PUBLISHED BY THE ASSESSEE AND ALSO THE WRITE UP ON TH IS NEW LINE OF BUSINESS OF MEDICAL TOURISM. HE SUBMITTED THAT THE DIRECTO RS OF THE ASSESSEE COMPANY HAD UNDERTAKEN THE VISIT TO THE LONDO N FOR GETTING REFERRAL PATIENT FROM LONDON AND HAVE ALSO MET CERTAIN DOCTORS IN HOSPITAL IN LONDON, LIKE SHRI SHERAZ DAYA, OPHTHALMOL OGIST. EVEN THOUGH ASSESSEE MAY NOT HAVE GOT THE BUSINESS OR ABLE TO SIGN ANY AGREEMENT IN LONDON BUT IT DOES NOT MEAN THE DIRECTORS HA VE NOT UNDERTAKEN THE TRAVEL FOR THE BUSINESS PURPOSE. SUCH A N EXPENSE HAS TO BE SEEN FROM THE ANGLE OF COMMERCIAL EXPEDIENCY AN D NOT FROM THE POINT OF VIEW WHETHER IT HAS AN IMMEDIATE AND PROXIMAT E RELATION WITH ITA NO. 3938/DEL/2016 ADMAKAN OVERSEAS PVT. LTD. VS. DCIT 5 THE EARNING OF THE INCOME IN THIS YEAR. THUS, HE SUB MITTED THAT THE EXPENSES SHOULD BE ALLOWED AND SO FAR AS THE EVIDENC ES FOR ACTUAL TRAVELLING IS CONCERNED; HE SUBMITTED THAT, THEY HAVE B EEN DULY PRODUCED BEFORE THE AUTHORITIES BELOW WHICH HAVE NOT D ISPUTED. 6. ON THE OTHER HAND, LD. SR. DR SUBMITTED THAT , FIRST OF ALL IT IS NOT THE CASE HERE THAT, WHETHER THE ASSESSEE HAD ENTERE D INTO A NEW VENTURE OF MEDICAL TOURISM OR NOT, BUT THE MAIN ISSUE I S THAT WHETHER THE ASSESSEE HAS BEEN ABLE TO ADDUCE ANY EVIDENCE FOR THE PURPOSE OF VISIT IN LONDON. WHATEVER MINOR INCOME HAS BEEN SHOWN IN THIS YEAR FROM THE REFERRAL PATIENT, THEY ARE FROM NIGERIA WHICH IS AN UNDERDEVELOPED/ DEVELOPING COUNTRY AND WHY A PATIENT FROM WOULD FROM LONDON WILL COME TO INDIA FOR MEDICAL TREATMENT. I N ANY CASE, THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE OR PROVE ITS C OMMERCIAL EXPEDIENCY BY ADDUCING ANY EVIDENCE. HE FURTHER POIN TED OUT THAT IN THE NEXT YEAR THE ASSESSEE HAS PERMANENTLY CLOSED DOWN THIS NEW VENTURE. EVEN UNDER THE PRINCIPLE OF COMMERCIAL EXPED IENCY, THE ONUS WAS HEAVILY UPON THE ASSESSEE TO PROVE THE GENUINENESS OF THE EXPENDITURE AND ALSO WHETHER IT WAS THE PURPOSE OF BUSI NESS OR NOT. THUS, ORDER OF THE LD. CIT (A) SHOULD BE AFFIRMED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS AS WELL AS MATE RIAL REFERRED TO BEFORE US. THE ASSESSEE HAD INCURRED HUGE EXPENDITUR E ON ACCOUNT OF ITA NO. 3938/DEL/2016 ADMAKAN OVERSEAS PVT. LTD. VS. DCIT 6 FOREIGN TRAVELLING OF ITS TWO DIRECTORS (HUSBAND AND W IFE) FOR SUM OF RS. 9,45,841/- FOR VISIT TO LONDON. THE SAID VISIT HAS BE EN JUSTIFIED FOR THE PURPOSE OF BUSINESS ON THE GROUND THAT THE ASSESSEE CO MPANY HAD STARTED A NEW BUSINESS OF MEDICAL TOURISM WHICH WAS GE TTING A REFERRAL PATIENTS FROM VARIOUS COUNTRIES TO INDIA FOR MEDICAL PR OCEDURE/ TREATMENT. THE SAID EXPENDITURE HAS BEEN TRIED TO BE JUS TIFIED THAT DURING THE YEAR, IT HAS SHOWN INCOME OF RS. 54,194/- OUT OF THE REFERRAL FEE. IF THE ASSESSEE HAS UNDERTAKEN FOREIGN TRAVELLING FOR THE PURPOSE OF BUSINESS AND FOR COMMERCIAL CONSIDERATIO N, IT IS NOT NECESSARY THAT INCOME MUST BE EARNED FROM SUCH EXPENDI TURE DURING THE YEAR, BUT ASSESSEE HAS TO DEMONSTRATE THE COMMERCIAL EXPEDIENCY. THE ONUS LIES VERY HEAVILY UPON THE ASSESSEE TO SHOW THAT THE EXPENDITURE INCURRED WAS IN FACT FOR THE PURPOSE OF B USINESS AND SUCH AN ONUS CAN ONLY BE DISCHARGED BY ADDUCING EVIDENCE AND MATERIAL ON RECORD THAT IT WAS DUE TO COMMERCIAL EXPEDIENCY OR FOR THE BUSINESS PURPOSE. HERE IN THIS CASE, EXCEPT FOR STATING THAT ASSE SSEE HAS MET ONE DOCTOR OR MAY BE A PARTICULAR DOCTORS, HOWEVER TH E ASSESSEE HAS NOT BROUGHT FORWARD ANY EVIDENCE AS TO WHAT WAS THE M EETING ABOUT, OR WHETHER ANY KIND OF AGREEMENT OR UNDERSTANDING WAS ENTERED FOR GETTING A REFERRAL PATIENT OR THERE WAS SOME LIKELIHOOD OF BUSINESS IN FUTURE. EVEN IF THE NEW BUSINESS VENTURE HAS BEEN FAIL ED LATER ON BUT ASSESSEE SHOULD HAVE BROUGHT SOME EVIDENCE ON RECORD TO PRIMA FACIE ITA NO. 3938/DEL/2016 ADMAKAN OVERSEAS PVT. LTD. VS. DCIT 7 SHOW THAT THE FOREIGN TRAVELLING UNDERTAKEN BY THE DIREC TORS WERE WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSE OF TH E COMPANY. HERE IN THIS CASE PREPONDERANCE OF PROBABILITY MISERABLY FAILS AS NONE OF THE FACTORS OR MATERIAL INDICATES THAT SUCH FOREIGN TRAVEL WA S FOR THE PURPOSE OF BUSINESS. ASSESSEE MAY HAVE STARTED A NEW LINE OF BUSINESS, BUT THE PARTICULAR VISIT OF LONDON DOES NOT AP PEAR TO BE FOR THE PURPOSE OF BUSINESS SANS ANY SUPPORTING EVIDENCE LIKE, ANY KIND OF CORRESPONDENCE, AGREEMENT, EXCHANGE OF MAILS, ETC . MERE STATING THAT THE DIRECTORS HAVE MET ONE DOCTOR AND THAT TO BE ONE NAME HAS BEEN GIVEN WILL NOT SUFFICE. ACCORDINGLY, WE UPHOLD THE ORDER OF THE AO AND CONSEQUENTLY THE APPEAL OF THE ASSESSEE IS DISMIS SED. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JANUARY, 2018. SD/- SD/- (O.P. KANT) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30/01/2018 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ITA NO. 3938/DEL/2016 ADMAKAN OVERSEAS PVT. LTD. VS. DCIT 8 ASSISTANT REGISTRAR ITAT, NEW DELHI