DCIT, New Delhi V. Hindustan Associated Engineers Pvt. Ltd., New Delhi

ITA 5105/DEL/2013

• Counselvise Citation: 510520114 RSA 2013
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 04-09-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Assessee Lawyers: SUMIT KANT BHATNAGAR
• Keywords: Additional evidence; Tax effect
• Section: 14A

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 C CC C : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG, ,, , JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NO. .. .5105/DEL/2013 5105/DEL/2013 5105/DEL/2013 5105/DEL/2013 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2007 2007 2007 2007- -- -08 0808 08 DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -12(1), 12(1), 12(1), 12(1), NE NENE NEW DELHI. W DELHI. W DELHI. W DELHI. VS. VS. VS. VS. M/S HINDUSTAN ASSOCIATED M/S HINDUSTAN ASSOCIATED M/S HINDUSTAN ASSOCIATED M/S HINDUSTAN ASSOCIATED ENGINEERS PVT.LTD., ENGINEERS PVT.LTD., ENGINEERS PVT.LTD., ENGINEERS PVT.LTD., K KK K- -- -54, CHOWDHARY BUILDING, 54, CHOWDHARY BUILDING, 54, CHOWDHARY BUILDING, 54, CHOWDHARY BUILDING, CONNAUGHT PLACE, CONNAUGHT PLACE, CONNAUGHT PLACE, CONNAUGHT PLACE, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 001. 110 001. 110 001. 110 001. PAN : AAACH1505J. PAN : AAACH1505J. PAN : AAACH1505J. PAN : AAACH1505J. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SATPAL SINGH, SR.DR. RESPONDENT BY : SHRI SUMIT KANT BHATNAGAR, FCA. ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-XV, NEW DELHI DATED 28 TH JUNE, 2013 FOR THE AY 2007-08. 2. GROUND NO.1 OF THE REVENUES APPEAL READS AS UND ER:- WHETHER LD.CIT(A) WAS CORRECT ON FACTS AND CIRCUMS TANCES OF THE CASE AND IN LAW IN DELETING THE ADDITION OF RS.1,09,473/- MADE BY AO BY INVOKING PROVISIONS OF SECTION 14A READ WITH RULE 8D? 3. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED DR THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MAXOPP INV ESTMENT LTD. VS. CIT, NEW DELHI [2012] 347 ITR 272 (DELHI) AND, IN VIEW OF THE ABOVE DECISION, THE MATTER MAY BE SENT BACK TO THE FILE O F THE ASSESSING OFFICER FOR READJUDICATION. ITA-5105/DEL/2013 2 4. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, STATED THAT THE TOTAL RELIEF ALLOWED BY THE LEARNED CIT(A) IN T HIS REGARD IS ONLY ` 1,09,473/- AND TAX EFFECT WOULD BE LESS THAN ` 40,000/-. DUE TO SMALLNESS OF THE TAX EFFECT, THE COST OF LITIGATION , IF THE MATTER IS SENT BACK TO THE FILE OF THE ASSESSING OFFICER, WOULD BE MORE AND, THEREFORE, HE, ON BEHALF OF THE ASSESSEE, CONCEDES THAT INSTEA D OF SETTING ASIDE, THIS MATTER MAY BE DECIDED AGAINST THE ASSESSEE. H E, HOWEVER, SUBMITTED THAT THE CONCESSION OF THE ASSESSEE IN TH IS YEAR FOR ADDITION IS PURELY ON ACCOUNT OF LOW TAX EFFECT AND SHOULD N OT BE CONSIDERED AS A RES JUDICATA AGAINST THE ASSESSEE IN THE SUBSEQUENT YEAR BECAUS E IN THE SUBSEQUENT YEAR, IF THE DISALLOWANCE IS MORE, T HE ASSESSEE RESERVES HIS RIGHT TO CONTEST THE SAME. 5. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. AS RIGH TLY POINTED OUT BY THE LEARNED DR, IN VIEW OF THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. (SUPRA) , THE MATTER IS REQUIRED TO BE SENT BACK TO THE FILE OF THE ASSESSI NG OFFICER FOR RECOMPUTATION OF DISALLOWANCE UNDER SECTION 14A, WI THOUT APPLYING RULE 8D. HOWEVER, IT IS REQUESTED BY THE ASSESSEE S COUNSEL THAT DUE TO SMALLNESS OF THE ADDITION, INSTEAD OF SETTING AS IDE, THE ADDITION MAY BE SUSTAINED. IN VIEW OF THE ABOVE, WE ALLOW GROUN D NO.1 OF THE REVENUES APPEAL AND UPHOLD THE DISALLOWANCE OF ` 1,09,473/- MADE BY THE ASSESSING OFFICER UNDER SECTION 14A. WE MAY CL ARIFY THAT THIS ORDER WOULD NOT BE CONSIDERED AS A CONCESSION BY TH E ASSESSEE ON ANY LEGAL ISSUE AND, IN THE SUBSEQUENT YEAR, IF SO ADVI SED, THE ASSESSEE WOULD BE AT LIBERTY TO CONTEST THE DISALLOWANCE MAD E UNDER SECTION 14A. 6. GROUND NOS.2 & 3 OF THE REVENUES APPEAL READ AS UNDER:- ITA-5105/DEL/2013 3 2. WHETHER LD.CIT(A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN DELETING TH E ADDITION OF RS.8,55,988/- MADE BY AO ON ACCOUNT OF FOREIGN TRAVELING OF DIRECTORS DESPITE THE FACT THAT NO JUS TIFICATION OF THESE EXPENSES WAS PRODUCED BY THE ASSESSEE BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS? 3. WHETHER LD.CIT(A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN ALLOWING TH E FOREIGN TRAVELING EXPENSES TO THE ASSESSEE BY ADMIT TING ADDITIONAL EVIDENCES AND WITHOUT GIVING AN OPPORTUN ITY TO THE AO TO EXAMINE THE SAME? 7. THE FACTS OF THE CASE ARE THAT DURING THE ACCOUN TING YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION , THE ASSESSEE CLAIMED TOTAL TRAVELING EXPENSES OF ` 18,98,442/- WHICH INCLUDED FOREIGN TRAVELING EXPENSES OF ` 8,55,988/-. THE ASSESSING OFFICER DISALLOWED THE ENTIRE FOREIGN TRAVEL EXPENSES WHICH IS ALLOWED BY THE CIT(A). AGGRIEVED BY THE ORDER OF LEARNED CIT(A), THE REVEN UE IS IN APPEAL BEFORE US VIDE GROUND NOS.2 & 3 OF ITS APPEAL. 8. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D PERUSED THE MATERIAL PLACED BEFORE US. LEARNED CIT(A) DELETED THE DISALLOWANCE OF FOREIGN TRAVEL EXPENSES WITH THE FOLLOWING FINDING: - 6.2 REGARDING THE GROUND NO.6 TO 9 OF THE APPEAL, THE APPELLANT HAS FILED DETAILS RELATING TO FOREIGN TRA VEL OF THE TWO DIRECTORS OF THE COMPANY, MRS. USHA AHUJA AND M R. V.K. AHUJA. THE LD. COUNSEL INFORMED THAT BOTH THE DIRE CTORS ARE ACTIVELY ENGAGED IN THE BUSINESS OF THE COMPANY . THE APPELLANT COMPANY IS ASSOCIATED WITH M/S KIRLOSKAR ENGINES LTD. AND IS EXCLUSIVE MARKETING ASSOCIATE OF M/S S. E.M.T. PEILSTICK, FRANCE FOR MARINE APPLICATION. THE PRIM ARY PURPOSE OF THE DIRECTORS FOREIGN VISIT WAS TO MEET SR. VICE PRESIDENT OF FAIRBANK MORSE IN SUPPORT OF WHICH COP IES OF RELEVANT E-MAILS WERE PRODUCED BEFORE ME. THE LD. COUNSEL ALSO FURNISHED FURTHER DETAILS OF MEETINGS IN INDIANAPOLIS AND MUNICH. THE LD. COUNSEL ALSO RELI ED UPON THE DECISION OF ITAT MUMBAI IN THE CASE OF SCINDIA INVESTMENT PVT.LTD. DATED 31.05.2010 IN WHICH IT WA S HELD THAT MERELY BECAUSE THERE WAS NO ACTIVITY OF THE AS SESSEE ITA-5105/DEL/2013 4 IN A FOREIGN COUNTRY, IT CANNOT BE SAID THAT THE CL AIM FOR FOREIGN TRAVEL EXPENSES NOT CLAIMED TO BE ALLOWED. ON CAREFUL APPRAISAL OF THE DETAILS OF THE PURPOSE OF FOREIGN TRAVEL, COPIES OF BILLS AND TICKETS FURNISHED BEFOR E ME, I HOLD THAT THE FOREIGN TRAVEL UNDERTAKEN BY THE TWO DIRECTORS OF THE APPELLANT WAS FOR BUSINESS PURPOSE AND HENCE ALLOWABLE UNDER SECTION 37(1). BOTH DIRECTOR S ARE ACTUALLY ENGAGED IN THE BUSINESS OF APPELLANT AND M ERELY SINCE THEY HAPPEN TO BE SPOUSES IS NOT SUFFICIENT T O HOLD ENTIRE FOREIGN TRAVEL EXPENSES FOR PERSONAL PURPOSE . THE LD. AO HAS NOT BROUGHT OUT ANY SPECIFIC ADVERSE EVI DENCE IN SUPPORT OF THE SUSPICION THAT THE FOREIGN TRAVEL EX PENSES WERE FOR PERSONAL PURPOSE AND NOT FOR BUSINESS PURP OSE. IN VIEW OF THE ABOVE, THE DISALLOWANCE MADE BY THE AO IS NOT SUSTAINABLE. ACCORDINGLY, THE ADDITION MADE ON THI S GROUND IS DELETED. 9. LEARNED CIT(A) HAS RECORDED THE FINDING THAT PRI MARY PURPOSE OF DIRECTORS VISIT WAS TO MEET SENIOR VICE PRESIDENT OF FAIRBANK MORSE IN SUPPORT OF WHICH COPIES OF RELEVANT E-MAILS WERE PR ODUCED BEFORE THE CIT(A). THE ASSESSEE HAD ALSO PRODUCED BEFORE THE CIT(A) THE EVIDENCE OF OTHER BUSINESS MEETINGS IN INDIANAPOLIS AND MUNICH. ON THE BASIS OF ABOVE DETAILS, THE CIT(A) RECORDED THE FINDING THAT THE FOREIGN TRAVEL UNDERTAKEN BY THE TWO DIRECTORS WHO WERE ACTUALLY ENGAGED IN THE BUSINESS OF THE ASSESSEE WAS FOR THE PURPOSE OF BUSINESS. IN VIEW OF THE ABOVE FACTUAL FINDING REC ORDED BY THE CIT(A), WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF LEARNED CIT(A). THE SAME IS SUSTAINED AND GROUND NOS.2 & 3 ARE REJECTED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 7 TH MARCH, 2014. SD/- SD/- ( (( (CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 07.03.2014 VK. ITA-5105/DEL/2013 5 COPY FORWARDED TO: - 1. APPELLANT : DEPUTY COMM DEPUTY COMM DEPUTY COMM DEPUTY COMMISSIONER OF INCOME TAX, ISSIONER OF INCOME TAX, ISSIONER OF INCOME TAX, ISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -12(1), NEW DELHI. 12(1), NEW DELHI. 12(1), NEW DELHI. 12(1), NEW DELHI. 2. RESPONDENT : M/S HINDUSTAN ASSOCIATED ENGINEERS PVT.LTD., M/S HINDUSTAN ASSOCIATED ENGINEERS PVT.LTD., M/S HINDUSTAN ASSOCIATED ENGINEERS PVT.LTD., M/S HINDUSTAN ASSOCIATED ENGINEERS PVT.LTD., K KK K- -- -54, CHOWDHARY BUILDING, 54, CHOWDHARY BUILDING, 54, CHOWDHARY BUILDING, 54, CHOWDHARY BUILDING, CONNAUGHT PLACE, NEW DELHI CONNAUGHT PLACE, NEW DELHI CONNAUGHT PLACE, NEW DELHI CONNAUGHT PLACE, NEW DELHI 110 001. 110 001. 110 001. 110 001. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR