M/s Gripwell Tools Industries, Jalandhar V. The Addl. Commissioner of Income Tax, Jalandhar

ITA 407/ASR/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9589 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 29-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BHAWANI SHANKAR
• Assessee Lawyers: J S BHASIN
• Keywords: Gift; Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR (CAMP AT JALANDHAR) BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NO.407(ASR)/2015 ASSESSMENT YEAR: 2010-11 M/S GRIPWELL TOOLS INDUSTRIES C-104, FOCAL POINT EXTENSION, JALANDHAR. PAN:AACFG0536D VS. ADDL. CIT RANGE-II, JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. J.S. BHASIN (ADV.) RESPONDENT BY: SH. BHAWANI SHANKAR (DR) DATE OF HEARING: 24.06.2016 DATE OF PRONO UNCEMENT: 22.08.2016 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORD ER OF LEARNED CIT(A), JALANDHAR DATED 15.05.2015 FOR ASST. YEAR:2 010-11. 2. THE ONLY GRIEVANCE RAISED BY ASSESSEE IS THE ACT ION OF LEARNED CIT(A) BY WHICH HE HAD CONFIRMED THE ADDITIONS, WHI CH THE ASSESSING OFFICER HAD MADE ON ACCOUNT OF DISALLOWANCE OUT OF FOREIGN TRAVELING EXPENSES. 3. THE BRIEF FACTS OF THE CASE AS NOTED IN THE ASSE SSMENT ORDER ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFAC TURING AND EXPORT OF HAND TOOLS. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ITA NO.407 (ASR)/2015 ASST. YEA R: 2010-11 2 OBSERVED THAT ASSESSEE HAD CLAIMED FOREIGN TRAVELIN G (TICKET) OF RS.2,72,080/-, AND FOREIGN TRAVELING EXPENSES OF RS .5,78,864/-. THE ASSESSING OFFICER CONFRONTED THE SAME TO THE ASSESS EE REGARDING ALLOWABILITY OF FOREIGN EXPENSES. 4. IN REPLY THE ASSESSEE SUBMITTED THAT ALL EXPENSE S ARE VOUCHED AND SUPPORTED WITH THE RELEVANT BILLS AND ALSO PRODUCED ORIGINAL BILLS AND VOUCHERS IN THIS REGARD. THE ASSESSING OFFICER OBSE RVED THAT OUT OF TOTAL EXPENSES OF RS.5,78,864/- A PART OF IT WERE INCURRE D THROUGH CREDIT CARD AND THE EXPENSES ON TICKETS INCLUDED THE TICKET OF MISS HARSIMRAN RANA WHO WAS NEITHER A PARTNER NOR AN EMPLOYEE OF THE AS SESSEE FIRM. THE ASSESSING OFFICER FURTHER OBSERVED THAT EXPENSES IN CURRED THROUGH CREDIT CARDS RELATED TO EARLIER YEAR. THE ASSESSING OFFICE R FURTHER OBSERVED THAT TRIP UNDERTAKEN BY PARTNERS OF FIRM AND HIS DAUGHTE R WERE TOURIST DESTINATION AND DURATION OF THE TRIP WAS ABOUT ONE MONTH. HE FURTHER OBSERVED THAT ASSESSEE WAS NOT ABLE TO EXPLAIN AS T O HOW THE EXPENSES WERE RELATED TO A BUSINESS EXPENDITURE. THEREFORE, HE MADE DISALLOWANCE OF RS.2,71,898/- OUT OF FOREIGN TRAVELING EXPENSES WHICH REPRESENTED THE PAYMENTS MADE BY ASSESSEE THROUGH CREDIT CARD A ND ALSO INCLUDED THE TICKETS EXPENSES OF PARTNER AND HIS DAUGHTER TO THE TUNE OF RS.1,13,838/-. 5. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE LEARN ED CIT(A), WHO ALSO UPHELD THE SAME. ITA NO.407 (ASR)/2015 ASST. YEA R: 2010-11 3 6. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 7. AT THE OUTSET, LEARNED AR SUBMITTED THAT THE AUT HORITIES BELOW HAS DISALLOWED THE FIRST AMOUNT OF RS.1,58,060/- HOLDIN G THAT THE EXPENDITURE RELATED TO EARLIER YEAR. HE SUBMITTED T HAT THE BILLS OF THE EXPENDITURE WERE RECEIVED IN THE YEAR UNDER CONSIDE RATION AND ALSO THE EXPENSES WERE CLAIMED ONLY AFTER THE PARTNER RETURN ED FROM ABROAD, THEREFORE, AS PER THE REGULAR ACCOUNTING POLICIES T HE EXPENSES WAS BOOKED IN THE YEAR UNDER CONSIDERATION. 8. AS REGARDS THE OTHER AMOUNTING OF RS.1,13,838/-, THE LEARNED AR SUBMITTED THAT THE TRAVELING WAS UNDERTAKEN FOR TH E BUSINESS PURPOSES ONLY AND SINCE MR. S.S. RANA WAS AN OLD MAN OF 82 Y EARS OF AGE, THEREFORE, HE TOOK HER DAUGHTER FOR HIS PERSONAL CA RE AND SHE WAS ALSO HELPING IN MAKING ARRANGEMENT FOR MEETING THE EXIST ING CUSTOMERS AND ALSO HOLDING MEETING WITH PROSPECTIVE BUYERS. IT WA S FURTHER SUBMITTED THAT NO SEPARATE EXPENSES WERE INCURRED ON LODGING OF HARSIMARAN RANA AND THEREFORE, THE EXPENDITURE WAS INCURRED FOR THE PURPOSES OF BUSINESS. TO SUPPORT HIS ARGUMENTS THE LEARNED AR R ELIED UPON THE CASE LAW OF THE HONBLE DELHI HIGH COURT IN THE CASE OF RAHULJEE & COMPANY (P.) LTD. VS. ITAT & ORS.(2012) 73 DTR 0089 . FURTHER RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. U.P. ASBESTOS LIMITED (2013) 260 CTR 0194(ALL). ITA NO.407 (ASR)/2015 ASST. YEA R: 2010-11 4 9. WITHOUT PREJUDICE IT WAS SUBMITTED THAT EVEN IF THE DISALLOWANCE WAS TO BE MADE IT SHOULD HAVE BEEN RESTRICTED TO RS .56,919/- RELATING TO THE TICKET OF MS. HARSIMRAN KAUR. 10. THE LEARNED DR, ON THE OTHER HAND, HEAVILY PLAC ED HIS RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 11. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT AS REGARDS THE EXPENDITURE OF RS.1,58,060/- THE AUTHORITIES BELOW HAD MADE A FIND ING OF FACT THAT THE EXPENSES WERE INCURRED THROUGH CREDIT CARD AND WERE RELATED TO PURCHASE OF GIFT ITEMS FROM THE DUTY FREE SHOP AND OTHER OU TLETS WHICH CANNOT QUALIFY AS A BUSINESS EXPENDITURE. THE LEARNED CIT( A) HAS ALSO MADE A FINDING OF FACT THAT EVEN BEFORE HIM NO EVIDENCE WA S FILED TO SUPPORT THE ARGUMENTS THAT THE SAID EXPENDITURE WAS INCURRED AS BUSINESS EXPENDITURE. IN VIEW OF THE ABOVE, WE DO NOT FIND A NY INFIRMITY IN THE ORDER OF LEARNED CIT(A) AS REGARDS THE CONFIRMATION OF DISALLOWANCE TO THIS EXTENT. 12. AS REGARDS THE CONFIRMATION OF DISALLOWANCE OF RS.1,13,838/, WE FIND THAT THE PARTNER OF ASSESSEE FIRM TOOK HIS DAU GHTER MS. HARSIMRAN RANA FOR AN ALLEGED BUSINESS TRIP TO U.S.A. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESSEE TIME AND AGAIN TO JUSTIFY THE BUSINESS RELATIONSHIP OF T HE TOUR UNDERTAKEN BY THE PARTNER OF THE ASSESSEE FIRM ALONG WITH HIS DAU GHTER WHICH THE ITA NO.407 (ASR)/2015 ASST. YEA R: 2010-11 5 ASSESSEE FAILED TO EXPLAIN ANY BUSINESS OF CONNECTI ON OF THE TOUR. DURING APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ALS O THE ASSESSEE DID NOT BEING ON RECORD ANYTHING NEW. HOWEVER, THE LEARNED AR HAS ARGUED BEFORE US THAT THE EXPENSES WERE INCURRED FOR BUSIN ESS PURPOSES THOUGH THE BENEFIT OF SUCH EXPENSES HAD NOT OCCURRED DURIN G THE YEAR UNDER CONSIDERATION. THE HONBLE DELHI HIGH COURT IN THE CASE OF RAHULJEE & COMPANY (P.) LTD. VS. ITAT & ORS.(SUPRA) HAS HELD THAT IF THERE IS A FOREIGN TRAVEL EXPENSES IN CONNECTION WITH THE BUSINESS, ME RELY BECAUSE IN SAID FOREIGN TRAVEL, NO BUSINESS COULD BE TRANSACTED OR THE FOREIGN TRAVEL DID NOT RESULT IN BAGGING ANY CONTRACT IS NOT THE DETER MINATIVE FACTOR. WE FIND THAT ADMITTEDLY THE ASSESSEE IS AN EXPORTER OF HAND TOOLS AND THE VISIT BY PARTNER OF ASSESSEE FIRM TO A FOREIGN COUNTRY CANNO T BE SIMPLY BRUSHED ASIDE THAT THE SAME WAS NOT FOR BUSINESS PURPOSES. HOWEVER, WE ARE IN AGREEMENT WITH THE FINDINGS OF AUTHORITIES BELOW TH AT EXPENSE INCURRED FOR HIS DAUGHTER WERE NOT JUSTIFIED, THEREFORE, THE AUTHORITIES BELOW SHOULD HAVE RESTRICTED THE DISALLOWANCE TO THE EXTE NT OF RS.56,919/- WHICH THE ASSESSEE HAD INCURRED FOR THE TICKET FOR THE DAUGHTER OF THE PARTNER. THE ASSESSEE HAS CLAIMED TO HAVE NOT INCUR RED ANY OTHER EXPENSES FOR HIS DAUGHTER, THEREFORE, THE ADDITION OUT OF RS.1,13,838/- IS RESTRICTED TO RS.56,919 ONLY. THE ARGUMENT OF LEARN ED AR THAT ASSESSEE HAD ITSELF DISALLOWED 10% OF EXPENSE UNDER THE HEAD FOREIGN CURRENCY, THEREFORE, THE BENEFIT OF THIS SHOULD HAVE BEEN GIV EN. IN THIS RESPECT, WE FIND THAT THE ARGUMENT OF LEARNED AR HAS NO FORCE A S ASSESSING OFFICER ITA NO.407 (ASR)/2015 ASST. YEA R: 2010-11 6 HAS NOT MADE DISALLOWANCE OUT OF EXPENDITURE INCURR ED ON FOREIGN CURRENCY AND THEREFORE, THIS ARGUMENT IS REJECTED. 13. IN VIEW OF THE ABOVE, THE APPEAL FILED BY THE A SSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 .08.2016. SD/- SD/- (A.D. JAIN) ( T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED: 22.08.2016. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER