M/s. Multiple Exports, Surat V. The ACIT., Circle-6, Surat

ITA 4110/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6112 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 20-05-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 12-11-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DENNIS CHOKSHI
• Section: 80HHC; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : AHMEDABAD CAMP AT SURAT (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SH RI D.C. AGRAWAL, A.M.) I.T.A. NO. 4100/AHD./2007 ASSESSMENT YEAR : 2004-2005 ASSISTANT COMMISSIONER OF INCOME TAX, -VS.- M/S. MULTIPLE EXPORTS, SURAT CIRCLE-6, SURAT (PAN : AAHFM 6578 L) (APPELLANT) (RESPONDENT) & I.T.A. NO. 4110/AHD./2007 ASSESSMENT YEAR : 2004-2005 M/S. MULTIPLE EXPORTS, SURAT -VS.- ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-6, SURAT (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DENNIS CHOKSHI DEPARTMENT BY : SHRI SANJEEV KASHYAP , SR. D.R. O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THESE CROSS APPEALS ARE AGAINST THE ORDER DATED 20 .08.2007 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-IV, SURAT FOR THE ASSESSMENT YE AR 2004-05. 2. THE ONLY GROUND RAISED BY THE REVENUE IN ITS APP EAL IS THAT THE LD. CIT(A) ERRED IN DELETING THE ADDITIONS MADE ON ACCOUNT OF UNDISCLO SED SALES OF RS.22,99,665/- MADE BY THE A.O. 3. THE FACTS RELATING TO CONTROVERSY INVOLVED IN TH E AFORESAID GROUND OF APPEAL IS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT A SUM OF RS.20,15,835/- HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT AS SAMPLE EXPENSES. FROM THE LEDGER PERTAINING TO THIS ITEM, IT WAS FOUND THAT THESE CONSTITUTED M OSTLY SMALL PURCHASES FROM THE OPEN MARKET. THESE ARE EXPENDITURES IN RELATION TO SAREES PURCHA SED FROM THE OPEN MARKET WHICH WERE SUBSEQUENTLY TRACED AND DESIGNED WITH THE IDEAS FRO M THESE SAREES. THESE EXPENDITURES WERE 2 ITA NO. 4100 & 4110/AHD /2007 BOOKED UNDER THE HEAD SAMPLE EXPENSES CLEARLY NOM ENCLATURE OF THIS, HENCE, INDICATES THAT CERTAIN PARTIES OF THESE SALES WERE GIVEN FREE OF C OST. ON BEING ASKED TO THE ASSESSEE TO EXPLAIN AND ESTABLISH THE NATURE OF EXPENDITURE, IT WAS STA TED BY THE ASSESSEE THAT THESE ARE NOT FREE SAMPLES BUT WASTAGES OUT OF THE PRODUCTION AND DESI GNING PROCESS. THE EXPENSES OF THE NATURE OF WASTAGE WAS GIVEN THE MISLEADING AND AMBIGUOUS NOME NCLATURE OF SAMPLE EXPENSES. IT WAS FURTHER STATED THAT THE PURCHASES WERE MADE ARE COP YING AND TRANSPIRING DESIGNS TO DEVELOP NEAR DESIGN AS PER DEMAND AND PREFERENCES OF THE CUSTOME RS. THESE SAMPLES WERE SENT TO PARTIES FOR APPROVAL AND FURTHER MODIFICATION AND THUS, BECAME UNUSUAL. SINCE, THEY WERE DOTES WITH COLOUR ETC. THE CLAIM OF THE ASSESEE THAT READYMADE SAREES AND DRESS MATERIALS WERE PURCHASED FOR SAMPLE WAS REJECTED BY THE AO ON THE GROUND THAT IN THE AUDIT REPORT, FINISHED FABRICS WAS NOT AT ALL PURCHASED DURING THE YEAR. THE AO CONCLUDED THA T THESE SAREES WERE PURCHASED BY THE ASSESSEE AT A COST OF RS.20,15,835/- AND SOLD OUT O F BOOKS AND ADOPTED THE GROSS PROFIT AT THE RATE OF 14.08% DISCLOSED BY THE ASSESSEE. THEREFORE, THE GROSS PROFIT WORK OUT TO RS.2,83,830/-. THE AGGREGATE UNACCOUNTED SALE ARE TO THE TUNE OF RS.22 ,99,665/-, WHICH HAVE NOT DISCLOSED BY THE ASSESSEE. THUS, THE AO HAS MADE AN ADDITION OF RS.2 2,99,665/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. IN THE IMPUGNED ORDER, THE LD. CIT(A) RIGHTLY DE LETED THE ADDITION OF RS.22,99,665/- BY OBSERVING THAT NO OVERSEAS PARTY WOULD GIVE A CONFI RMATION TO BE FILED BEFORE THE AO THAT IT HAD ACTUALLY REACHED THE SAMPLES WHICH WOULD OTHERWISE HAVE NO COMMERCIAL VALUE AND NO PARTY WOULD EVER THINK OF VALUATING THE SAMPLES TO THE AS SESSEE, WHICH WOULD OTHERWISE ALSO BE A FRUITLESS EXERCISE. IN VIEW OF CLEAR EVIDENCES THAT THESE SAMPLES WERE SAID TO THE OVERSEAS PARTIES ON VARIOUS DATES THROUGH COURIER AS SAMPLES, THE AO S ACTION IN TREATING THE SAME AS SALES NOT RECORDED IN THE BOOKS OF ACCOUNTS IS NOT IN ORDER O N THIS ACCOUNT. 5. AT THE TIME OF HEARING BEFORE US, SHRI SANJEEV K ASHYAP, SR. D.R. APPEARING ON BEHALF OF THE REVENUE CONTENTED THAT THE ORDER OF LD. CIT(A) IS NOT ACCEPTABLE AS BECAUSE THE ASSESSING OFFICER HAS RIGHTLY MADE THE ADDITIONS OF RS.22,99, 665/- BEING UNACCOUNTED SALES. THE AO WAS JUSTIFIED IN MAKING THE ADDITIONS AS THE ASSESSEE F AILED TO SUBMIT ANY CONCRETE EVIDENCE IN SUPPORT OF THEIR CLAIM. THE LD. D.R. ALSO CONTENDE D THAT THE LD. CIT(A) HAS DELETED THE ADDITION 3 ITA NO. 4100 & 4110/AHD /2007 BY MERELY ON THE SUBMISSIONS OF THE ASSESEE WITHOUT CONSIDERING THE FACTS OF THE CASE AND FINDINGS OF THE AO. THE LD. D.R. SUGGESTED THAT THE ORDER OF LD. CIT(A) BE DELETED. 6. ON THE OTHER HAND, SHRI DENNIS CHOKSHI, LD. COUN SEL APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDER OF LD. CIT(A). 7. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE R IVAL SUBMISSIONS MADE BEFORE US AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE A LSO PERUSED THE ORDERS OF AUTHORITIES BELOW. IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS DELETED THE ADDITION OF RS.22,99,665/- MADE BY THE ASSESSING OF FICER FOR THE DETAILED REASONS GIVEN IN PAGES 4-5 OF THE IMPUGNED ORDER, WHICH READS AS UNDER :- I HAVE CONSIDERED THE DETAILS AND FIND THAT THE A. O. HAS NOT FULLY APPRECIATED THE FACTS OF THE CASE AND HAS USED THE EXPLANATION OF THE APPELLANT AND THE EXPORT MANAGER OF THE FIRM ONLY I N PART. THE EXPORT MANAGER SHRI MAHESH AGRAWAL APPEARED BEFORE ME ALSO DURING THE APPELLATE PROCEEDINGS AND CLARIFIED THE FACTS. THE FACTS ARE THAT THE APPELLANT WOULD PURCHASE FINISHED FABRICS FOR SAMPL ES WHICH WOULD BE 5 METERS OR 7 METERS IN LENGTH AND IS CUT INTO TWO OR THREE PIECES. ONCE A SIMPLE IS SENT TO THE TRACING OR DESIGN DEPARTMEN T OF THE MILL FROM WHICH THE APPELLANT WOULD GET JOB WORK DONE, IT WOU LD BECOME UNUSABLE AND WOULD NOT BE RETURNED TO THE APPELLANT . IT IS ALSO SEEN THAT OUT OF THE TWO OR THREE PIECES CUT FROM THE FIVE OR SEVEN METER SAMPLE PIECE, ONE WOULD BE KEPT WITH THE APPELLANT ITSELF FOR RECORD OR DISPLAY AND A PIECE WOULD BE SENT TO THE FOREIGN CUSTOMER F OR APPROVAL OR CHANGE IN DESIGN. I AM ALSO INCLINED TO AGREE WITH THE APPELLANT THAT THE PIECE LYING WITH THE MILL WOULD BE USED AS A WASTE CLOTH BECAUSE A TWO METER FABRIC CAN NEITHER BE SOLD IN THE MARKET NOR USED FOR ANY COMMERCIAL PURPOSES. IT IS SEEN THAT THE APPELLANT HAS DEBITED POST AND COURIER EXPENSES OF RS.6,13,035/- UNDER THE HEAD C OMMUNICATION EXPENSES AND HAS ALSO FILED A COMPLETE CHART OF SA MPLES SENT TO VARIOUS PARTIES ABROAD FOR APPROVAL WHICH IS SUPPORTED BY T HE RECEIPTS OF THE COURIER CO. M/S. D.H.L. EXPRESS AND THE RECEIPT CLE ARLY MENTIONS FABRIC SAMPLE. THE A.O. PROBABLY IS CONFUSED ABOU T THE ISSUE OF SENDING FREE SAMPLES OVERSEAS WITH THE EXPORTS MADE BY THE APPELLANT AND HAS MENTIONED THAT THE EXPORT INVOICES ARE-1 OR BILL OF LADING WERE NOT FURNISHED BY THE APPELLANT. OBVIOUSLY, THERE CO ULD BE NO EXPORT INVOICES IN RESPECT OF THESE SAMPLES WHICH WERE SEN T THROUGH COURIER AND WERE DEBITED UNDER THE HEAD COMMUNICATION EXPE NSES OUT OF WHICH HE DISALLOWED 25% OF THE EXPENSES. IT IS ALSO SEEN THAT THE SAMPLES EXPENSES WERE CLAIMED IN EARLIER YEAR ALSO AND THE A.O. HAS NOT DOUBTED THE PURCHASE OF SUCH SAMPLES. I AM ALSO INCLINED TO AGREE 4 ITA NO. 4100 & 4110/AHD /2007 WITH THE APPELLANT THAT NO OVERSEAS PARTY WOULD GIV E A CONFIRMATION TO BE FILED BEFORE THE A.O. THAT IT HAD ACTUALLY RECEI VED SUCH SAMPLES WHICH WOULD OTHER WISE HAVE NO COMMERCIAL VALUE AND NO PARTY WOULD EVER THINK OF RETURNING THE SAMPLES TO THE APPELLAN T WHICH WOULD OTHERWISE ALSO BE A FRUITLESS EXERCISE. IN VIEW OF THE CLEAR EVIDENCE THAT THESE SAMPLES WERE SENT TO THE OVERSEAS PARTIES ON VARIOUS DATES THROUGH COURIER AS SAMPLES, THE A.O.S ACTION IN TR EATING THE SAME AS SALES NOT RECORDED IN THE BOOKS OF ACCOUNTS IS NOT IN ORDER AND ADDITION ON THIS ACCOUNT IS DIRECTED TO BE DELETED. FROM THE AFORESAID REASONING GIVEN BY THE LEARNED C OMMISSIONER OF INCOME TAX(APPEALS), WE ARE CONVINCED THAT THE LD. CIT(A) RIGHTLY DELETED T HE ADDITION OF RS.22,99,665/- MADE BY THE A.O. BECAUSE, IN FACT, THE ASSESSEE MADE NO SUCH SALES. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A). RESULTANTLY, THE GROUND RAISED BY THE REVENUE IN ITS APPEAL IS REJECTED. 8. NOW WE TAKE UP THE ASSESSEES APPEAL, I.E. ITA N O. 4110/AHD/2007, WHEREIN THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS AP PEAL :- (1) THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE DISALLOWANCE OF THE ENTIRE DEDUCTI ON U/S. 80HHC OF THE ACT AS MADE BY THE AO WITHOUT APPRECIATING THE FACT (A) THAT THE TAXATION LAWS (AMENDMENT) ACT, 2005 MA KES UNDUE DISTINCTION BETWEEN EXPORTERS ON THE BASIS OF TURNOVER AND AMEN DS THE LAW, BY LAYING DOWN VARIOUS CONDITIONS, ON A RETROSPECTIVE BASIS, WHICH IS UNCONSTITUTIONAL AND ULTRA VIRES, REQUIRING OUTRIGHT ANNULMENT. (B) THAT DEPB WAS NEVER AN ALTERNATIVE TO DRAWBACK FOR THE APPELLANT AND THUS THE THIRD PROVISO TO SECTION 80HHC(3) BECOMES INFRU CTUOUS. (C) THAT THE AMOUNT OF DEPB LICENSE RECEIVED BY THE APPELLANT IS NOTHING BUT REIMBURSEMENT OF COST OF DUTIES SUFFERED BY THE INP UTS AND THUS, THE SAME WAS RIGHTLY REDUCED BY THE APPELLANT FROM THE COST OF G OODS SOLD AND ACCORDINGLY THE PROFIT SO ARRIVED HAS TO BE TREATED AS DERIVED FROM EXPORTS BEING FULLY ELIGIBLE FOR DEDUCTION U/S. 80HHC OF THE ACT. (D) THAT THE APPELLANT FIRM HAS IN FACT NOT EARNED ANY PROFIT, I.E. PREMIUM ON TRANSFER OF DUTY ENTITLEMENT PASSBOOK SCHEME (DEPB) , BUT THERE IS A LOSS SINCE THE DEPB HAS BEEN SOLD AT A DISCOUNT. HENCE, IT IS MOST HUMBLY SUBMITTED THAT THE DEDUCTI ON UNDER SECTION 80HHC AS COMPUTED BY THE APPELLANT MAY KINDLY BE ALLOWED. ALL THE AFORESAID GROUNDS REGARDING DISALLOWANCE OF DEDUCTION U/AS. 80HHC OF THE ACT ARE INDEPENDENT OF EACH OTHER REQUIRING SEP ARATE ADJUDICATION. 5 ITA NO. 4100 & 4110/AHD /2007 (2) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADHOC DISALLOWANCE TO THE EXTENT OF 20% OUT OF TELEPHONE EXPENSES AND TRAVELLING AND CONVEYANCE EXPENSES AS MADE BY T HE ITO, ON THE GROUND THAT EXPENSES ARE UNVERIFIABLE AND ALSO ELEMENT OF NON-B USINESS USE IN SUCH EXPENSES CANNOT BE RULED OUT, WHICH IS PURELY ON THE BASIS O F ESTIMATIONS, CONJECTURES AND SURMISES AND HENCE, NEEDS TO BE DELETED. 9. WITH REGARD TO THE GROUND NO. 1, AT THE TIME OF HEARING BEFORE US, LD. COUNSEL APPEARING ON BEHALF OF ASSESSEE CONTENDED THAT IN VIEW OF THE LATEST DECISION OF THE ITAT, SPECIAL BENCH, MUMBAI IN THE CASE OF TOPMAN EXPORTS VS.- ITO REPO RTED IN [2009] 125 TTJ (MUMBAI)(SB) 289, THE MATTER IS REQUIRED TO BE SENT BACK TO THE FILE OF ASSESSING OFFICER. THE LD. COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT THE REVISED WORKING OF DEDUCTION UNDER SECTION 80HHC IN THE CASE OF ASSESSEE AS PER THE ITAT, SPECIAL BENCH, MU MBAI DECISION IN THE CASE OF TOPMAN EXPORTS WILL BE RS.31,45,678/-, WHICH READS AS UNDE R :- SR. NO. PARTICULARS AMOUNT (RS.) AMOUNT(RS.) A. TOTAL TURNOVER 16,25,68,234 B. EXPORT TURNOVER 16,19,37,406 C. ADJUSTED PROFIT OF TRADING GOODS (-)75,88,904 D. EXPORT INCENTIVES (I) U/S.28(IIIB) FACE VALUE OF DEPB LESS:LOSS ON SALE OF DEPB (II) U/S. 28(IIID) PREMIUM ON SALE OF DEPB (NIL AS THE DEPB IS SOLD AT A LOSS) 2,18,78,858 17,17,852 2,01,61,006 E. WORKING OF DEDUCTION U/S. 80HHC ADJUSTED PROFIT OF TRADING GOODS + 90% OF EXPORT INCENTIVES X EXPORT TURNOVER / TOTAL TURNOVER (I.E. DEPB LICENSES U/S. 28(IIIB) 2,01,61,006 X 90% = 1,81,44,905/- X 16,19,37,406/- / 16,25,68,234 (-)75,88,904 1,80,74,496 ELIGIBLE DEDUCTION U/S.80HHC @ 30% NIL 1,04,85,592 31,45,678 6 ITA NO. 4100 & 4110/AHD /2007 10. THE LD. COUNSEL OF THE ASSESSEE ACCORDINGLY SUB MITTED THAT THE MATTER BE RESTORED TO THE FILE OF ASSESSING OFFICER, WHO WILL VERIFY THE AFOR ESAID CALCULATION AND RE-WORK OUT THE DEDUCTION UNDER SECTION 80HHC AS PER THE DECISION OF THE ITA T, SPECIAL BENCH, MUMBAI IN THE CASE OF TOPMAN EXPORTS VS.- ITO (SUPRA). 11. AS AGAINST, THIS, THE LD. D.R. APPEARING ON BEH ALF OF THE REVENUE VEHEMENTLY OBJECTED TO THE APPLICATION OF THE DECISION OF ITAT, SPECIAL BE NCH, MUMBAI IN THE CASE OF TOPMAN EXPORTS VS.- ITO IN THE FACTS OF ASSESSEES CASE IN VIEW O F THE FACT THAT THE ASSESSEE HAD THE OPTION TO CHOOSE EITHER THE DUTY DRAWBACK OR DEPB. THE TURNOV ER OF THE ASSESSEE IS MORE THAN RS.10 CRORES AND AS PER THE AMENDED PROVISIONS OF SECTION 80HHC OF THE AC T, A PROFITS COMPUTED UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) OF SUB -SECTION 3 OF THE INCOME TAX ACT OR AFTER GIVING EFFECT TO THE FIRST PROVISO SHALL BE FURTHER INCREA SED BY THE AMOUNT WHICH BEARS TO NINETY PERCENT OF ANY SUM REFERRED TO IN CLAUSE (IIID) OF SECTION 28 OF THE IT ACT, THE SAME PROPORTION AS THE EXPORT TURNOVER BEARS TO BE TOTAL TURNOVER OF BUSIN ESS CARRIED ON BY THE ASSESEE, IF IT COULD BE PROVED THAT IT HAD THE OPTION TO CHOOSE EITHER THE DUTY DRAWBACK OR DEPB. 12. IN REPLY, THE LD. COUNSEL OF THE ASSESSEE DREW OUR ATTENTION TO THE DECISION OF ITAT, SPECIAL BENCH, MUMBAI IN THE CASE OF TOPMAN EXPORTS VS.- ITO (SUPRA), WHEREIN IT IS HELD THAT THE WORD PROFIT IN SECTION 28(IIID) REFERS TO TH E EXCESS OF SALE PROCEEDS OVER THE FACE VALUE OF DEPB AND ENTIRE AMOUNT RECEIVED ON SALE OF DEPB ENT ITLEMENT IS NOT PROFIT CHARGEABLE UNDER SECTION 28(IIID) BUT THE FACE VALUE OF DEPB HAS TO BE DEDUCTED FROM THE SALE PROCEEDS. THE LD. COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT THE DECISION OF ITAT, SPECIAL BENCH, MUMBAI IN THE CASE OF TOPMAN EXPORTS VS.- ITO (SUPRA) IS DEL IVERED ON 11.8.09, WHEREIN THE LD. CIT(A) PASSED THE IMPUGNED ORDER ON 28.08.2007. THUS WHEN THE LD. CIT(A) PASSED THE IMPUGNED ORDER, THE DECISION OF ITAT, SPECIAL BENCH, MUMBAI (SUPRA) WAS NOT AVAILABLE, THEREFORE, IN THE INTEREST OF JUSTICE, HE HAS NO OBJECTION IN CASE THE MATTER BE RESTORED TO THE FILE OF ASSESSING OFFICER WHO WILL RE-COMPUTE THE DEDUCTION UNDER SECTION 80HHC A FTER EXAMINING THE FACTS IN ACCORDANCE WITH LAW LAID DOWN IN THE CASE OF TOPMAN EXPORTS VS.- I TO (SUPRA). 13. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT WHEN THE LD. C IT(A) PASSED THE IMPUGNED ORDER, THE DECISION 7 ITA NO. 4100 & 4110/AHD /2007 OF ITAT, SPECIAL BENCH MUMBAI IN THE CASE OF TOPMAN EXPORTS WAS NOT AVAILABLE. BY CONSIDERING THE TOTALITY OF THE FACTS, WE ARE CONVI NCED THAT WHETHER THE WORKING SUBMITTED BY THE ASSESSEE IS IN ACCORDANCE WITH THE DECISION OF ITAT , SPECIAL BENCH, MUMBAI IN THE CASE OF TOPMAN EXPORTS (SUPRA), NEEDS VERIFICATION AT THE E ND OF ASSESSING OFFICER. WITHOUT COMMENTING ON THE ARGUMENTS OF THE ASSESSEE, WE RES TORE THE MATTER BACK TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION THAT ASSESSING OFFICER M AY VERIFY THE WORKING SUBMITTED BY THE ASSESSEE IN THE LIGHT OF DECISION OF ITAT, SPECIAL BENCH, MUMBAI IN THE CASE OF TOPMAN EXPORTS (SUPRA) AND RE-WORK OUT THE DEDUCTION UNDER SECTION 80HHC OF THE INCOME TAX ACT, 1961. 14. WITH REGARD TO THE GROUND NO. 2, THE FACTS RELA TING TO CONTROVERSY INVOLVED THAT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER DISALLOWED 2 5% OF THE FOLLOWING EXPENSES AMOUNTING TO RS.15,17,641/- AS CONFIRMED BY THE LD. CIT(A) IN HI S IMPUGNED ORDER, WHICH READS AS UNDER :- SR. NO. PARTICULARS AMOUNT (RS.) AMOUNT (RS.) 1. COMMUNICATION EXPENSES TELEPHONE EXPENSES MOBILE EXPENSES TELEX/FAX CHARGES POSTAGE/COURIER EXPENSES 40,480 29,346 1,000 6,13,035 6,83,861 2. TRAVELLING & CONVEYANCE EXPENSES FOREIGN TRAVELLING EXPENSES TRAVELLING EXPENSES CONVEYANCE EXPENSES CAR & SCOOTER EXPENSES TOTAL EXPENSES TOTAL EXPENSES 6,18,668 29,390 69,036 1,16,686 8,33,780 15,17,641 15. ON APPEAL, IN THE IMPUGNED ORDER, THE LD. CIT(A ) RESTRICTED THE DISALLOWANCE TO 20% I.E. RS.3,03,528/-. AT THE TIME OF HEARING, THE LD. COUN SEL OF THE ASSESSEE SUBMITTED THAT THERE IS NO 8 ITA NO. 4100 & 4110/AHD /2007 JUSTIFICATION WHATSOEVER IN MAKING ANY DISALLOWANCE OUT OF FOREIGN TRAVELLING EXPENSES AMOUNTING TO RS.6,18,668/-. HE SUBMITTED THAT THE S AID AMOUNT WAS INCURRED BY ACCOUNT PAYEE CHEQUE IN RESPECT OF FOREIGN TOUR UNDERTAKEN BY THE EXPORT MANAGER MR. MAHESH AGRWAL, ALONE, FOR PROCURING EXPORT ORDERS AND THE SAID TRIPS BEIN G UNDERTAKEN WITHOUT ANY FAMILY MEMBERS, THERE IS NO QUESTION OF ANY PERSONAL ELEMENT THEREI N. 16. AT THE TIME OF HEARING, ON BEHALF OF ASSESSEE S HRI DINESH CHOKSHI, LD. COUNSEL SUBMITTED BEFORE US WITH REGARD TO ADHOC DISALLOWANCE AS FOLL OWS :- . OUT OF COMMUNICATION EXPENSES TOTALING TO RS.6,83, 861/-, AN AMOUNT OF RS.6,13,035/- IS ON ACCOUNT OF POSTAGE AND COURIER EXPENSES FOR SAMPLES SENT TO THE FOREIGN CUSTOMERS, FOR WHICH THERE CAN BE NO ELEMENT OF PERSONAL USE. . OUT OF THE TRAVELLING EXPENSES TOTALING TO RS.8,33 ,780/- AN AMOUNT OF RS.6,18,668/- WAS PAID BY ACCOUNT PAYEE CHEQUE IN R ESPECT OF FOREIGN TOUR UNDERTAKEN BY THE EXPORT MANAGER MR. MAHESH AG RAWAL, ALONE, FOR PROCURING EXPORT ORDERS AND THE SAID TRIPS BEING UN DERTAKEN WITHOUT ANY FAMILY MEMBERS, THERE IS NO QUESTION OF ANY PERSONA L ELEMENT THEREIN. 17. ON THE OTHER HAND, SHRI SANJEEV KASHYAL, LD. SR . D.R. VEHEMENTLY SUPPORTED THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 18. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS MADE BEFORE US AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. BY CO NSIDERING THE TOTALITY OF THE FACTS, WE ARE OF THE OPINION, THAT THE LD. CIT(A) IS LEGALLY AND FAC TUALLY CORRECT IN RESTRICTING THE DISALLOWANCE TO 20% IN RESPECT OF TELEPHONE AND TRAVELLING & CONVEY ANCE EXPENSES AND RS.1,000/- OUT OF TELEX & FAX CHARGES. THERE IS NO ALLEGATION THAT ANY PERS ONAL ELEMENT IS INVOLVED IN RESPECT OF FOREIGN TOUR EXPENSES UNDERTAKEN BY THE EXPORT MANA GER MR. MAHESH AGRAWAL, ALONE, FOR PROCURING EXPORT ORDERS. WE, THEREFORE, DIRECT THE ASSESSING OFFICER NOT TO MAKE ANY DISALLOWANCE OUT OF FOREIGN TRAVELLING AMOUNTING TO RS.6,18,668/- INCURRED IN RESPECT OF FOREIGN TOUR UNDERTAKEN BY THE EXPORT MANAGER MR. MAHESH AG RAWAL. TO SUM UP, WE ARE OF THE VIEW THAT 9 ITA NO. 4100 & 4110/AHD /2007 (I) 20% DISALLOWANCE OUT OF POSTAGE/ COURIER EXPENS ES AMOUNTING TO RS.6,13,035/- IS HEREBY DELETED. (II) LEARNED COMMISSIONER OF INCOME TAX(APPEALS) RI GHTLY RESTRICTED THE DISALLOWANCE TO 20% IN RESPECT OF TELEPHONE EXPENSES AMOUNTING TO RS.40,48 0/-, MOBILE EXPENSES AMOUNTING TO RS.29,346/-, TELEX/ FAX CHARGES OF RS.1,000/-. (III) FOREIGN TRAVELLING EXPENSES OF MR. MAHESH AGR AWAL, EXPORT MANAGER AMOUNTING TO RS.6,18,668/- IS HEREBY DELETED. HOWEVER, IN RESPEC T OF BALANCE EXPENSES I.E. TRAVELLING EXPENSES OF RS.29,390/-, CONVEYANCE EXPENSES OF RS.69,036/- AND CAR AND SCOOTER EXPENSES OF RS.1,16,686/-, THE VIEW OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) RESTRICTING THE DISALLOWANCE TO 20% IS UPHELD. RESULTANTLY, THIS GR OUND OF APPEAL IS PARTLY ALLOWED. 19. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 04.06.2010 . SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 04 / 06 /2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED, (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.