Tirupati Services Pvt. Ltd., Kanpur V. ACIT, New Delhi

ITA 5516/DEL/2016

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 6495 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 25-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH DUBEY
• Keywords: Principle of natural justice; Earning of tax free income; Rule 8D

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 5516/DEL/2016 : ASSTT. YEAR : 2010-11 TIRUPATI SERVICES PVT. LTD., C/O KAILASH MOTORS BUILDING, 84/105, G.T. ROAD, KANPUR-208003 VS ACIT, CIRCLE-16(1), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. A A ACT4868N ASSESSEE BY : NONE REVENUE BY : SH. PRAKASH DUBEY, SR. DR DATE OF HEAR ING: 1 7 . 02 .20 2 1 DATE OF PRONOUNCEMENT: 06.04 .20 2 1 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-33, NEW DELHI DATED 06. 07.2015. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE: 1. BECAUSE THE LEARNED CIT (APPEALS) ERRED IN LAW AND ON FACTS IN NOT CONSIDERING THE SUBMISSION OF T HE APPELLANT WITH RESPECT TO SUFFICIENCY OF OWN FUNDS IN INVESTMENT IN SHARES IN THE PAST AS WELL AS DURING THE YEAR OUT OF OWN NET FUNDS IGNORING THE CITATION OF JUDGMENTS IN THE FOLLOWING CASES:- I. CIT VS. RELIANCE UTILITY POWER LIMITED REPORTED IN 313 ITR 340 (BOM.) II. CIT VS. HERO CYCLES LIMITED REPORTED IN 323 ITR 518 (P & H). ITA NO. 5516/DEL/2016 TIRUPATI SERVICES PVT. LTD. 2 2. BECAUSE THE LEARNED CIT (APPEALS) ERRED IN LAW AND ON FACTS IN NOT CONSIDERING THE JUDGMENTS OF JURISDICTIONAL HIGH COURT IN THE CASES OF CIT-VI VS . TAIKISHA ENGINEERING INDIA LIMITED REPORTED IN 370 ITR 338 (DELHI)/2015 & IN THE CASE OF JOINT INVESTMENT PVT. LIMITED VS. CIT IN REPORTED IN 372 ITR 694 (2015) (DELHI) THAT THE DISALLOWANCES CANNO T EXCEED THE EXEMPT INCOME EARNED BY THE APPELLANT GIVING THE PLEA THAT JUDICIAL PRONOUNCEMENT RELATE TO CLAUSE (I) OF SUB-NOTE-2 OF RULE 8D. 3. BECAUSE THE LEANED CIT(APPEALS) ERRED IN LAW AND ON FACTS IN NOT CONSIDERING THE FOREIGN TRAVEL EXPENSES BEING FOR BUSINESS PURPOSES AND IN CONFIRMING THE SUM OF RS.4,61,793/- WITHOUT ASSIGNING REASONS. 4. BECAUSE THE DISALLOWANCES CONFIRMED BY THE LEARNED CIT (APPEALS) IS UNJUSTIFIED, CONTRARY TO T HE FACTS, LAW AND AGAINST THE PRINCIPALS OF NATURAL JUSTICE. DISALLOWANCE U/S 14A: 3. STRAIGHT TO THE FACTS OF THE CASE: THE AVERAGE INVESTMENTS : RS.41,29,050/-. DIVIDEND RECEIVED : NIL THE ASSESSEES OWN FUND : RS.5,72,72,655/- 4. FROM THE ABOVE, IT CAN BE HELD THAT THE ASSESSEE HAS SUFFICIENT OWN INTEREST FREE FUNDS AVAILABLE TO MAK E INVESTMENTS HAS NOT INCURRED ANY INTEREST COST ON THE INVESTMEN T AND ALSO HAS NOT EARNED ANY DIVIDEND. IN THE ABSENCE OF ANY EARNING OF EXEMPT INCOME NO DISALLOWANCE IS CALLED FOR. ITA NO. 5516/DEL/2016 TIRUPATI SERVICES PVT. LTD. 3 DISALLOWANCE ON ACCOUNT OF FOREIGN TRAVEL: 5. FROM THE RECORDS, IT IS GATHERED THAT SRI VINEET CHANDRA & SMT. NIDHI CHANDRA, DIRECTORS OF THE COMPANY UNDERT OOK JOURNEY TO PARIS VIA LONDON W.E.F. 13.11.2009 TO 20 .11.2009. THE INVITATION WAS RECEIVED FROM JONATHAN WHARTMAN, EXECUTIVE VICE PRESIDENT OF MDT ARMOR, A US CORPORATION OPERA TING IN AUBURN, ALABAMA. MDT ARMOR ORGANIZED A BOOTH AT THE MILIPOL DEFENCE SHOW IN PARIS ON NOVEMBER, 17 TO 20. INVITA TION WAS RECEIVED FOR VISITING THE AFORESAID BOOTH AT PARIS. THE PHOTOCOPY OF INVITATION LETTER WAS FURNISHED AT THE TIME OF A SSESSMENT PROCEEDINGS. THE INVITATION WAS PUT UP BEFORE THE B OARD OF DIRECTORS FOR CONSIDERING THE NECESSITY OF VISITING THE BOOTH AT PARIS. THE ASSESSEE VISITED THE PLACE IN THE WIDER INTEREST OF BUSINESS AND TO EXPLORE THE POSSIBILITIES OF SUPPLI ES OF VARIOUS KINDS OF VEHICLES AND TO INTERACT WITH OTHER BUSINE SSMEN. A COPY OF RESOLUTION PASSED IN THE MEETING OF BOARD OF DIR ECTORS WAS ALSO FURNISHED BEFORE THE LEARNED AO. THE A.O. OBSE RVED THAT SINCE THERE IS NO CONNECTION BETWEEN THE PARIS DEFE NSE EQUIPMENTS AND VEHICLE SHOW AND HELD THAT THE BOOKI NGS DONE FOR THREE PEOPLE WAS A PLEASURE TRIP IN THE GARB OF BUSINESS TRIP AND SO, THE SAID EXPENSES BEING PERSONAL IN NATURE ARE DISALLOWED. 6. THE FACT THAT FOREIGN TOUR TO PARIS WAS FOR THE PURPOSE OF BUSINESS WAS SUBMITTED BEFORE THE LEARNED AO. AS PE R BOOKS OF ACCOUNT THE TOTAL AMOUNT OF EXPENSES ON TRAVELLING HEAD IS RS.13,22,932/-. OUT OF THIS, EXPENSES INCURRED ON F OREIGN TRAVELLING BY THE DIRECTORS IS TO THE TUNE OF RS.7, 97,915/-. REST OF THE TRAVELLING EXPENSES IS RS.5,25,017/- BY DIRE CTORS AND EMPLOYEES. IT WOULD BE SEEN THAT THE TOTAL AMOUNT O N FOREIGN ITA NO. 5516/DEL/2016 TIRUPATI SERVICES PVT. LTD. 4 TRAVELLING IS DISALLOWED AT RS.6,85,313/- WHICH IS INCLUSIVE OF THE FOLLOWING: A) TRAVELLING EXPENSES OF FOREIGN TOUR AS PER PHOTOCOPY OF BILLS ATTACHED WITH THE ASSESSMENT ORDER RS.4,61,793.0 0 B) INVOICE NO.36 DATED 23.01.2010 OF AVIKRIT TRAVELLS. THE AMOUNT IS TWICE ADDED, ONCE IT IS BASIS OF THIS INVOICE AND AGAIN IT IS DISALLOWED AGAINST VOUCHER NO.1193. PHOTOCOPIES OF INVOICE AND VOUCHER ARE WITH THE ASSESSMENT ORDER. RS. 23,520.00 C) HOTEL BOOKING FOR PARIS & NETHERLAND ON ESTIMATE BASIS RS.2,00,000.00 TOTAL RS. 6,85,313.00 7. THE LD. A.O. DISALLOWED A SUM OF RS. 2 LACS FOR HOTEL BOOKING IN PARIS AND NETHERLAND ON ESTIMATE BASIS W HEREAS INVOICE NO. 30 OF AVIKRIT TRAVEL IS CONSISTED OF AM OUNT OF HOTEL BOOKING IN PARIS. FURTHERMORE, IN FACT THE AFORESAI D TWO DIRECTORS NEITHER STAYED IN NETHERLAND NOR THE TOUR WAS AIMED FOR THE VISIT OF NETHERLAND. BESIDES, NO EXPENSES A RE INCURRED AND ACCORDINGLY NO EXPENSES ARE DEBITED IN THE BOOK S OF ACCOUNT FOR NETHERLAND. ONLY VISA WAS OBTAINED FOR NETHERLAND IN ORDER TO BE AN EASIER COURSE IN OBTAINING VISA F OR VISITING PARIS. AS SUCH, DISALLOWANCE OF RS.2,00,000/- ON ES TIMATE BASIS IS WITHOUT ANY BASE. SECONDLY THE ABOVE TWO DIRECTO RS UNDER TOOK JOURNEY TO ABROAD AND NONE ELSE WAS THERE. SO THE OBSERVATION OF THE LD. A.O. FOR THREE PERSONS IS IN CORRECT AND WITHOUT ANY BASIS. SINCE, THE EXPENDITURE IS INCURR ED FOR THE DIRECTORS OF THE COMPANY IN RELATION TO THE BUSINES S AFFAIRS, NO DISALLOWANCE IS CALLED FOR IN THIS CASE. ITA NO. 5516/DEL/2016 TIRUPATI SERVICES PVT. LTD. 5 8. AS A RESULT, THE APPEAL OF THE ASSESSEE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06/04/2021. SD/- SD/- (SUCHITRA KAMBLE) (DR. B. R. R. KUMAR) JUDICIAL MEMBER AC COUNTANT MEMBER DATED: 06/04/2021 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR