BELIM ELECTROMAC INDUSTRIES, MUMBAI V. ITO, WD-13(2)(1), MUMBAI

ITA 498/MUM/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0132 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 21-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Business income; Business expenditure; Additional evidence
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ' B ' BENCH, MUMBAI BEFORE SHRI G.S. PANNU , ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN , JUDICIAL MEMBER ITA NO. 498 /MUM/ 2014 (ASSESSMENT YEAR: 2010 - 11 ) M/S. BELIM ELECTROMAC INDUSTRIES C/O. M/S. RAVI & DEV, C A S 601, 'A' WING, AURUS CHAMBERS S.S. AMRUTWAR MARG WORLI, MUMBAI 400013 VS. INCOME TAX OFFICER - 13(2)(1) MUMBAI PAN AAAFB8885A APPELLANT RESPONDENT APPELLANT BY: SHRI ANUJ KISNADWALA RESPONDENT BY: SHRI SUMAN KUMAR DATE OF HEARING: 08 .03.2018 DATE OF PRONOUNCEMENT: 0 9 . 03.2018 O R D E R PER SANDEEP GOSAIN , J M THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - 24 , MUMBAI DATED 11 . 11 .201 3 FOR A.Y. 2010 - 11 . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1.0 THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - 24, MUMBAI CONFIRMING THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE INCOME - TAX ACT, 1961 BY THE ASSESSING OFFICER, IS BOTH BAD - IN - LAW AND BAD - IN - FACTS. DISALLOWANCE OF MANAGEMENT TRAINING & DEVELOPMENT EXPENSES: RS. 17,86,032/ - 2.0 THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN - (A) CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER, OF MANAGEMENT TRAINING AND DEVELOPMENT EXPENSES OF RS. 17, 86,032/ - AND (B) CONFIRMING THE FINDING OF THE ASSESSING OFFICER THAT THESE EXPENSES WERE PERSONAL EXPENSES OF PARTNER AND WERE NOT INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. ITA NO. 498 /MUM/ 2014 M/S. BELIM ELECTROMAC INDUSTRIES 2 3.0 THE ASSESSEE MAY BE ALLOWED TO ADD, AMEND, ALTER OR RAISE ADDITIONAL GROUND S OF APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF RE - ROLLING STEEL AND PURCHASE AND SALE OF STEEL. THE RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 23.09.2010 DECLARING TOTAL INCOME OF ` 11,65,120/ - THE CASE WAS SELECTED FOR SCRUTINY AND REQUISITE STATUTORY NOTICES WERE ISSUED. THE AO, DURING COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAS INCURRED AN EXPENDITURE OF ` 17,86,032/ - ON TRAVELLING EXPENSES OF SHRI HIMANSHU PARIHA R, SON OF ONE OF THE PARTNERS, AN ELECTRICAL ENGINEER BY QUALIFICATION AND AN EMPLOYEE OF THE ASSESSEE FIRM. THEREFORE, THE AO CALLED FOR DETAILS AND DOCUMENTS AND EXPLANATION FROM THE ASSESSEE FOR INCURRING THE SAME AND CLAIMING THE ABOVE AMOUNT AS REVENU E DEDUCTION. THE AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND DISALLOWED THE SAID EXPENDITURE. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) AND THE CIT(A), AFTER CONSIDERING THE FACTS OF THE CASE, DISMISSED AP PEAL FILED BY THE ASSESSEE. AGAINST THE ORDER OF THE LEARNED CIT(A) THE ASSESSEE PREFERRED THE PRESENT APPEAL BEFORE US RAISING THE ABOVE MENTIONED GROUNDS. 5. THE SOLITARY GROUND RAISED BY THE ASSESSEE BEFORE US IS CHALLENGING THE ORDER OF THE CIT(A) IN CON FIRMING THE DISALLOWANCE MADE BY THE AO ON MANAGEMENT TRAINING AND DEVELOPMENT EXPENSES OF ` 17,86,032/ - AND CONFIRMING THE FINDINGS OF THE AO TO THE EFFECT THAT THE EXPENSES WERE PERSONAL EXPENSES OF THE PARTNER AND WERE NOT INCURRED FOR THE PURPOSE OF BUS INESS OF THE ASSESSEE. 6. FROM THE FACTS OF THE PRESENT CASE WE NOTICED THAT THE AO DISALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING THAT THE EXPENSES IN QUESTION, I.E. ` 17,86,032/ - WERE INCURRED ON SHRI HIMANSHU PARIHAR, A MANAGEMENT TRAINEE, FOR HIS EDUCATI ON WAS NOT A TRAINING EXPENDITURE AND IT WAS NOT A ITA NO. 498 /MUM/ 2014 M/S. BELIM ELECTROMAC INDUSTRIES 3 GENUINE BUSINESS EXPENDITURE. IT WAS FURTHER HELD THAT THE SAID EXPENDITURE INCURRED BY THE ASSESSEE ON HIGHER EDUCATION OF THE SON OF THE PARTNER IN A UNIVERSITY IN USA WAS NOT FOR THE BUSINESS PURPOSE AN D IS THUS NOT ALLOWABLE AS DEDUCTION WHILE COMPUTING BUSINESS INCOME OF THE ASSESSEE FIRM AND THEREFORE ADDED THE SAME TO THE INCOME OF THE ASSESSEE. THE LEARNED CIT(A) ALSO SUSTAINED THE SAID ADDITION WHEREAS IN THE CONTRARY THE ASSESSEE SUBMITTED THAT SP ONSORING HIGHER EDUCATION AND TRAINING OF SHRI HIMANSHU PARIHAR WITH INSTITUTE OF TECHNOLOGY AT CHICAGO WAS NOT PERSONAL EXPENSES OF THE PARTNERS AND WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS. IT WAS ALSO SUBMITTED THAT TH ERE WAS CLEAR NEXUS BETWEEN THE EXPENDITURE ON FOREIGN HIGHER EDUCATION AND TRAINING OF SHRI HIMANSHU PARIHAR WITH THE BUSINESS OF THE ASSESSEE. AT THIS STAGE THE LEARNED A.R. ALSO DRAWN OUR ATTENTION TO THE APPLICATION FILED BY THE ASSESSEE FOR ADMISSION OF ADDITIONAL EVIDENCES UNDER RULE 29 OF THE APPELLATE TRIBUNAL RULES, 1963. 7. ON THE OTHER HAND, THE LEARNED D.R. STRONGLY CONTESTED THE SAID APPLICATION MOVED BY THE ASSESSEE FOR ADMISSION OF ADDITIONAL EVIDENCE S . 8. WE HAVE HEARD BOTH THE PARTIES AT LENGTH O N THIS APPLICATION MOVED BY THE ASSESSEE FOR SEEKING ADMISSION OF ADDITIONAL EVIDENCE. AS PER THE FACTS CONTAINED IN THE APPLICATION, IT IS SUBMITTED BY LEARNED A.R. THAT SHRI HIMANSHU PARIHAR PRIOR TO HIS STUDIES AND TRAINING WAS WORKING WITH THE ASSESSEE AS AN EMPLOYEE FOR A SALARY OF ` 10,000/ - PER MONTH. IT IS FURTHER SUBMITTED LOOKING AT HIS CALIBRE AND INTELLIGENCE, A SPONSORSHIP AGREEMENT WAS ENTERED INTO WITH HIM AND AS PER THE AGREEMENT HE WAS SENT FOR HIGHER EDUCATION AND TRAINING TO USA AND THEREF ORE THESE EXPENSES WERE BORNE BY THE FIRM PROVIDED THAT ON COMPLETION OF HIS TRAINING HE WOULD RETURN TO INDIA AND WORK WITH THE ASSESSEE FOR A MINIMUM PERIOD OF FIVE YEARS. IT IS FURTHER SUBMITTED IN THE APPLICATION THAT SHRI HIMANSHU PARIHAR, AFTER HIS T RAINING, AS PER THE TERMS OF AGREEMENT HAS JOINED THE ASSESSEE FIRM. IT WAS ALSO SUBMITTED THAT TAKING INTO ACCOUNT HIS QUALIFICATIONS, SKILLS AND EXPERIENCE ACQUIRED BY HIM SUBSEQUENT HIS HIGHER EDUCATION AND TRAINING ITA NO. 498 /MUM/ 2014 M/S. BELIM ELECTROMAC INDUSTRIES 4 HE HAS BEEN IN EMPLOYMENT AT REMUNERA TION WHICH IS MUCH LOWER THAN REMUNERATION THAT HE WOULD HAVE FETCHED OTHERWISE FROM OTHER EMPLOYERS. A CHART SHOWING COMPARISON OF REMUNERATION THAT HE WOULD HAVE FETCHED FROM OTHER EMPLOYERS AND ACTUAL SALARY DRAWN FROM THE ASSESSEE IS ENCLOSED AT PAGE N O. 5 OF THE PAPER BOOK. THE REMUNERATION THAT HE WOULD HAVE FETCHED FROM OTHER EMPLOYERS IS DULY SUPPORTED BY OFFER LETTERS FROM E - PACE TECHNOLOGIES (ENCLOSED AT PAGE NOS. 6 & 7 OF PAPER BOOK) AND HGST INC (PAGES 8 TO 10 OF PAPER BOOK). IN ORDER TO SUPPORT THE CONTENTIONS CONTAINED IN THE APPLICATION, THE LEARNED A.R. SUBMITTED THAT ADMISSION OF THE AFORESAID ADDITIONAL EVIDENCE S WOULD NOT, IN ANY WAY PREJUDICE THE REVENUE, RATHER IT WOULD RENDER ASSISTANCE TO THE TRIBUNAL TO DISPOSE OFF THE APPEAL IN ACCOR DANCE WITH LAW. THE LEARNED A.R. ALSO RELIED UPON CERTAIN JUDGEMENTS MENTIONED IN THE APPLICATION. 9. HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS THE CONTENTIONS CONTAINED IN THE APPLICATION AND AFTER HEARING THE RIVAL CONTENTIONS, WE ARE OF THE VIEW THAT THE DOCUMENTS NOW BEING RELIED UPON BY THE ASSESSEE BY WAY OF ADDITIONAL EVIDENCE S GO TO THE ROOT OF THE CASE AND IN ANY CASE NO PREJUDICE IS CAUSED TO THE REVENUE. THEREFORE THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE ARE ADMITTED. 10. SINCE WE HAVE ALREADY ADMITTED THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE AND ADMITTEDLY THESE EVIDENCES WERE NOT BEFORE THE AO AT THE TIME OF FRAMING THE ASSESSMENT, THEREFORE THE MATTER IS RESTORED BACK TO THE FILE OF THE AO TO VERIFY THE ADDITIONAL EVIDE NCES AND DECIDE THE ISSUE AFRESH AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH MARCH, 2018 . SD/ - SD/ - ( G.S. PANNU ) ( SANDEEP GOSAIN ) ACCOUNTANT MEMBER JUDICIAL MEMBER ITA NO. 498 /MUM/ 2014 M/S. BELIM ELECTROMAC INDUSTRIES 5 MUMBAI, DATED: 9 TH MARCH, 2018 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) - 24 , MUMBAI 4. THE CIT - 13 , MUMBAI 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.