ACIT, New Delhi V. Smt. Mamta Chaudhary, New Delhi

ITA 46/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3805 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 07-06-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 07-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S SAHOTA
• Assessee Lawyers: SAMEER KAPUR
• Keywords: Fair market value; Assessment record
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E : NEW DELHI BEFORE SHRI A.D.JAIN, JM AND SHRI R.C.SHARMA, AM ITA NO.46/DEL/2009 ASSESSMENT YEAR : 2005-06 ASSTT.COMMISSIONER OF INCOME TAX, CIRCLE-27(1), NEW DELHI. VS. SMT.MAMTA CHOUDHARY, PROP. M/S AUTO TECH ENGINEERS, 14/79, SUBHASH NAGAR, NEW DELHI. PAN NO.AADPC4757B. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G.S.SAHOTA, SR.DR. RESPONDENT BY : SHRI SAMEER KAPUR, CA. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 1.9.2008 FOR THE AY 2005-06, IN THE MATTER OF ORDER PASSED BY THE AO U/S 143(3) OF THE IT ACT. 2. IN THE FIRST GROUND, THE REVENUE IS AGGRIEVED FO R DELETION OF DISALLOWANCE OF RS.12.32 LAKHS MADE BY THE AO ON ACCOUNT OF FOREIGN TRAVEL EXPENSES. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FR OM THE RECORD, WE FOUND THAT ASSESSEE WAS DERIVING INCOME FROM EXPORT OF AUTO CO MPONENTS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS TRAVELED ABRO AD ON SIX DIFFERENT TRIPS. THE DETAILS OF EXPENSES WERE FILED BEFORE THE AO. HOWE VER, THE AO DECLINED THE CLAIM OF DEDUCTION ON THE PLEA THAT ASSESSEE HAS NOT SUBS TANTIATED THE BUSINESS PURPOSE OF THE FOREIGN TRIPS SO UNDERTAKEN. THE CIT(A) CALLED FOR THE ASSESSMENT RECORDS AND FOUND THAT ASSESSEE HAS SUBMITTED DETAILS OF EXPENS ES INCURRED, BILLS AND VOUCHERS OF THE EXPENSES AND THE PURPOSE FOR WHICH FOREIGN T RAVEL WAS UNDERTAKEN. AFTER RECORDING A FINDING THAT AO HAS NOT DOUBTED THE GEN UINENESS OF THE EXPENSES MADE BY THE ASSESSEE, DELETED THE DISALLOWANCE. WE FOUN D THAT IN ASSESSEES OWN CASE, ITAT IN THE AY 2003-04 DEALT WITH THE SIMILAR ISSUE OF TRAVELING EXPENSES AND HELD AS UNDER:- ITA-46/DEL/2009 2 AFTER CONSIDERING RIVAL SUBMISSIONS OF THE PARTIES AND MATERIAL ON RECORD, WE SEE NO LEGAL JUSTIFICATION FOR DISALLOWI NG ANY PORTION OF TRAVELING EXPENSES CLAIMED BY THE ASSESSEE. GENUIN ENESS OF EXPENSES CLAIMED HAS NOT BEEN DOUBTED BY REVENUE AU THORITIES AT ANY STAGE OF THE PROCEEDINGS. IT IS ALSO AN ADMITTED P OSITION THAT TRAVELING EXPENSES PROVED BENEFICIAL I N IMPROVING AND AUGMENTING ASSESSEES EXPORTS, MAY BE IN THE NEXT YEAR OR TWO YEARS LATER. HAVING REGARD TO THE FACT THAT AUTO PARTS EXPORTED BY THE ASSESSEE ARE MANUFACTURED BY THE ASSESSEES HUSBAND, WE SEE NO O BJECTION IN ASSESSEE PAYING FOR HER HUSBANDS TRAVELING. THE E XPENDITURE WERE INCURRED WHOLLY AND EXCLUSIVELY FOR PURPOSES OF BUS INESS. THE DISALLOWANCE OF EXPENSES ON THE GROUND THAT THERE W AS NO AGREEMENT BETWEEN THE PARTIES OR THAT BENEFIT OF EXPORT WAS R ECEIVED NOT IN THE YEAR OF TRAVELING BUT IN THE LATER YEARS, ARE NO GR OUND TO DISALLOW THE EXPENSES. ON FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THIS DISALLOWANCE TO BE UNJUSTIFIED AND DELETE THE SAME. THE GROUND OF APPEAL IS ALLOWED. 3. DURING THE YEAR UNDER CONSIDERATION ALSO, WE FOU ND THAT ASSESSEE HAS PLACED DETAILS BEFORE THE LOWER AUTHORITIES DULY INDICATIN G THE COUNTRIES WHERE IT WAS MAKING EXPORTS AND THE RESPECTIVE COUNTRIES TO WHIC H FOREIGN TRAVELING WAS UNDERTAKEN. EVEN IN RESPECT OF TRAVELING UNDERTAKE N TO GERMANY WHERE EXHIBITION WAS HELD AND TO ATTEND THE SAME THE ASSESSEE HAS UN DERTAKEN THE TRAVELING, THE ASSESSEE HAS PRODUCED INVITATION TO THE EXHIBITION, CORRESPONDENCE WITH THE EXHIBITOR, SHIPPING BILL, INVOICE ETC. FOR SALE OF THE PRODUCTS. THE DOCUMENTARY EVIDENCE SO PLACED ON RECORD CLEARLY ESTABLISHED CO MMERCIAL EXPEDIENCY AND THE PURPOSE OF THE VISIT WHICH WE FOUND TO BE ESSENTIAL LY FOR THE PURPOSE OF BUSINESS. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) FOR DELETING THE DISALLOWANCE OF FOREIGN TRAVEL EXPENSE S WHICH IS IN THE SPIRIT OF DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2003-04. 4. IN THE SECOND GROUND, THE REVENUE IS AGGRIEVED F OR DELETING DISALLOWANCE OF RS.10 LAKHS U/S 40A(2)(B). AS THE ASSESSEE WAS EXP ORTING AUTO PARTS MANUFACTURED BY THE CONCERN OF HER HUSBAND, THE AO DISALLOWED A SUM OF RS.10 LAKHS U/S 40A(2)(B) BY OBSERVING THAT ASSESSEE FAILED TO GIVE COMPARATIVE DETAILS OF PURCHASES MADE FROM THE SISTER CONCERN. BY THE IMP UGNED ORDER, CIT(A) DELETED THE DISALLOWANCE BY OBSERVING THAT AO HAS NOT GIVEN ANY FINDING THAT VALUE OF ITA-46/DEL/2009 3 GOODS PURCHASED FROM THE SISTER CONCERN WAS EXCESSI VE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS AND TH AT AO HAS SIMPLY MADE AD-HOC DISALLOWANCE OF RS.10 LAKHS. WE HAVE CONSIDERED TH E RIVAL CONTENTIONS AND FOUND FROM THE RECORD THAT AD-HOC DISALLOWANCE OF RS.10 L AKHS WAS MADE BY THE AO U/S 40A(2)(B) OUT OF THE PURCHASE PRICE PAID TO THE SIS TER CONCERN. UNDER THE PROVISIONS OF SECTION 40A(2)(B), THE BURDEN IS CAST ED ON THE REVENUE TO INDICATE THAT EXPENDITURE SO INCURRED BY THE ASSESSEE IS EXC ESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVI CES OR FACILITIES FOR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSI NESS OR PROFESSION OF THE ASSESSEE OR THE BENEFIT DERIVED OR ACCRUING TO HIM THEREFROM, SO MUCH OF THE EXPENDITURE AS IS CONSIDERED BY THE REVENUE TO BE E XCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED AS A DEDUCTION. NEGATIVE ONUS CANNO T BE CASTED TO THE ASSESSEE TO SHOW THAT NO PAYMENT IN EXCESS OF FAIR MARKET VALUE HAS BEEN PAID TO THE SISTER CONCERN. IN THE INSTANT CASE BEFORE US, WHILE MAKI NG AN AD-HOC DISALLOWANCE OF RS.10 LAKHS, THE AO HAS NOT MADE ANY COMPARISON ANA LYSIS OF THE PAYMENT MADE FOR PURCHASE MADE FROM SISTER CONCERN TO POINT OUT IF ANY PAYMENT IN EXCESS OF THE FAIR MARKET VALUE OF THE PRODUCTS SO AVAILABLE IN T HE MARKET, WAS MADE TO THE SISTER CONCERN. ON THE CONTRARY, THE ASSESSEE HAS SUBMITT ED CERTAIN DETAILS WHICH INDICATED THAT PAYMENT MADE FOR PURCHASES FROM THE SISTER CONCERN WERE EITHER SAME OR COMPARATIVELY LOWER THAN THE PRICES AT WHIC H THE SISTER CONCERN WAS MAKING SALES TO THE OTHER CONCERNS/OUTSIDE PARTIES. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING T HE DISALLOWANCE MADE U/S 40A(2)(B). 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 11 TH JUNE, 2010. SD/- SD/- (A.D.JAIN) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 11.06.2010. VK. ITA-46/DEL/2009 4 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR