DCIT, New Delhi V. M/s TSL Defence Technologies Pvt. Ltd, New Delhi

ITA 4072/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4293 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 11-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 01-09-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: RAVI RAMCHANDRAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI, DELHI, DELHI, DELHI, BENCH BENCH BENCH BENCH H HH H , NEW DELHI NEW DELHI NEW DELHI NEW DELHI BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER AND SHRI K. D. RANJAN, ACCOUNTANT MEMBER ITA NO. 4072 /DEL/2010 (ASSESSMENT YEAR 2005-06) DCIT, CC-5, VS. M/S. TSL DEFENCE TECHNOLOGIES NEW DELHI PVT. LTD., 208-216, AUROBINDO PLACE, HAUZ KHAS, DDA COMMERCIAL COMPLEX, NEW DELHI. (APPELLANT) (RESPONDENT) PAN AABCT5355R APPELLANT BY: SHRI RAVI RAMCHANDRAN, SR. DR RESPONDENT BY: SHRI KAPIL GOEL, SHRI RAKESH KUMAR ., SHRI DINESH KUMAR.,ADV. ORDER ORDER ORDER ORDER PER K. D. RANJAN, AM: PER K. D. RANJAN, AM: PER K. D. RANJAN, AM: PER K. D. RANJAN, AM: 1. THIS APPEAL BY THE REVENUE FOR THE ASSESSMENT YE AR 2005-06 ARISES OUT OF THE ORDER OF LD. CIT(A)-I, NEW DELHI. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE REPRODUCED AS UND ER: 1) THE ORDER OF THE LD. CIT(A) IS NOT CORRECTS IN LAW AND F ACTS. 2) IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION OF ` 14,87,799/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF EXPENSES OF PERSONAL NATURE. 2. THE ONLY ISSUE FOR CONSIDERATION RELATES TO DELE TION OF ADDITION OF ` 14,87,799/- MADE BY THE ASSESSING OFFICER ON A CCOUNT OF EXPENSES OF PERSONAL NATURE. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS FROM P & L ACCOUNT FOUND THAT THE ASSESSEE HAD CLAIMED ENTERTAINMENT EXPENSES OF ` 14,87,799/-. HE OBSERVED THAT ALL THE EXPENSES WERE IN THE SHAPE OF HOTEL BILLS OF I.T.A.NO. 4072/DEL/2010 2 THE DIRECTORS ETC. ON THESE FACTS, HE CAME TO THE CONCLUSION THAT THESE EXPENSES WERE IN THE NATURE OF PERSONAL EXPEN DITURE OF THE DIRECTORS. HE, THEREFORE, DISALLOWED THE AMOUNT OF ` 14,87,799/-. 3. ON APPEAL, IT WAS SUBMITTED THAT THE COMPANYS A CCOUNTS HAD BEEN AUDITED AS PER THE COMPANIES ACT AS WELL AS IN COME TAX ACT. THERE WAS NO QUALIFICATION FROM AUDITORS THAT ANY E LEMENT OF UNVERIFIABLE / UNVOUCHED EXPENSES WERE CLAIMED BY T HE ASSESSEE. MERELY BECAUSE THE EXPENDITURE WAS INCURRED BY THE DIRECTORS, NO AD-HOC DISALLOWANCE COULD BE MADE IN THE HANDS OF T HE ASSESSEE COMPANY. LD. CIT(A) AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE OBSERVED THAT IN THE ASSESSEES CASE, NO A D-HOC DISALLOWANCE COULD BE MADE ON THE GROUND OF PERSONA L EXPENSES. HE ACCORDINGLY, DELETED THE ADDITION OF ` 14,87,799 /-. 4. BEFORE US, LD. SR. DR SUPPORTING THE ORDER OF AS SESSMENT SUBMITTED THAT THE LD. CIT(A) IS NOT JUSTIFIED IN D ELETING THE ADDITION. HE HAS SUBMITTED THAT THE EXPENDITURE WAS IN THE NA TURE OF PERSONAL EXPENSES OF DIRECTORS AND THEREFORE, DISALLOWANCE M ADE BY THE ASSESSING OFFICER IS JUSTIFIED. ON THE OTHER HAND, LD. A.R. FOR THE ASSESSEE SUBMITTED THAT NO ADDITION IN THE CASE OF THE ASSESSEE IS CALLED FOR AS THE ASSESSEE IS A LEGAL ENTITY AND AS SUCH THE ASSESSEE WOULD NOT BE HAVING ANY ELEMENT OF PERSONAL NATURE. HE PLACED RELIANCE ON THE DECISION OF HON'BLE GUJARAT HIGH CO URT IN THE CASE OF SAYAJI IRON & ENGINEERING CO. VS CIT 253 ITR 749. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE ASSESSMENT ORDER, WE FIND THAT THE ASSESSING OFFICER HAD DISALLOWED THE ENTIR E EXPENSES OF ` 14,87,799/- ON THE GROUND THAT EXPENSES WERE IN THE SHAPE OF HOTEL BILLS OF THE DIRECTORS. HE HAS NOT EXAMINED THE CA SE AS TO HOW THE EXPENSES WERE NOT INCURRED WHOLLY AND EXCLUSIVELY F OR THE PURPOSE OF BUSINESS. MOREOVER, THE BOOKS OF ACCOUNT OF THE ASSESSEE HAVE I.T.A.NO. 4072/DEL/2010 3 BEEN AUDITED. THE AUDITORS HAVE NOT POINTED OUT TH AT EXPENDITURE WAS IN THE NATURE OF PERSONAL EXPENSES OF THE DIREC TORS. IN THE CASE OF A COMPANY THE AFFAIRS ARE MANAGED BY ITS DI RECTORS AND EMPLOYEES. NO DOUBT, EXPENDITURE INCURRED FOR NON -BUSINESS PURPOSES CANNOT BE ALLOWED EVEN IF IT IS INCURRED B Y THE DIRE4CTORS. FOR THIS PURPOSE, THE ASSESSING OFFICER HAS TO MAKE OUT THE CASE. THEREFORE, THE EXPENDITURE INCURRED BY THE DIRECTOR S FOR THE PURPOSE OF BUSINESS COULD NOT BE DISALLOWED. THERE IS NOTH ING IN THE ASSESSMENT ORDER TO SUGGEST THAT EXPENDITURE INCURR ED BY THE ASSESSEE WAS NOT IN THE NATURE OF BUSINESS EXPENDIT URE. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF LD. CIT(A) DELETING THE ADDITION. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 8. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH APR., 2011. SD./- SD./- (A. D. JAIN) (K. D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:13 TH APR., 2011 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI