HERCULES INDUSTRIAL CHEMICALS P.LTD, NAVI MUMBAI V. ACIT 10(3), MUMBAI

ITA 4352/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3642 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 28-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 30-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALMAN KHAN
• Assessee Lawyers: KETAN K VED
• Keywords: Additional evidence; Royalty expenses
• Section: 69C; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.4380/M/2013 ASSESSMENT YEAR: 2008-09 THE ASSTT. COMMISSIONER OF INCOME TAX 15(2)(1), ROOM NO.403, 4 TH FLOOR, AAYAKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI - 400020 VS. M/S. HERCULES INDUSTRIAL CHEMICALS PVT. LTD., 601, 606-608, PLATINUM TECHNOPARK, PLOT NO.17-18, SECTOR 30A, VASHI, NAVI MUMBAI 400 705 PAN: AABCH 3827Q (APPELLANT) (RESPONDENT) ITA NO.4352/M/2013 ASSESSMENT YEAR: 2008-09 M/S. ASHLAND INDIA PVT. LTD. (M/S. HERCULES INDUSTRIAL CHEMICALS PVT. LTD. IS MERGED WITH ASHLAND INDIA PVT. LTD. W.E.F. 1 APRIL 2013), 601, 606-608, PLATINUM TECHNOPARK, PLOT NO.17-18, SECTOR 30A, VASHI, NEW MUMBAI 400 705 PAN: AABCH 3827Q VS. THE ASSTT. COMMISSIONER OF INCOME TAX 15(2)(1), ROOM NO.451, 4 TH FLOOR, AAYAKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI KETAN K. VED, A.R. REVENUE BY : SHRI SALMAN KHAN, D.R. DATE OF HEARING : 23.03.2016 DATE OF PRONOUNCEMENT : 13.05.2016 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE ABOVE TITLED CROSS APPEALS ONE BY THE REVENUE AND THE OTHER BY THE ASSESSEE HAVE BEEN PREFERRED AGAINST THE ORDER DATE D 21.01.2011 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER R EFERRED TO AS THE CIT(A)] ITA NO.4380/M/2013 & ITA NO.4352/M/2013 M/S. HERCULES INDUSTRIAL CHEMICALS PVT. LTD. 2 RELEVANT TO ASSESSMENT YEAR 2008-09. SINCE THE FAC TS AND ISSUES INVOLVED THEREIN ARE COMMON, HENCE THE SAME WERE HEARD TOGET HER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING TECHNICAL KNOWHOW FOR MAN UFACTURE OF CHEMICAL PRODUCTS REQUIRED FOR PULP AND PAPER INDUSTRIES. T HE ASSESSEE COMPANY FILED ITS RETURN OF INCOME DECLARING LOSS OF RS.1,18,38,7 10/-. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO), HOWEVER, MADE CERTAIN DISALLOWANCES INCLUDING DISALLOWANCE OF ROYALTY EXPENDITURE AMOUN TING TO RS.23,66,000/- AND ADHOC DISALLOWANCE TRAVELLING EXPENSES AMOUNTING TO RS.29,74,525/-. THE AO ALSO MADE ADDITION OF RS.6,28,700/- UNDER SECTION 6 9C OF THE ACT ON ACCOUNT OF AIR INFORMATION. THE AO MADE CERTAIN OTHER DISALLO WANCES ON ACCOUNT OF PROFESSIONAL FEES ETC. AND THUS ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT RS.61,71,950/- AS AGAINST THE RETURNED LOSS OF RS.1 ,18,38,710/-. 3. IN APPEAL, THE LD. CIT(A) DELETED THE DISALLOWAN CE OF ROYALTY EXPENDITURE. HE, HOWEVER, CONFIRMED THE DISALLOWANC E OF TRAVELLING EXPENSES AMOUNTING TO RS.29,74,525/-. THE LD. CIT(A) ALSO C ONFIRMED ADDITION AMOUNTING TO RS.6,28,700/- UNDER SECTION 69C OF THE ACT OUT OF ADDITION MADE OF RS.60,98,920/- MADE BY THE AO. THE REVENUE, THU S, HAS COME IN APPEAL BEFORE US AGITATING THE ACTION OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE OF ROYALTY EXPENDITURE; WHEREAS THE ASSESSEE HAS COME IN APPEAL BEFORE US AGITATING THE CONFIRMATION OF DISALLOWANCE OF TRAVE LLING EXPENSES AND ALSO IN RESPECT OF ADDITIONS CONFIRMED UNDER SECTION 69C OF THE ACT. 4. FIRST WE TAKE UP THE APPEAL OF THE REVENUE I.E. ITA NO.4380/M/2013. ITA NO.4380/M/2013 5. THE AO DURING THE ASSESSMENT PROCEEDINGS NOTED T HAT THE ASSESSEE DERIVED ROYALTY INCOME MAINLY ON PROVIDING TECHNOLO GY AND KNOWHOW PURCHASED FROM M/S. HERCULES INC, USA VIDE AGREEMEN T DATED 01.01.03 AND ITA NO.4380/M/2013 & ITA NO.4352/M/2013 M/S. HERCULES INDUSTRIAL CHEMICALS PVT. LTD. 3 FURTHER SOLD TO THE INDIAN COMPANIES. THE AO NOTED THAT DURING THE YEAR, THE ASSESSEE HAD SOLD THE SAID TECHNICAL KNOWHOW TO ONL Y ONE PARTY NAMELY CONNELL BROTHERS COMPANY (INDIA) PVT. LTD. (HEREINA FTER REFERRED TO AS THE CBC LTD.) WITH WHICH THE ASSESSEE HAD ENTERED INTO AN AGREEMENT DATED 13.01.03. AS PER THE TERMS OF THE SAID AGREEMENT, THE ASSESSEE WOULD RECEIVE A ROYALTY PAYMENT OF 14% ON NET SALES VALUE OF PRODUC T SOLD, AGAINST WHICH THE ASSESSEE HAD TO MAKE A PAYMENT AT THE RATE OF 5% TO ITS PARENT COMPANY M/S. HERCULES INC, USA AND HENCE THE ASSESSEE WAS LEFT W ITH A NET MARGIN OF 9% ON SALES VALUE EFFECTED. THE AO NOTED THAT THE ASS ESSEE HAD SHOWN A ROYALTY INCOME OF RS.1,52,91,846/- ACCORDING TO WHICH SALES WERE WORKED OUT AT RS.10,92,27,470/-, CONSIDERING 14% AS ROYALTY INCOM E. THE AO FURTHER NOTED THAT THE ASSESSEE, HOWEVER, HAD DEBITED RS.78,27,37 3/- AS ROYALTY EXPENSES WHICH WERE WORKED OUT TO RS.7.16% OF SALES, WHEREAS , AS PER THE AGREEMENT THE ASSESSEE WAS LIABLE TO PAY ONLY 5% OF SALES AS ROYALTY. THE AO, THEREFORE, DISALLOWED THE EXCESS CLAIM WORKED OUT AT RS.23,66, 000/- AND ADDED THE SAID AMOUNT TO THE RETURNED INCOME OF THE ASSESSEE. BEI NG AGGRIEVED BY THE ABOVE ACTION OF THE AO, THE ASSESSEE PREFERRED APPEAL BEF ORE THE LD. CIT(A). 6. IN APPEAL, THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT THE AO WHILE MAKING DISALLOWANCE ON ACCOUNT OF ROYALTY EXP ENSES HAS COMPUTED THE ROYALTY ON PRODUCTS SOLD AT THE RATE OF 14%. THE A O, WHILE DOING SO, IGNORED THE FACT THAT AS PER THE AMENDED AGREEMENT WITH CBC LTD., ROYALTY ON CERTAIN PRODUCTS WAS RECEIVABLE AT THE RATE OF 5% ONLY AND ON CERTAIN OTHER PRODUCTS AT 14%. THE ASSESSEE ALSO AGITATED THE DISALLOWANCE O F TRAVELLING EXPENSES AND ADDITIONS CONFIRMED ON ACCOUNT OF AIR INFORMATION A ND FURTHER SUBMITTED CERTAIN DETAILS AND EVIDENCES IN THIS RESPECT. THE LD. CIT(A) ON THE ABOVE SUBMISSIONS CALLED REMAND REPORT FROM THE AO. IN T HE REMAND REPORT, THE AO REPORTED THAT ON VERIFICATION OF DETAILS FILED BY T HE ASSESSEE DURING THE REMAND PROCEEDINGS, IT WAS NOTICED THAT AS PER THE TERMS O F THE AGREEMENT DATED 13.01.03 ENTERED WITH CBC LTD., THE ASSESSEE WAS EN TITLED TO RECEIVE ROYALTY ITA NO.4380/M/2013 & ITA NO.4352/M/2013 M/S. HERCULES INDUSTRIAL CHEMICALS PVT. LTD. 4 PAYMENT @ 14% ON NET SALES VALUE OF PRODUCTS AGAINS T WHICH THE ASSESSEE HAD TO MAKE A PAYMENT @ 5% TO ITS PARENT COMPANY M/S. H ERCULES INC, USA. HOWEVER, AS PER THE ASSESSEE THERE WAS AN AMENDED A GREEMENT DATED 29.03.05 WITH CBC LTD. AS PER WHICH ON PRODUCT HERCON AND I MPRESS THE ROYALTY PAYABLE WAS 5% AND FOR OTHER PRODUCTS IT WAS SETTLE D AT 14%. IT WAS ALSO SUBMITTED THAT THE SAID AGREEMENT WAS PRODUCED BEFO RE THE AO DURING THE ASSESSMENT PROCEEDINGS VIDE LETTER DATED 29.11.10. IT WAS THEREFORE CLAIMED THAT THE ROYALTY EXPENDITURE WAS CORRECTLY COMPUTED IN THE RETURN OF INCOME. THE AO, HOWEVER, REPORTED THAT THE AMENDED AGREEMEN T DATED 29.03.05 COULD NOT BE RELIED UPON AS THE ORIGINAL AGREEMENT AND TH E AMENDED AGREEMENT WERE RESPECTIVELY SIGNED BY DIFFERENT DIRECTORS OF THE G OVERNMENT. THE AO FURTHER NOTED THAT SINCE THE ASSESSEE ACQUIRED TECHNICAL KN OWHOW AT THE RATE OF 5% FROM PARENT COMPANY AND IT WAS NOT PROBABLE THAT TH E ASSESSEE COMPANY WOULD SALE THE SAME AT THE SAME RATE OF 5% WITHOUT EARNIN G ANY PROFIT. HE ACCORDINGLY REPORTED THAT THE DISALLOWANCE ON ACCOU NT OF ROYALTY EXPENDITURE WAS RIGHTLY MADE DURING THE ASSESSMENT PROCEEDINGS. 7. THE LD. CIT(A), AFTER GOING THROUGH THE REMAND R EPORT AND CONSIDERING THE SUBMISSIONS OF THE LD. A.R. OF THE ASSESSEE, OB SERVED THAT THE ASSESSEE HAD ENTERED INTO ORIGINAL AGREEMENT IN THE YEAR 2003 WH EREAS THE SUBSEQUENT AMENDMENTS WERE MADE IN THE AGREEMENT IN THE YEAR 2 005 WHICH WERE DULY PLACED ON RECORD DURING THE ASSESSMENT PROCEEDINGS. THE SAID AMENDED AGREEMENT CLEARLY STATED THAT ON PRODUCT HERCON AN D IMPRESS ROYALTY AT THE RATE OF 5% WAS PAYABLE AND FOR OTHER PRODUCTS AT TH E RATE OF 14%. HE OBSERVED THAT THE REGISTRATION OF THE AFORESAID AGREEMENTS W AS NOT NECESSARY AS PER THE LAW. HE, CONSIDERING THE SUBMISSIONS OF THE ASSESS EE THAT THE PRODUCTS HERCON AND IMPRESS ON WHICH 5% ROYALTY WAS CHARGED WERE N EWLY ADDED IN THE LIST OF PRODUCTS AND IN ORDER TO ATTRACT MORE CUSTOMERS THE ASSESSEE COMPANY DECIDED TO RECOVER ONLY THE COST ON THESE PRODUCTS INITIALL Y AND THAT THE SAME WAS A ITA NO.4380/M/2013 & ITA NO.4352/M/2013 M/S. HERCULES INDUSTRIAL CHEMICALS PVT. LTD. 5 BUSINESS DECISION AND THE AO WAS NOT SUPPOSED TO SI T OVER IT, DELETED THE ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF ROYALTY EXPENDITURE. 8. BEFORE US, THE LD. A.R. OF THE ASSESSEE SUBMITTE D THAT SINCE THE ABOVE STATED PRODUCT HERCON AND IMPRESS WERE NEWLY ADDE D PRODUCTS AND THAT IT WAS A COMMERCIAL DECISION OF THE ASSESSEE COMPANY T O SELL THE SAID PRODUCTS ON NO PROFIT BASIS SO AS TO ATTRACT MORE CUSTOMERS. I T HAS ALSO BEEN SUBMITTED THAT IN THE SUBSEQUENT ASSESSMENT YEAR 2011-12, THE PARE NT COMPANY I.E. M/S. HERCULES INC, USA HAS WAIVED OFF THE ENTIRE ROYALTY PAYABLE BY THE ASSESSEE AND THAT THE ASSESSEE HAS NOT PAID ANY ROYALTY TO T HE PARENT COMPANY AND THE ENTIRE AMOUNT HAS BEEN OFFERED TO TAX BY THE ASSESS EE COMPANY FOR A.Y. 2011- 12. IT HAS, THEREFORE, BEEN CONTENDED THAT THE DIS ALLOWANCE MADE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION WOULD RESULT IN DOUBLE TAXATION OF THE SAME INCOME. 9. CONSIDERING THE ABOVE CONTENTIONS, WE DO NOT FIN D ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHILE DELETING THE DISALLOW ANCE OF ROYALTY EXPENDITURE. THE APPEAL OF THE REVENUE IS THEREFORE DISMISSED. 10. NOW COMING TO THE APPEAL OF THE ASSESSEE I.E. I TA NO.4352/M/2013. ITA NO.4352/M/2013 11. THE ASSESSEE IN ITS APPEAL HAS AGITATED THE DIS ALLOWANCE OF RS.29,74,525/- ON ACCOUNT OF TRAVELLING EXPENSES MA DE ON ADHOC BASIS AT THE RATE OF 15%. THE ASSESSEE HAS ALSO AGITATED THE CO NFIRMATION OF ADDITION OF RS.6,28,700/- UNDER SECTION 69C OF THE ACT. 12. SO FAR AS THE DISALLOWANCE OF TRAVELLING EXPEND ITURE IS CONCERNED, THE AO NOTED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.59,49,051/- UNDER THE HEAD TRAVELLING EXPENDITURE. THE AO OBSERVED THA T THOUGH THE ASSESSEE HAD CLAIMED THE SAID EXPENDITURE WAS INCURRED ON ACCOUN T OF VISITS OF ITS EMPLOYEES TO THE CUSTOMERS, HOWEVER, THE ASSESSEE HAD NOT FUR NISHED ANY DETAILS AS TO THE ITA NO.4380/M/2013 & ITA NO.4352/M/2013 M/S. HERCULES INDUSTRIAL CHEMICALS PVT. LTD. 6 NAMES AND ADDRESSES OF THE CUSTOMERS AND THE DETAIL S OF BUSINESS PROCURED. HE, FURTHER OBSERVED THAT AS PER THE CLAUSE 9.3 OF THE AGREEMENT OF THE ASSESSEE WITH CBC LTD., ALL THE EXPENSES RELATING TO SALE, D ISTRIBUTION AND OTHER EXPENSES WERE TO BE BORNE BY THE CBC LTD. HE ACCOR DINGLY DISALLOWED THE 50% OF THE TRAVELLING EXPENSES CLAIMED BY THE ASSES SEE. 13. IN APPEAL, THE ASSESSEE RELIED UPON THE CLAUSE 9.6 OF THE AGREEMENT WHICH STATES THAT IN AN EFFORT TO ASSIST THE LICENSEE (CB C LTD.) WITH DEVELOPMENT OF ITS BUSINESS FOR THE SALE OF PRODUCTS, THE LICENSOR (AS SESSEE) MAY FROM TIME TO TIME SEND ITS OWN REPRESENTATIVES TO VISIT THE CUSTOMERS AND PROMOTE THE LICENSEES BUSINESS WITH THOSE CUSTOMERS. THE ASSESSEE, THERE FORE, CLAIMED THAT THE SAID EXPENDITURE WAS INCURRED ON ACCOUNT OF VISITS OF IT S EMPLOYEES. THE LD. CIT(A), HOWEVER, OBSERVED THAT THE ASSESSEE COULD N OT FULLY SUBSTANTIATE THE TRAVELLING EXPENSES AND FURTHER THAT EVEN IN THE EA RLIER ASSESSMENT YEAR, THE DISALLOWANCE AT THE RATE OF 50% OF THE EXPENSES HAD BEEN CONFIRMED BY HIS PREDECESSOR. HE ACCORDINGLY CONFIRMED THE DISALLOW ANCE MADE BY THE AO ON THIS ISSUE. 14. BEFORE US, THE LD. A.R. OF THE ASSESSEE HAS BRO UGHT OUR ATTENTION TO THE ORDER OF THE TRIBUNAL DATED 30.04.13 PASSED IN ITA NO.7501/M/2011 IN THE OWN CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2007-0 8. THE IDENTICAL ISSUE REGARDING 50% OF DISALLOWANCE OF TRAVELLING EXPENSE S HAS BEEN CONSIDERED BY THE TRIBUNAL AND THE TRIBUNAL AFTER CONSIDERING THE SUBMISSIONS OF THE PARTIES HAS DELETED THE ADHOC DISALLOWANCE OF TRAVELLING EX PENSES OBSERVING AS UNDER: 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT T HE DEDUCTION ON ACCOUNT OF TRAVELING EXPENSES WAS CLAIMED BY THE ASSESSEE RELY ING ON CLAUSE 9.6 OF THE AGREEMENT WHEREAS THE SAID CLAIM OF THE ASSESSEE WA S DISALLOWED BY THE AUTHORITIES BELOW RELYING ON CLAUSE 9.3 OF THE SAID AGREEMENT. WE THEREFORE FIND IT RELEVANT TO QUOTE THE SAID TWO CLAUSES: CLAUSE 9.3 ITA NO.4380/M/2013 & ITA NO.4352/M/2013 M/S. HERCULES INDUSTRIAL CHEMICALS PVT. LTD. 7 'EXPENSES - ALL EXPENSES AND ALL RISKS INCURRED BY THE LICENSEE IN CONNECTION WITH THE MANUFACTURE, DISTRIBUTION AND S ALE OF THE PRODUCTS WILL BE FOR THE ACCOUNT OF AND SHALL BE BORNE AND P AID FOR BY THE LICENSEE. WITHOUT PREJUDICE TO THE GENERALITY OF THE FOREGOIN G, THE LICENSEE WILL IN ALL CASES BE RESPONSIBLE FOR THE PAYMENT OF ALL TRANSPO RTATION, SHIPPING, HANDLING, INSURANCE, BROKERAGES, TAXES, CUSTOMS, ST ORAGE AND OTHER GOVERNMENTAL CHARGES, HOWEVER DESIGNATED, IMPOSED I N THE TERRITORY'. CLAUSE 9.6 'IN AN EFFORT TO ASSIST THE LICENSEE WITH DEVELOPME NT OF ITS BUSINESS FOR THE PRODUCTS, THE LICENSOR MAY FROM TIME TO TIME SEND I TS OWN REPRESENTATIVES TO VISIT WITH CUSTOMERS AND PROMOTE THE LICENSEEE'S BUSINESS WITH THESE CUSTOMERS. THE LICENSEE SHALL COOPERATE FULLY WITH SUCH REPRESENTATIVES.' AS IS CLEARLY EVIDENT FROM THE AFORESAID CLAUSES OF THE RELEVANT AGREEMENT, ALL THE EXPENSES AND RISKS INCURRED BY T HE LICENSEE NAMELY M/S CONNELL BROS. CO. (INDIA) PVT. LTD. IN CONNECTION W ITH THE MANUFACTURE, DISTRIBUTION AND SALE OF THE PRODUCTS WERE TO BE BO RNE AND PAID FOR BY M/S CONNELL BROS. CO. (INDIA) PVT. LTD. THE EXPENSES IN QUESTIO N ON TRAVELING HOWEVER WERE INCURRED BY THE ASSESSEE AS LICENSOR AND NOT BY M/S CONNELL BROS. CO. (INDIA) PVT. LTD. AS LICENSEE AND THE SAME, IN OUR OPINION, THER EFORE WERE COVERED BY CLAUSE 9.6 OF THE AGREEMENT WHICH REQUIRED THE ASSE SSEE AS LICENSOR TO SEND FROM TIME TO TIME ITS OWN REPRESENTATIVES TO VISIT THE C USTOMERS AND PROMOTE THE LICENSEE'S BUSINESS WITH THE SAID CUSTOMERS IN AN E FFORT TO ASSIST THE LICENSEE WITH DEVELOPMENT OF ITS BUSINESS FOR THE PRODUCTS. THE SAID EXPENSES THEREFORE WERE TO BE BORNE AND PAID FOR BY THE ASSESSEE AS PE R CLAUSE 9.6 OF THE AGREEMENT AND THE AUTHORITIES BELOW, IN OUR OPINION, WERE NOT JUSTIFIED IN DISALLOWING 50% OF THE TRAVELING EXPENSES OF THE ASSESSEE RELYING ON C LAUSE 9.3 OF THE AGREEMENT WHICH COVERED ONLY EXPENSES AND RISKS INCURRED BY T HE LICENSEE. IT IS ALSO OBSERVED THAT THE TRAVELING EXPENSES CLAIMED BY THE ASSESSEE WERE INCLUSIVE OF FOREIGN TRAVEL EXPENSES WHICH AS STATED SPECIFIC ALLY BY THE ASSESSEE IN THE WRITTEN SUBMISSIONS FILED BEFORE THE ID. CIT(A) WERE INCURRED FOR THE PURPOSE OF VISITS OF ITS EMPLOYEES TO HERCULES INC.'S OFFICES AND PLANTS SITUATED IN USA, KOREA, SINGAPORE, THAILAND ETC. FOR OBTAINING ON SITE TRAI NING IN ORDER TO ENABLE THEM IN ASSISTING M/S M/S CONNELL BROS. CO. (INDIA) PVT. LT D. WITH REGARD TO TECHNOLOGY AND MARKETING OF ITS PRODUCTS. THE ID. CIT(A) PRESUMED THAT THE SAID EXPENSES WERE INCURRED FOR THE PURPOSES OF TRAINING TO THE EMPLOY EES OF M/S CONNELL BROS. CO. (INDIA) PVT. LTD. AND PROCEEDED ON THIS WRONG PRESU MPTION TO CONFIRM THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF TRAVELI NG EXPENSES. MOREOVER VIDE LETTER DTD. 13-12-2010 FILED BY THE A SSESSEE BEFORE THE ID. CIT(A) AS ADDITIONAL EVIDENCE, M/S CONNELL BROS. CO. (INDIA) PVT. LTD. HAD CLARIFIED THAT TRAVELING EXPENSES INCURRED BY THE ASSESSEE WERE CO VERED BY CLAUSE 9.6 OF THE AGREEMENT AND NOT BY CLAUSE 9.3. HAVING REGARD TO ALL THESE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE ENTIRE TRAVELING EXPENS ES OF RS. 30,31,107/- WERE INCURRED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUS INESS AND THERE WAS NO JUSTIFICATION IN DISALLOWING 50% OF THE SAID EXPENS ES ON ADHOC BASIS. IN THAT VIEW OF THE MATTER, WE DELETE THE DISALLOWANCE MADE BY THE A.O., AND CONFIRMED BY THE ID. ITA NO.4380/M/2013 & ITA NO.4352/M/2013 M/S. HERCULES INDUSTRIAL CHEMICALS PVT. LTD. 8 CIT(A) ON ACCOUNT OF TRAVELING EXPENSES AND ALLOW T HIS APPEAL OF THE ASSESSEE. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. 15. THE FACTS FOR THE YEAR UNDER CONSIDERATION ARE IDENTICAL. THE ASSESSEE HAD CLAIMED THE TRAVELLING EXPENSES INCURRED FOR BU SINESS PURPOSE OF THE ASSESSEE WHICH WERE COVERED BY CLAUSE 9.6 OF THE AG REEMENT OF THE ASSESSEE WITH CBC LTD. RESPECTIVELY FOLLOWING THE FINDINGS OF THE TRIBUNAL GIVEN IN THE OWN CASE OF THE ASSESSEE IN THE EARLIER ASSESSM ENT YEAR, WE DELETE THE ADHOC DISALLOWANCE MADE BY THE LOWER AUTHORITIES ON ACCOU NT OF TRAVELLING EXPENSES OF THE EMPLOYEES. THIS GROUND IS ACCORDINGLY DECID ED IN FAVOUR OF THE ASSESSEE. 16. SO FAR AS THE CONFIRMATION OF ADDITION OF RS.6, 28,700/- UNDER SECTION 69C IS CONCERNED, THE RELEVANT FACTS ARE THAT DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO DIRECTED THE ASSESSEE TO RECONC ILE THE RECEIPTS/EXPENDITURE AS PER AIR INFORMATION WITH THAT OF ACCOUNTS OF THE ASSESSEE. IN RESPONSE, THE ASSESSEE STATED THAT WITH RESPECT TO PAYMENTS MADE TO AMERICAN EXPRESS BANK OF RS.54,02,545/- AND RS.6,96,375/- BOTH DATED 31.0 3.08 AS DETAILED IN THE AIR INFORMATION, THAT NO SUCH PAYMENT WAS MADE BY THE A SSESSEE. THE AO, HOWEVER, OBSERVED THAT SINCE THERE WAS A SPECIFIC A IR INFORMATION. HE, THEREFORE, TREATED THE ABOVE EXPENDITURE AGGREGATIN G TO RS.60,98,920/- AS UNEXPLAINED UNDER SECTION 69C OF THE ACT AND ADDE D THE SAME TO THE RETURNED INCOME OF THE ASSESSEE. 17. DURING THE REMAND PROCEEDINGS, THE ASSESSEE FUR NISHED THE CONFIRMATION FROM AMERICAN EXPRESS BANK ALONG WITH COPIES OF THE BANK STATEMENT AND STATED THAT THERE WAS MULTIPLE PAYMENTS AMOUNTING T O RS.54,70,621/- AND THAT ALL THESE PAYMENTS WERE MADE THROUGH AMERICAN EXPRE SS CREDIT CARD AND FOR THE PURPOSE OF TRAVELLING EXPENSES TOTALING TO RS.5 4,70,220/-. THE AO, CONSIDERING THE ABOVE DOCUMENTS, REPORTED IN THE RE MAND REPORT THAT THE ASSESSEE HAD SUBMITTED THE EXPLANATION REGARDING TH E EXPENDITURE OF ITA NO.4380/M/2013 & ITA NO.4352/M/2013 M/S. HERCULES INDUSTRIAL CHEMICALS PVT. LTD. 9 RS.54,70,220/-. HE, HOWEVER, RECOMMENDED THE CONFI RMATION OF DISALLOWANCE OF THE REMAINING AMOUNT OF RS.6,28,700/-. THE LD. CIT(A) ACCORDINGLY CONFIRMED THE DISALLOWANCE OF THE AMOUNT OF RS.6,28 ,700/- UNDER THIS HEAD. 18. THE LD. A.R. OF THE ASSESSEE HAS BROUGHT OUR AT TENTION TO PAGE 69 OF THE PAPER BOOK WHICH IS A CONFIRMATION GIVEN BY THE AME RICAN EXPRESS BANKING CORPORATION STATING THAT THEY HAVE NOT RECEIVED ANY CONSOLIDATED PAYMENT FOR AN AMOUNT OF RS.54,70,621/- AND RS.6,96,375/- DURIN G THE FINANCIAL YEAR 2007- 08. IT HAS BEEN FURTHER STATED THAT TOTAL PAYMENT WORTH RS.54,70,621/- HAVE BEEN RECEIVED DURING THE ENTIRE FINANCIAL YEAR 2007 -08 THROUGH MULTIPLE REMISSIONS. THE LD. A.R. OF THE ASSESSEE HAS RELIE D UPON THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF S HREEBALLABH R. LOHIYA VS. ITO ITA NO.4120/M/2011 DATED 08.08.12 WHEREIN THE TRIBUNAL HAS OBSERVED THAT THE ADDITIONS CANNOT BE MADE MERELY ON THE BAS IS OF AIR INFORMATION AND WITHOUT BRINGING ANY EVIDENCE ON RECORD THAT ASSESS EE HAS ACTUALLY RECEIVED ANY SUCH AMOUNT AS ALLEGED AS PER AIR INFORMATION. THE LD. A.R. HAS FURTHER RELIED UPON ANOTHER DECISION OF THE CO-ORDI NATE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI S. GANESH VS. ACIT ITA NO.527/M/ 2010 08.12.10 WHEREIN THE TRIBUNAL HAS OBSERVED THAT THERE MAY BE SO MANY REASONS FOR NON MATCHING OF THE ACTUAL RECEIPTS WITH THAT OF AIR INFORMATION AND THAT THE ADDITIONS SOLELY ON THE BASIS OF AIR INFORMATION WITHOUT ANY SUPPORT ING EVIDENCE CANNOT UPHELD. 19. IN THE CASE IN HAND BEFORE US, THE ASSESSEE HAS SPECIFICALLY PLEADED THAT IT HAS NOT MADE ANY PAYMENT EXCEPT RS.54,70,621/- THRO UGH MULTIPLE PAYMENTS TO THE AMERICAN EXPRESS BANK, WHICH FACT HAS ALSO BEEN CONFIRMED BY THE SAID BANK. UNDER SUCH CIRCUMSTANCES, THE BURDEN SHIFTS UPON THE AO TO PROVE THAT THE ASSESSEE HAS MADE PAYMENTS IN EXCESS OF WHAT HA S BEEN CLAIMED BY THE ASSESSEE AS THE ASSESSEE IS NOT SUPPOSED TO PROVE T HE NEGATIVE. SINCE THERE IS NO OTHER EVIDENCE AVAILABLE OF ANY SUCH PAYMENTS MA DE BY THE ASSESSEE EXCEPT THE AIR INFORMATION ALONE, HENCE, IN OUR VIEW, THE ADDITIONS SOLELY ON THE BASIS ITA NO.4380/M/2013 & ITA NO.4352/M/2013 M/S. HERCULES INDUSTRIAL CHEMICALS PVT. LTD. 10 OF AIR INFORMATION ARE NOT SUSTAINABLE IN THE EYES OF LAW. THIS GROUND OF THE ASSESSEES APPEAL IS THEREFORE ALLOWED AND THE ADDI TIONS CONFIRMED BY THE LD. CIT(A) IN RELATION TO THE ABOVE ISSUE ARE HEREBY OR DERED TO BE DELETED. 20. IN THE RESULT, THE APPEAL OF THE REVENUE IS HER EBY DISMISSED WHEREAS THE APPEAL OF THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.05.2016. SD/- SD/- (RAJESH KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 13.05.2016. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.