ITO, New Delhi V. M/s. Mantec Consultants Pvt. Ltd., New Delhi

ITA 5392/DEL/2014

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0956 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 01-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B B BHAGAT
• Keywords: Deemed to accrue or arise in india; Retrospective amendment
• Section: 115JB

Judgement Text

ITA NO. 5392/DEL/2014 ASSESSMENT YEAR 2010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.5392/DEL/2014 ASSESSMENT YEAR: 2010-11 INCOME TAX OFFICER, WARD 6(2), NEW DELHI. VS M/S MANTEC CONSULTANTS PVT. LTD., 805, VISHAL BHAWAN, 95, NEHRU PLACE, NEW DELHI-110019 APPELLANT RESPONDENT DEPARTMENT BY: SHRI GAURAV SHARMA, SR. DR ASSESSEE BY : SHRI B.B. BHAG AT, ADVOCATE DATE OF HEARING : 30.08. 2018 DATE OF PRONOUNCEMENT : 27.11.2018 O R D E R PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER: THIS APPEAL IS PREFERRED BY THE DEPARTMENT AGAINS T THE ORDER DATED 9.7.2014 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-IX, NEW DELHI FOR ASSESSMENT YEAR 20 10-11. 2.0 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING TECHNICAL AND MANAGEMENT CONSULTANCY SERVICES. THE RETURN OF INCOME WAS FIL ED DECLARING THE TAXABLE INCOME AT NIL. THE ASSESSMENT U/S 143( 3) OF THE ITA NO. 5392/DEL/2014 ASSESSMENT YEAR 2010-11 2 INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) WAS COMPLETED AT RS. 1,14,71,230/- AFTER MAKING THE FOLLOWING ADD ITIONS AND DISALLOWANCES:- I) EXPORT COMMISSION DISALLOWED - RS. 70,48,23 7/- II) DISALLOWANCE FOR PROVISION OF GRATUITY - RS. 9,80,192/- III) SALARY AND RENT PAID IN UK - RS. 17,56,116 /- IV) DISALLOWANCE U/S 14A` - RS. 2,43,148/- 2.1 PROPORTIONATE DISALLOWANCE ON FOREIGN TRAVEL E XPENSES TO THE TUNE OF RS. 36,09,459/- WAS ALSO MADE. SOME OTHER ADDITIONS AND DISALLOWANCES WERE ALSO MADE ON ACCOU NT OF LONG TERM CAPITAL GAIN AND INTEREST PAID ON ADVANCE TAX LIABILITY. THE ASSESSEE APPROACHED THE LD. FIRST APPELLATE AUTHORI TY WHO PARTLY ALLOWED THE ASSESSEES APPEAL BY GIVING RELIEF BY D ELETING ADDITION OF RS. 17,56,116/- BEING SALARY AND RENT PAID IN UK . THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ALSO DELETED T HE ADDITION OF RS. 70,48,237/- BEING EXPORT COMMISSION PAID WER E DISALLOWED U/S 40A(I) OF THE ACT. LD. COMMISSIONER OF INCOME TAX (APPEALS) ALSO PROVIDED RELIEF TO THE ASSESSEE BY DELETING THE ADDITION OF RS. 36,09,459/- ON ACCOUNT OF FOREIGN T RAVELLING EXPENSES. NOW, THE DEPARTMENT IS BEFORE THE ITAT A ND HAS ITA NO. 5392/DEL/2014 ASSESSMENT YEAR 2010-11 3 CHALLENGED THESE THREE DELETIONS MADE BY THE LD. CO MMISSIONER OF INCOME TAX (APPEALS). 3.0 THE LD. SENIOR DEPARTMENTAL REPRESENTATIVE (SR . DR) SUBMITTED THAT AS FAR AS THE DELETION OF ADDITION O F RS. 17,56,116/- BEING SALARY AND RENT PAID IN UK WAS CO NCERNED, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DID NO T CONSIDER THE FACT THAT THE IDENTITY OF THE PERSONS TO WHOM T HESE PAYMENTS WERE MADE WAS NOT ESTABLISHED. IT WAS ALSO SUBMITT ED THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAD DRAWN AN INCORRECT CONCLUSION THAT THE PERSONS TO WHOM THE S ALARY AND RENT WERE PAID WERE NOT CHARGEABLE TO TAX IN INDIA. 3.1 WITH RESPECT TO THE SECOND ISSUE PERTAINING TO DELETION OF DISALLOWANCE OF RS. 70,48,237/- U/S 40A(I), IT W AS SUBMITTED THAT THE PAYMENT OF EXPORT COMMISSION HAVE BEEN MAD E WITHOUT DEDUCTION OF TAX AT SOURCE ALTHOUGH EXPLANATION TO SECTION 9 OF THE ACT PROVIDED THAT THE INCOME OF NON-RESIDENT WA S TO BE DEEMED TO ACCRUE OR ARISE IN INDIA, IRRESPECTIVE OF THE FACT WHETHER THE NON-RESIDENT HAD A RESIDENCE OR PLACE O F BUSINESS CONNECTION IN INDIA OR WHETHER OR NOT THE NON-RESID ENT HAD RENDERED SERVICES IN INDIA. IT WAS SUBMITTED THAT THIS AMENDMENT WAS INSERTED BY FINANCE ACT, 2010 W.E.F. 1.6.1976 ITA NO. 5392/DEL/2014 ASSESSMENT YEAR 2010-11 4 AND WAS APPLICABLE TO CLAUSE (V), (VI) AND (VII) OF SECTION 9(1) OF THE ACT. 3.2 WITH RESPECT TO THE THIRD ISSUE REGARDING DELE TION OF ADDITION OF RS. 36,09,459/- PERTAINING TO PROPORTI ONATE DISALLOWANCE OF FOREIGN TRAVELLING EXPENSES, IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAD RIGHTLY DISALLOWED THE EX PENSES IN PROPORTION TO THE BUSINESS EARNING OF THE TWO UNITS OF THE ASSESSEE AND FURTHER, THE ASSESSEE HAD DELIBERATELY NOT CLAIMED THE EXPENSES IN THE EXEMPTED UNIT AND HAD CLAIMED T HE ENTIRE EXPENSES OF THE FOREIGN TOURS IN THE UNIT WHICH WAS LIABLE TO PAY TAXES APPARENTLY TO EVADE PAYMENT OF TAXES. 4.0 IN RESPONSE, THE LD. AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT THE FIRST ISSUE REGARDING DELETION O F ADDITION PERTAINING TO SALARY AND RENT PAID TO PERSONS IN UK WAS COVERED BY THE ORDER OF THE ITAT IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2009-10 IN ITA NO. 4497/DEL/2013. 4.1 WITH RESPECT TO THE SECOND ISSUE PERTAINING TO DELETION OF DISALLOWANCE U/S 40A(I) ON ACCOUNT OF COMMISSION PAID TO FOREIGN AGENTS, IT WAS SUBMITTED THAT THIS ISSUE WA S ALSO COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE BY ORDER OF THE ITA NO. 5392/DEL/2014 ASSESSMENT YEAR 2010-11 5 TRIBUNAL FOR ASSESSMENT YEAR 2011-12 IN ITA NO. 1207/DEL/2016. 4.2 WITH RESPECT TO THE THIRD ISSUE I.E. DELETION OF PROPORTIONATE DISALLOWANCE OUT OF FOREIGN TRAVELLIN G EXPENSES, THE LD. AR SUBMITTED THAT THERE WAS NO REVENUE LOSS TO THE DEPARTMENT AS HAS BEEN ALLEGED BY THE DEPARTMENT. IT WAS SUBMITTED THAT THE ASSESSEE HAD MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR BOTH THE TAX-EXEMPT AND THE TAX-PAYING ENTITY AND FURTHER THE ASSESSEE HAS ALSO PAID TAX ON BOOK PROF ITS U/S 115 JB OF THE ACT AND, THEREFORE, THE CONTENTION OF THE DEPARTMENT THAT THE ASSESSEE HAS BENEFITTED BY BOOKING BOGUS E XPENSES AGAINST NON EXEMPTED UNIT IS INCORRECT. IT WAS PRA YED THAT THE DEPARTMENTS APPEAL BE DISMISSED. 5.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT THE F IRST ISSUE REGARDING DELETION OF DISALLOWANCE OF RS. 17,56,116 /- IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF T HE ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 VID E ORDER DATED 15.1.2016 IN ITA NO. 4497/DEL/2013 WHEREIN TH E RELEVANT OBSERVATIONS AND FINDINGS ARE CONTAINED IN PARA 7 O F THE SAID ITA NO. 5392/DEL/2014 ASSESSMENT YEAR 2010-11 6 ORDER. THE SAME IS BEING REPRODUCED HERE-IN-UNDER FOR A READY REFERENCE:- WE HAVE CAREFULLY HEARD THE RIVAL CONTENTION. ACCORDING TO THE AO AS PER THE PROVISION OF SECTION 40A(III) ANY SALARY PAID WHICH IS CHARGEABLE TO TAX AND IS PAID OUTSIDE INDIA TO A NON RESIDENT IS DISALLOW ABLE IF NO TAX IS DEDUCTED THEREON. THEREFORE SALARY PAID T O MR. BRARA, DISALLOWED. AS PER ASSESSEE MR. BRARA IS AN EMPLOYEE OF THE COMPANY HAS NOT WORKED IN INDIA AND THEREFORE ADMITTEDLY PROVISION OF SECTION 5 (2) SHA LL NOT BE APPLICABLE TO HIM AND IT IS ADMITTEDLY SUCH SALA RY IS NOT RECEIVED OR ACCRUED TO HIM IN INDIA. ONLY ASPEC TS REQUIRED TO BE EXAMINED IS WHETHER THE SALARY WAS P AID WOULD BE CHARGEABLE TO TAX AS INCOME U/S 9(L)(II) O NLY. ACCORDING TO THAT SECTION INCOME EARNED IN INDIA IS DEEMED TO ACCRUE OR ARISE IN INDIA AND IS CHARGEABL E TO TAX IN THE HANDS OF THE NON-RESIDENT IF IT IS EARNE D IN INDIA. AS PER THE EXPLANATION TO THAT SECTION THE S ERVICE RENDERED IN INDIA SHALL BE REGARDED AS INCOME.EARNE D IN INDIA. IN THIS CASE IT IS ADMITTED FACT THAT THE EM PLOYEE DID NOT RENDER ANY SERVICE IN INDIA AND HENCE THE DELETION OF DISALLOWANCE OF RS. 1684727/- MADE BY T HE AO IS CORRECT. WE CONFIRM THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THIS GROUND . 5.0.1 THE LD. SR. DR COULD NOT POINT ANY DISTINGUI SHING FACT IN THE YEAR UNDER APPEAL FROM ASSESSMENT YEAR 2009-10. ACCORDINGLY, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE AS AFORESAID, WE DISMI SS GROUND NO. 1 AND 2 OF THE DEPARTMENTS APPEAL. 5.1 SIMILARLY, IT IS SEEN THAT THE SECOND ISSUE I. E. DELETION OF RS. 70,48,237/- WHICH HAD BEEN MADE U/S 40A(I) O F THE ACT IS ITA NO. 5392/DEL/2014 ASSESSMENT YEAR 2010-11 7 ALSO COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSEE S OWN CASE FOR ASSESSMENT YEAR 2009-10 IN ORDER DATED 15.1.2016 IN ITA NO. 4497/DEL/2013. THIS ORDER OF THE TRIBUNAL WAS ALSO FOLLOWED IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12 VID E ORDER DATED 31.10.2017 IN ITA NO. 1207/DEL/2016. THE REL EVANT OBSERVATIONS OF THE ITAT IN ASSESSMENT YEAR 2009-10 ARE CONTAINED IN PARA 11 AND 12 AND THE SAME ARE BEING REPRODUCED HERE-IN-UNDER FOR A READY REFERENCE:- 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. FIRSTLY IT IS AN ADMITTED FACT THAT AS SESSEE HAS PAID COMMISSION TO MR. ISH BRARA FOR RENDERING SERVICES IN USA. IT IS ALSO NOT IN DISPUTE THAT HE HAS PROVIDED SERVICES TO THE COMPANY OUTSIDE INDIA AND NO PART OF SERVICES HAVE BEEN RENDERED IN INDIA. FURTH ER THERE IS NO CLARITY ON THE AMOUNT OF COMMISSION PAI D ON WHICH PROVISIONS OF SECTION 40A (I) IS APPLIED BY I D AO. AT SOME PART OF THE ORDER THE AMOUNT IS MENTIONED AS R S. 21,83,306/- AND ULTIMATELY THE AMOUNT DISALLOWED IS RS. 7395110/-. FOR VERIFICATION OF THIS AMOUNT CIT (A) HAS SET ASIDE THE ISSUE FOR DETERMINATION OF AMOUNT TO THE FILE OF AO. ON MERITS CIT (A) HAS HELD THAT AS THE SERVI CES HAVE BEEN RENDERED OUTSIDE INDIA AND NO PART OF SERVICES ARE RENDERED IN INDIA BY NONRESIDENT. ACCO RDING TO THE PROVISION OF SECTION 5 (2) RWS 9 (1) OF THE INCOME TAX ACT THIS SUM IS NOT CHARGEABLE TO TAX IN INDIA. NOW THE REVENUE HAS RAISED THE GROUND THAT BY VIRTUE OF INTRODUCTION OF EXPLANATION TO SECTION 9 W.E.F. 1.6 .1976 BY THE FINANCE ACT 2010 IT IS PROVIDED THAT IRRESPE CTIVE OF RESIDENCE OR PLACE OF BUSINESS OR BUSINESS CONNE CTION IN INDIA OF NON RESIDENT AND IRRESPECTIVE OF WHETHE R SERVICES HAVE BEEN RENDERED INDIA OR NOT , FOR INTE REST, ROYALTY AND FEES FOR TECHNICAL SERVICES SHALL NOT B E RELEVANT. IDENTICAL ISSUE HAS BEEN CONSIDERED BY TH E ITA NO. 5392/DEL/2014 ASSESSMENT YEAR 2010-11 8 COORDINATE BENCH IN DEPUTY COMMISSIONER OF INCOME-T AX, CIRCLE-52, KOLKATA V. SUBHOTOSH MAJUMDER [2016] 65 TAXMANN.COM 42 (KOLKATA - TRIB.) WHERE IN FOLLOWING THE DECISION OF HONOURABLE DELHI HIGH COURT IN CIT V. ANGELIQUE INTERNATIONAL LTD. [2013] 359 ITR 9/219 TAXMAN 104/38 TAXMANN.COM 425 (DELHI) HAS HELD THAT:- '20. FROM THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO PRECEDENTS CITED ABOVE, WE ARE OF THE VIEW THAT TILL AMENDMENT IN EXPLANATION TO SEC. 9(2) OJ THE ACT. THE PREVAILING LEGAL POSITION WAS THAT UNLESS THE TECHNICAL SERVICES WERE RENDERED IN INDIA, THE FEES FOR SUCH SERVICES COULD NOT BE BROUGHT TO TAX UNDER SEC TION 9(L)(VII) OF THE ACT. THE LAW AMENDED WAS UNDOUBTED LY RETROSPECTIVE IN NATURE HUT SO FAR AS TAX WITHHOLDI NG LIABILITY IS CONCERNED, IT DEPENDS ON THE LAW AS IT EXISTED AT THE POINT OF TIME WHEN PAYMENTS, FROM WHICH TAXE S OUGHT TO HAVE BEEN WITHHELD, WERE MADE. THE TAX DEDUCTOR IS NOT EXPECTED TO KNOW HOW THE LAW WILL CHANGE IN FUTURE. A RETROSPECTIVE AMENDMENT IN LAW DOES CHANGE THE TAX LIABILITY IN RESPECT OF AN INCOME, W ITH RETROSPECTIVE EFFECT, BUT IT CANNOT CHANGE THE TAX WITHHOLDING LIABILITY, WITH RETROSPECTIVE EFFECT. T HE TAX WITHHOLDING OBLIGATIONS FROM PAYMENTS TO NON-RESIDE NTS, AS SET OUT IN SECTION 195 OF THE ACT, REQUIRE THAT THE PERSON MAKING THE PAYMENT 'AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT PAYEE OR AT THE TIME OF PAYME NT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAF T OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME TAX THEREON AT THE RATES IN FORCE'. WHEN THESE OBLIGATI ONS ARE TO BE CHARGED AT THE POINT OF TIME WHEN PAYMENT IS MADE OR CREDITED, WHICHEVER IS EARLIER, SUCH OBLIGATIONS CAN ONLY BE DISCHARGED IN THE TIGHT OF THE LAW AS IT ST ANDS THAT POINT OF TIME. SECTION 40(A)(I) OF THE ACT PRO VIDES THAT INTER ALIA, NOTWITHSTANDING ANYTHING TO THE CONTRAR Y IN SECTIONS 30 TO 38 OF THE ACT, ANY AMOUNT PAYABLE OU TSIDE INDIA, OR PAYABLE IN INDIA TO A NON-RESIDENT, SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER T HE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' ON WHICH TAX IS DEDUCTIBLE AT SOURCE WIDER CHAPTER XVI I-B AND SUCH TAX HAS NOT BEEN DEDUCTED. ACCORDINGLY, TH E ITA NO. 5392/DEL/2014 ASSESSMENT YEAR 2010-11 9 ASSESSEE CANNOT BE FAULTED FOR NOT DEDUCTING TDS AN D CONSEQUENTLY, THE DELETION OF DISALLOWANCE BY CTT ( A) IS CONFIRMED. THIS COMMON ISSUE OF ALL THE THREE APPEA LS OF REVENUE IS DISMISSED. ' 12. CONCURRING WITH THE VIEWS OF COORDINATE BENCH, WE ALSO HOLD THAT ASSESSEE CANNOT BE HELD TO BE LIABLE TO DEDUCT TAX AT SOURCE RELYING ON THE SUBSE QUENT AMENDMENTS MADE IN THE ACT WITH RETROSPECTIVE EFFEC T. IN THIS CASE, EXPLANATIONS TO SEC. 9(2) WAS INSERTED B Y THE FINANCE ACT, 2010 WITH RETROSPECTIVE EFFECT FROM 1.6.1976 AND IT WAS IMPOSSIBLE FOR THE ASSESSEE TO DEDUCT TAX IN THE FINANCIAL YEARS 2008-09 RELEVANT TO AY 2009-10 WHEN AS PER THE RELEVANT LEGAL POSITION PREVALENT IN THAT YEAR, THE OBLIGATION TO DEDUCT TA X WAS NOT ON THE ASSESSEE. LAW CANNOT COMPEL A PERSON TO DO SOMETHING, WHICH IS IMPOSSIBLE TO PERFORM. OUR VIEW ALSO GETS SUPPORT FROM DECISION OF HONOURABLE SUPREME CO URT IN CASE OF KRISHNASWOMY S. PD V. UNION OF INDIO [20 06] 281ITR 305/151 TAXMAN 286, WHEREIN THE SAID LEGAL MAXIM WAS ACCEPTED BY THE HON'BLE SUPREME COURT AS UNDER:- 17. THE MAXIMUM OF EQUITY, NAMELY, ACTUS CURIAE NEMINEM GRAVABIT - AN ACT OF COURT SHALL PREJUDICE NO MAN, IS FOUNDED UPON JUSTICE AND GOOD SENSE WHICH SERVES A SAFE AND CERTAIN GUIDE FOR THE ADMINISTRAT ION OF LAW. THE OTHER RELEVANT MAXIM IS, LEX NON COGIT AD IMPOSSIBILIA - THE LAW DOES NOT COMPEL A MAN TO DO WHAT HE CANNOT POSSIBLY PERFORM. THE LAW ITSELF AND ITS ADMINISTRATION IS UNDERSTOOD TO DISCLAIM AS IT DOES IN ITS GENERAL APHORISMS, ALL INTENTION OF COMPELLING IMPOSSIBILITIES, AND THE ADMINISTRATION OF LAW MUST ADOPT THAT 7.- GENERAL EXCEPTION IN THE CONSIDERATI ON OF PARTICULAR CASES - UP SRTC V. IMIIAZ HUSSAIN [20 06] 1 SCC 380, SHAIKH SALIM HAJI ABDUL KHAGUMSAB V. KUMAR [2006] 1 SCC 46, MOHAMMAD GAZI V. STATE OF MP [2000] 4 SCC 342 AND GVRSHARAN SINGH V. NEW DELHI MUNICIPAL COMMITTEE [1996] 2 SCC 459.' ITA NO. 5392/DEL/2014 ASSESSMENT YEAR 2010-11 10 5.1.1 AS NO DISTINGUISHING FACT HAS BEEN BROUGHT T O OUR NOTICE BY THE LD. SR. DR ON THIS ISSUE, RESPECTFULL Y FOLLOWING THE ORDER OF THE COORDINATE BENCH IN ASSESSEES OWN CAS E AS AFOREMENTIONED, WE DISMISS GROUND NOS. 3 AND 4 OF T HE DEPARTMENTS APPEAL. 5.2 GROUND NO. 5 CHALLENGES THE ACTION OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING PR OPORTIONATE DISALLOWANCE OF RS.36,09,459/- INCURRED IN RESPECT OF FOREIGN TRAVEL EXPENSES. IT IS SEEN THAT THE ASSESSEE MAIN TAINS TWO DIVISIONS UNDER WHICH FOREIGN EXCHANGE IS EARNED BY THE ASSESSEE. UNDER SOFTWARE EXPORT DIVISION (SED), TH E ASSESSEE RUNS A CALL CENTER, INCOME FROM WHICH IS CLAIMED AS EXEMPT U/S 10A OF THE ACT. UNDER TECHNICAL & MANAGEMENT CONSU LTANCY SERVICES DIVISION (TMCD) THE ASSESSEE RECRUITS MANP OWER FOR FOREIGN COMPANIES FOR WHICH AN OFFICE IS MAINTAINED AT LONDON. THE ASSESSING OFFICER HELD THAT SINCE 90% OF THE FO REIGN EARNING WAS FROM SED, 90% OF THE FOREIGN TRAVEL EXPENSES SH OULD BE ALLOCATED TO THE SAME UNIT AND ACCORDINGLY 90% OF T HE FOREIGN TRAVEL EXPENSES WERE DISALLOWED. THE LD. COMMISSIO NER OF INCOME TAX (APPEALS) DELETED THE DISALLOWANCE BY OB SERVING THAT THE ASSESSEE HAD MAINTAINED SEPARATE BOOKS OF ACCOU NTS FOR BOTH ITA NO. 5392/DEL/2014 ASSESSMENT YEAR 2010-11 11 THE UNITS AND FURTHER THAT THE APPORTIONMENT HAD NO RATIONAL BASIS. THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) ALSO TOOK DUE NOTE OF THE FACT THAT THE ASSESSEE HAD PAID TAX U/S 115JB AND THUS AFTER PAYING MAT, THE ASSESSEE HAD NOT BEN EFITTED BY BOOKING ALLEGED BOGUS EXPENSES IN THE NON-EXEMPT UN IT. IT WAS THE CONTENTION OF THE ASSESSEE BEFORE THE LD. COMMI SSIONER OF INCOME TAX (APPEALS) THAT NO FOREIGN TRAVELLING WAS REQUIRED IN THE CASE OF SED BECAUSE THE AGENT IN THE USA IS PAI D 15% COMMISSION WHICH ALSO COVERS THE USA TRAVELLING EXP ENSES AND NO EXTRA EXPENSES WERE REQUIRED. IT IS ALSO UNDISP UTED THAT THE ASSESSEE HAD SUBMITTED COMPLETE DETAILS OF TRAVELLI NG EXPENSES BEFORE THE ASSESSING OFFICER WHICH CONTAINED THE NA MES OF VARIOUS ORGANISATIONS VISITED BY THE ASSESSEE. FRO M THE DETAILS FURNISHED BEFORE THE ASSESSING OFFICER, IT IS UNDIS PUTED THAT THE TRAVELLING EXPENSES WERE FOR VISIT TO DUBAI, ABU DH ABI, UK ETC. AND SINCE THE VISIT TO THESE AREAS CANNOT BE LINKED TO SED WHICH DEALS ONLY WITH THREE CUSTOMERS FROM USA, THE VISIT TO THESE COUNTRIES COULD NOT BE LINKED TO EXPENSES INCURRED FOR THE SED UNIT. IT IS SEEN THAT THE ASSESSING OFFICER HAS MA DE A DISALLOWANCE WITHOUT POINTING OUT ANY SPECIFIC DEFE CT IN THESE DETAILS FURNISHED BY THE ASSESSEE AND HAS MADE ONLY AN AD HOC ITA NO. 5392/DEL/2014 ASSESSMENT YEAR 2010-11 12 DISALLOWANCE. THE ASSESSING OFFICER HAS ALSO IGNOR ED THE FACT THAT SEPARATE BOOKS OF ACCOUNTS WERE DULY MAINTAINE D AND FURTHER THE ASSESSEE HAS ALSO PAID MAT UNDER THE PR OVISIONS OF SECTION 115JB AND, THUS, IT COULD NOT BE SAID THAT THE ASSESSEE STOOD TO BENEFIT BY OVERBOOKING OF FOREIGN TRAVEL E XPENSES IN THE TMCD UNIT. THEREFORE, WE ARE UNABLE TO INTERFERE W ITH THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX (APP EALS) ON THIS ISSUE ALSO AND WE ACCORDINGLY DISMISS GROUND NOS. 5 AND 6 OF THE DEPARTMENTS APPEAL. 5.3 GROUND NOS. 7, 8 AND 9 ARE GENERAL IN NATURE A ND DO NOT REQUIRE ANY ADJUDICATION. 6.0 IN THE RESULT, THE APPEAL OF THE DEPARTMENT ST ANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH NOVEMBER, 2018. SD/- SD/- (O.P. KANT) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27 TH NOVEMBER, 2018 GS ITA NO. 5392/DEL/2014 ASSESSMENT YEAR 2010-11 13 COPY FORWARDED TO: - 1) APPELLANT 2) RESPONDENT 3) CIT(A) 4) CIT 5) DR TRUE COPY BY ORDER ASST. REGISTRAR