M/S GNA DURAPARTS LIMITED, JALANDHAR V. ASSISTANT COMMISSIONER OF INCOME TAX , CENTRE CIRCLE-1, JALANDHAR

ITA 533/ASR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5720 (ITAT-AMRITSAR)
• Duration Of Justice: 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-03-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 14-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA LD
• Assessee Lawyers: GUNJEET SINGH SYAL LD
• Keywords: Business income; Business expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NOS.532(ASR)/2017 ASSESSMENT YEARS:2011-12 M/S. GNA AXLES LTD. 1-C, CHHOTI BARADARI GARHA ROAD, JALANDHAR PAN:AAACG8506C VS. ASST. CIT CENTRAL CIRCLE-1, JALANDHAR (APPELLANT) (RESPONDENT) ITA NOS.533, 534 & 535(ASR)/2017 ASSESSMENT YEARS:2010-11, 2011-12 & 20 12-13 M/S. GNA DURAPARTS LTD. 1-C, CHHOTI BARADARI GARHA ROAD, JALANDHAR PAN:AAACG4932G VS. ASST. CIT CENTRAL CIRCLE-1, JALANDHAR (APPELLANT) (RESPONDENT) APPELLANT BY: SH. GUNJEET SINGH SYAL (LD. ADV.) RESPONDENT BY: RAJEEV GUBGOTRA (LD. DR) DATE OF HEARING: 12.03.2018 DATE OF PRONOUNCEMENT: 23.03.2018 ORDER PER BENCH ALL THE AFORESAID FOUR APPEALS FILED BY THE ASSESSEES ARE AGAINST THE ORDERS DATED 11.05.2017 & 12.05.2017 RELATING TO ASSESSMENT YEARS: 2011-12 & 2010-11 TO 2012-13, RESPECTIVELY PASSE D BY THE LD. CIT(A)-5, LUDHIANA. 2. AS THE ISSUES INVOLVED IN ALL THE APPEALS ARE SIMILAR, TH EREFORE, ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. THE FACTS AND GROUNDS OF ITA ITA NOS.532 TO 535/ASR/2017 (A.YS.2011-1 2 & 2010-11 TO 2012-13) M/S GNA AXLES LTD. & GNA DUR APARTS LTD. VS. ACIT 2 NO.532(ASR)/2017 HAVE BEEN TAKEN INTO CONSIDERATION FO R ADJUDICATION AND THE RESULT OF THE SAME SHOULD ALSO BE APPLICABLE TO THE OTHER THREE APPEALS. 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT (A)-5, LUDHIANA HAS ERRED IN UPHOLDING THE ADDITION UNDER HEAD TA & CONVEYANCE. 2. THAT THE WRITTEN SUBMISSIONS OF THE APPELLANT SH OULD HAVE BEEN CONSIDERED IN PROPER CONTEXT. 3. THAT IT IS WRONG TO HOLD THAT NO BENEFIT WAS DER IVED BY THE ASSESSEE COMPANY FROM VISITS OF FAMILY. 4. THAT THE ORDER IS AGAINST LAW AND FACTS OF THE C ASE. 5. THAT THE APPELLANT PRAY TO ADD OR AMEND ANY GROU NDS OF APPEAL OR AT THE TIME OF HEARING. 3. SOLITARY CONTROVERSY IN THE APPEALS UNDER CONSIDERATI ON RELATES TO DISALLOWANCES UNDER THE HEAD OF T.A. & CONVEYANCE. THE ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT ORDER, DISALLOWED AN AMOUNT OF RS.4,59,184/- (WHICH WAS CLAIMED BY THE ASSESSEE IN LIEU OF EXPENDITURE UNDER THE HEAD OF TA & CONVEYANCE) , ON THE GROUND THAT THE EXPENSES RELATED TO THE FOREIGN TRAVELS OF THE FAM ILY MEMBERS ALLEGED TO HAVE BEEN BORNE BY THE ASSESSEE COMPANY AN D CLAIMED AS EXPENSES CAN NOT BE CONSIDERED GENUINE, BECAUSE FOREIGN VI SIT OF THE FAMILY MEMBERS ARE THE PRIVATE VISITS WHICH HAVE BEEN I MPLIEDLY SPONSORED BY THE COMPANY AND EXPENSES ARE DEBITED QUITE KNOWINGLY THAT THESE ARE NOT BUSINESS RELATED EXPENSES AND WHICH AR E NOT LIABLE TO BE ALLOWED AS DEDUCTION AND MOREOVER THE ASSESSEE HA S NOT FURNISHED ANY EVIDENCE/DETAILS OF INVOLVEMENT OF THE F AMILY MEMBERS IN THE ALLEGED BUSINESS MEETINGS NOR ANY DETAIL OF SUCH MEETINGS HAS BEEN FURNISHED. 4. ON APPEAL , THE LD. CIT(A) WHILE UPHOLDING THE DISALLOWANCES, IN ADDITION TO OBSERVATION OF ASSESSING OFFICER, ALSO OBSERVE D THAT THE ASSESSEE HAS NOT BEEN ABLE TO SHOW THAT THE CLAIMED EXPENSE S WERE WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS O F THE ASSESSEE ITA NOS.532 TO 535/ASR/2017 (A.YS.2011-1 2 & 2010-11 TO 2012-13) M/S GNA AXLES LTD. & GNA DUR APARTS LTD. VS. ACIT 3 COMPANY AND EVEN THE ASSESSEE HAS NOT BEEN ABLE TO SHOW T HE BENEFIT DERIVED BY THE BUSINESS FROM THE VISITS OF THE FAMILY M EMBERS AND RECIPROCATION OF HOSPITALITY IS NOT FOUND A GOOD ARGUME NT FOR ALLOWING THE EXPENSES AS DEDUCTION IN COMPUTING BUSINESS INCOME. 5. ON FEELING AGGRIEVED AGAINST THE ORDER PASSED BY THE LD. CIT(A), THE ASSESSEE PREFERRED THE INSTANT APPEALS BEFORE US AND I N RESPECT OF ITS CASE SUBMITTED THAT THE ONLY POINT OF DISPUTE IS RE GARDING DISALLOWANCE OF FOREIGN TRAVELLING EXPENSES UNDER THE H EAD TA & CONVEYANCE OF THE WIFE/S AND SON/S OF THE DIRECTORS OF THE ASSESSEE COMPANY. IT IS SUBMITTED THAT THE AO IN THE ASSESSEES OW N CASE FOR AY 2014-15 HAS RESTRICTED THE DISALLOWANCE TO 20% OF THE TOTAL EXPENDITURE AND IT IS SETTLED PRINCIPLE THAT WHERE TH ERE ARE NO VARIATION IN FACTS OR WHERE ALL RELEVANT FACTS HAVE BEEN CONSIDER ED BY THE REVENUE, THEN ACCORDING TO PRINCIPLES OF CONSISTENCY AN D DOCTRINE OF ESTOPPELS, THE REVENUE IS DEBARRED FROM TAKING A CO NTRARY VIEW. THE LD. A R ALSO RELIED UPON MANY JUDGMENTS WHICH ARE PART OF RECORD. THE LD. A R FURTHER SUBMITTED THAT IN THE PRESENT CASE THERE ARE NO CHANGES IN RELEVANT FACTS DURING THE YEARS UNDER CONSIDERA TION AND AY 2014-15. FOREIGN TRAVELLING EXPENSES OF THE WIFE/S AND SONS/S OF THE DIRECTORS HAS BEEN MADE IN AY 2014-15 AND THIS FACT HAS BEEN DULY ACCEPTED BY THE REVENUE. THEREFORE, THE REVENUE IS PRE CLUDING FROM TAKING A CONTRARY VIEW ON SAME FACTS BY DISALLOWING THE ENTIRE FOREIGN TRAVELLING EXPENSES OF THE WIVES OF THE DIRECTORS. IN ADDITION TO THE AFORESAID SUBMISSIONS, THE ASSESSEE HAS ALSO FILED DETAILS OF T HE FOREIGN TRAVEL EXPENSES. \ 6. WE HAVE GONE THROUGH WITH THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO RIVAL SUBMISSIONS OF THE PARTIES, ALTHOUGH THE ASSESSING OFFICER IN THE ASSESSEES CASE ITSELF FOR ASST. YEAR 2014-15 A LLOWED THE SAID EXPENSES, HOWEVER, SUBJECTED TO RESTRICTION OF DISALL OWANCES TO 20% OF TOTAL EXPENDITURE BUT IN OUR CONSIDERED VIEW T HAT IT CANNOT BE ITA NOS.532 TO 535/ASR/2017 (A.YS.2011-1 2 & 2010-11 TO 2012-13) M/S GNA AXLES LTD. & GNA DUR APARTS LTD. VS. ACIT 4 CONSTRUED AS ESTOPPELS AND SUBJECTED TO CONSISTENCY BECAUSE THA T CONSIDERATION BEFORE THE AO WAS ONLY ASST. YEAR: 2014-1 5. THAT IS, THE REVENUE HAS ALREADY TAKEN A DEFINITE AND, IN-AS-MUCH A S IT EXTENDS TO THREE YEARS IN SUCCESSION, A FIRM VIEW IN THE MATTER, AND IT IS RATHER FOR THE SUBSEQUENT YEAR/S (A.Y.2014-15) THAT THE DOCTRINE ( OF CONSISTENCY) MAY HAVE APPLICATION. NEEDLESS TO ADD, THE MATTER IS FA CTUAL, AND THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO THE PROCEEDINGS UNDER THE ACT (INCOME TAX ACT, 1961). AS STATED, THE QUESTION IS PRI NCIPALLY OF FACT; THE LAW OBLIGING THE ASSESSEE TO SHOW THAT AN EXPEN DITURE, CLAIMED AS A BUSINESS EXPENSES, HAS BEEN INCURRED WHOLLY O R EXCLUSIVELY FOR THE BUSINESS PURPOSE/S (SEC.37(1)). IT IS AGA IN TRITE THAT WORD WHOLLY IN S. 37(1) REFERS TO QUANTUM AND EXCLU SIVELY TO THE PURPOSE. BOTH THE CONDITIONS REMAIN UNSATISFIED IN THE P RESENT CASE. THE NEXUS WITH BUSINESS HAS TO BE CLEAR AND STRAIGHTFORWA RD, AND NOT REMOTE OR VAGUE, AS WOULD APPEAL TO A MAN OF BUSINESS, I.E., MOTIVATED AND GUIDED SOLELY BY BUSINESS CONSIDERATION. TH E SAME CANNOT BE SAID IN THE PRESENT CASE/S. THE ACCOMPANIMENT OF WIFE/S APPEARS TO BE PURELY FOR SOCIAL PURPOSE, AS CLEARLY HER INTERACTION IS RESTRICTED TO SOCIAL PLATFORMS. AS REGARDS SON/S, HE IS AN OUTSIDER TO THE BUSINESS, AT LEAST FOR THE RELEVANT YEARS. IN FACT, FOR THE LATER YEAR (A.Y.2014-15), THE LD. AR CLARIFIED THAT THE SON/S HA D JOINED BUSINESS, AND WHICH MAY PERHAPS LED TO THE ACCEPTANCE OF THE ASSESSE ES CLAIM FOR THAT YEAR (AT 80%). THE NEXUS OF THE IMPUGNED EX PENDITURE WITH THE BUSINESS FOR THE YEARS UNDER REFERENCE IS TENUOUS AND , IN THE LEAST, NOT TOTAL. IN OTHER WORDS, THE EXPENDITURE BEARS A SIG NIFICANT COMPONENT OF PERSONAL (NON-BUSINESS) ELEMENT. AS THE ASSESSE E MAY STAND TO DERIVE SOME BUSINESS BENEFIT FROM SUCH SOCIAL INTER COURSE AND, FURTHER CONSIDERING THAT THE SON/S HAS JOINED BUSI NESS SUBSEQUENTLY, INDICATING A BUSINESS PURPOSE AS WELL, WE CON SIDER IT PROPER TO RESTRICT THE DISALLOWANCE TO 40% OF THE IMPUG NED EXPENDITURE, I.E. QUA TA AND CONVEYANCE. WE DECIDE ACCORDINGLY. ITA NOS.532 TO 535/ASR/2017 (A.YS.2011-1 2 & 2010-11 TO 2012-13) M/S GNA AXLES LTD. & GNA DUR APARTS LTD. VS. ACIT 5 7. NOW, WE TAKE UP APPEALS OF THE ASSESSEE IN ITA NOS.53 3, 534 & 535(ASR)/2017, FOR ASST. YEARS: 2010-11, 2011-12 & 2012 -13, WHERE THE ASSESSEES HAVE RAISED SIMILAR GROUNDS AS TAKEN IN ITA NO.532(ASR)/2017, FOR ASST. YEAR:2011-12. SINCE THE GRO UNDS RAISED IN ITA NO.532(ASR)/2017 ARE STANDS ADJUDICATED AND THE FIN DINGS GIVEN THEREIN SHALL APPLY MUTATIS MUTANDIS TO THESE APPEALS ALSO. ACCORDINGLY, THESE APPEALS ARE ALSO PARTLY ALLOWED. 8. IN THE RESULT, ALL THE SAID APPEALS FILED BY THE ASSESSEE S ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.03.2018. SD/- SD/- (SANJAY ARORA) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JU DICIAL MEMBER DATED:23.03.2018 /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) M/S GNA AXLES LTD. & M/S GNA DURAPARTS LTD., JA LANDHAR. (2) THE ACIT, CENTRAL CIRCLE-1, JALANDHAR (3) THE CIT(A)-5, LUDHIANA (4) THE CIT CONCERNED. (5) THE SR DR, I.T.A.T., AMRITSAR TRUE COPY BY ORDER