ADDL CIT 17(2), MUMBAI V. EASTERN OVERSEAS CORPORATION, MUMBAI

ITA 407/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49339 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 14-04-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 15-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: MRS UMA MAHA DEOKAR
• Keywords: Business expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, I, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND T.R.SOOD (A.M ) ITA NO.407/MUM/2010 (ASSESSMENT YEAR:2003-04) DY. COMMISSIONER OF INCOME TAX, RANGE 17(2), ROOM NO.217, PIRAMAL CHAMBERS, MUMBAI-400012 M/S EASTERN OVERSEAS CORPORATION, FRAMROZ COURT, 60, D.PHALKE ROAD, DADAR (E), MUMBAI-400014 PAN:AAAFE0602J APPELLANT V/S RESPONDENT APPELLANT BY : SHRI S.K. SINGH RESPONDENT BY : MRS.UMA MAHA DEOKAR O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 23.10.2009 PASSED BY THE L EARNED COMMISSIONER OF INCOME TAX (A) FOR THE ASSESSMENT YEAR 2003-04. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE A SSESSEE FIRM IS ENGAGED IN THE BUSINESS OF SUPPLY, ERECTION , TESTING AND COMMISSIONING OF HYDRO ELECTRIC PROJECT AND ALS O IS SOLE SELLING AGENTS OF M/S GILBUT GILKES AND GARDEN LTD. U.K. IT FILED RETURN DECLARING TOTAL INCOME AT RS.71,37,390 /-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS INTERA LIA OBSERVED BY THE AO THAT THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS.10,60,362/- TOWARDS FOREIGN TRAVEL. ON BEING ITA NO.407/MUM/2010 (ASSESSMENT YEAR:2003-04) 2 [ 2 ASKED, THE ASSESSEE SUBMITTED THAT THE PURPOSE OF T HE VISIT WAS TOWARDS EXPORT EXPLORATION AND TO DISCUSS THE F INANCIALLY ATTRACTIVE CONCEPT OF SMALL HYDRO ELECTRIC PROJECT S. AS PART OF THE VISITS THE PERSONS CONTACTED WERE MR. MOHD. ARAFAT AND M/S GILKES. HOWEVER, THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS NOT FURNISHED ANY OTHER DETAILS OR CORRESPONDENCE OTHER THAN THE SUBMISSIONS. HE FURT HER OBSERVED THAT THIS STOCK SUPPLY GIVEN BY THE ASSES SEE YEAR AFTER YEAR. HE FURTHER OBSERVED THAT THE ASSESSEE CONTACTED M/S. GILKES, THE PARTY FROM WHOM DIFFERENT ITEMS O F PLANT AND MACHINERY ARE IMPORTED BY THE ASSESSEE. HE FURTHE R OBSERVED THAT THE MACHINERY IS BEING USED IN ON GOI NG PROJECTS OF K.T., T.P. AND LIKIMRO. THE RECEIPTS FROM THESE PROJECTS HAVE NOT BEEN OFFERED TO TAX AS THE ASSESS EE IS FOLLOWING PROJECT COMPLETION METHOD. HENCE, ACCORD ING TO THE AO, THE EXPENSES HAVE TO BE CAPITALIZED AND ACCORDINGLY, THE AO DISALLOWED THE ENTIRE EXPENDIT URE OF FOREIGN TRAVEL OF RS.10,60,362/-. THE AO AFTER MAKING SOME OTHER DISALLOWANCES COMPLETED THE ASSESSMENT A T AN INCOME OF RS.86,78,634/- VIDE ORDER DATED 29.3.200 6 PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961( IN SHORT THE ACT). ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX (A) WHILE OBSERVING THAT THE VISITS HAS BEEN DO NE BY AN EMPLOYEE OF THE COMPANY AND MANAGING PARTNER, IT CA NNOT BE SAID THAT THE VISIT WAS PERSONAL IN NATURE, THE TRA VELING ITA NO.407/MUM/2010 (ASSESSMENT YEAR:2003-04) 3 [ 3 EXPENSES RELATING TO PARTICULAR PROJECT HAVE BEEN D ULY CAPITALIZED IN THE BOOKS OF THE ASSESSEE, THERE IS ENOUGH EVIDENCE THAT THE VISIT TO LONDON BY MR. JOGINDER K UMAR AND MS.PAM SAUARES WAS FOR THE PURPOSE OF BUSINESS AND ACCORDINGLY, HE DELETED THE DISALLOWANCE OF TRAVELI NG EXPENSES OF RS.7,49,074/- AND CONFIRMED THE BALANC E DISALLOWANCE OF RS.3,11,288/- ON THE GROUND THAT T HE ASSESSEE HAS NOT FURNISHED SUFFICIENT EVIDENCE IN SUPPORT OF THE TRIP TO DUBAI. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A), THE REVENUE IS IN A PPEAL BEFORE US CHALLENGING IN THE GROUND OF APPEAL THE DELETION OF DISALLOWANCE OF TRAVELLING EXPENSES OF RS.7,49,074 /-. 4. AT THE TIME OF HEARING THE LEARNED D.R. SUBMITS THAT FOR THE REASONS AS MENTIONED IN THE ASSESSMENT ORDER, T HE LEARNED COMMISSIONER OF INCOME TAX (A) WAS NOT JUS TIFIED IN DELETING THE DISALLOWING OF FOREIGN TRAVELLING EXPE NSES TO THE EXTENT OF RS.7,49,074/- AND THEREFORE, THE DISALLO WANCE MADE BY THE AO BE RESTORED. 5. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE AO AND LEARNED COMMISSIONER OF ITA NO.407/MUM/2010 (ASSESSMENT YEAR:2003-04) 4 [ 4 INCOME TAX (A) FURTHER SUBMITS THAT SINCE THE ASSE SSEE HAS FILED COMPLETE DETAILS OF FOREIGN TRAVELLING EXPENS ES OF RS.7,49,074/- WHICH WERE INCURRED FOR THE PURPOSE O F BUSINESS, THE LEARNED COMMISSIONER OF INCOME TAX(A) WAS FULLY JUSTIFIED IN DELETING THE SAME AND THEREFORE, THE ORDER PASSED BY THE LEANED COMMISSIONER OF INCOME TAX (A ) BE UPHELD. 6. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON REC ORD, WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE H AS FILED HIS EXPLANATION BEFORE THE AO TO SHOW THE PURPOSES OF EXPORT EXPLORATION AND TO DISCUSS THE FINANCIALLY ATTRACTI VE CONCEPT OF SMALL HYDRO ELECTRIC PROJECTS AND AS PART OF THE VISITS THE PERSONS CONTACTED WERE MR.MOHD. ARAFAT AND M/S GILK ES. IT WAS DISALLOWED BY THE AO ON THE GROUND THAT THE AS SESSEE HAS NOT FURNISHED ANY OTHER DETAILS OR CORRESPONDEN CE AND THE PERSON CONTACTED M/S GILKES, THE PARTY FROM WHO M DIFFERENT ITEMS OF PLANT AND MACHINERY ARE IMPORTED BY THE ASSESSEE AND THAT THE MACHINERY IS BEING USED IN ON GOING PROJECTS OF K.T., T.P. AND LIKIMRO, THE RECEIPT FR OM THESE PROJECTS HAVE NOT BEEN OFFERED TO TAX AS THE ASSESS EE IS FOLLOWING THE PROJECT COMPLETION METHOD. THUS, ACC ORDING TO THE AO THE EXPENSES SHOULD HAVE BEEN CAPITALIZED B Y THE ASSESSEE. HOWEVER, WE FIND THAT IT IS NOT THE CASE OF THE REVENUE THAT THE FOREIGN VISIT WAS NOT MADE FOR THE PURPOSE ITA NO.407/MUM/2010 (ASSESSMENT YEAR:2003-04) 5 [ 5 OF BUSINESS OR IT WAS FOR PERSONAL IN NATURE OR THE ASSESSEE HAS NOT CONTACTED THE CONCERNED PERSONS. WE FURTHER FIND THAT IT IS ALSO NOT IN DISPUTE THAT THE TRAVELING EXPENSES RELATING TO THE PROJECT LIKIMRO AMOUNTING TO RS.11, 91,458/- HAS BEEN CAPITALIZED BY THE ASSESSEE AND THE SAME H AS NOT BEEN CLAIMED AS BUSINESS EXPENDITURE. THIS BEING SO AND KEEPING IN VIEW THAT THE REVENUE HAS PLACED NO CON TRARY MATERIAL AGAINST THE FINDING OF THE LEARNED COMMIS SIONER OF INCOME TAX (A) TO SHOW THAT THE FOREIGN TRAVEL EXPE NSES HAVE NOT BEEN INCURRED FOR THE PURPOSE OF BUSINESS, WE ARE INCLINED TO UPHOLD THE FINDINGS OF THE LEARNED COMM ISSIONER OF INCOME TAX (A) IN DELETING THE DISALLOWANCE OF F OREIGN TRAVELING EXPENSES TO THE EXTENT OF RS.7,49,074/- AND ACCORDINGLY THE GROUND TAKEN BY THE REVENUE IS REJE CTED. 7. IN THE RESULT, THE REVENUES APPEAL STANDS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24TH JUNE, 2011. SD/- SD/- (T.R.SOOD) (D.K.AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 24TH JUNE, 2011 SRL: ITA NO.407/MUM/2010 (ASSESSMENT YEAR:2003-04) 6 [ 6 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER ASSTT. REGISTRAR, ITA NO.407/MUM/2010 (ASSESSMENT YEAR:2003-04) 7 [ 7 ITAT, MUMBAI DATE INITIALS 1. DRAFT DICTATED ON 13.6.2011 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 13.6.2011 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM 5. APPROVED DRAFT COMES TO THE SR. PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER