J. Thomas & Co. Pvt. Ltd., Kolkata V. DCIT, CIR-4, KOLKATA, Kolkata

ITA 569/KOL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0725 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 31-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARINDAM BHATTACHARJEE
• Assessee Lawyers: S C GIRI
• Keywords: Business expenditure; Commercial expediency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENCH KOLKATA BEFORE SHRI N.V. VASUDEVAN, JM &DR. A.L.SAINI, AM ./ ITA NO.569/KOL/2016 ( / ASSESSMENT YEAR: 2011-12) M/S. J. THOMAS & CO. PVT. LTD. 11, R.N. MUKHERJEE ROAD, KOLKATA 700 001. VS. DCIT, CIR-4, KOLKATA P-7, CHOWRINGHEE SQUARE, AAYAKARBHAVAN, KOLKATA 700 069. ./ ./PAN/GIR NO. :AABCJ 2851 Q (APPELLANT) .. (RESPONDENT) APPELLANT BY :SHRI S.C GIRI RESPONDENT BY :SHRI ARINDAM BHATTACHARJEE, ADDL. CIT / DATE OF HEARING : 20/11/2017 /DATE OF PRONOUNCEMENT : 13/12/2017 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAINING TO ASSESSMENT YEAR 2011-12, IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)6, KOLKATA, IN APPEAL NO.286/CIT(A)-6/KOL/2015-16, DATED 24.02.2016, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER U/S.143(3) OF THE INCOME TAX ACT 1961, (HEREINAFTER REFERRED TO AS THE ACT) DATED 17.02.2014. 2.THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE READ AS UNDER: 1. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEAL) [HEREINAFTER REFERRED TO AS LD.CIT(A)] GROSSLY ERRED IN CONFIRMING THE ACTION OF THE ASSESSING M/S. J. THOMAS & CO. PVT. LTD. ITA NO.569/KOL/2016 ASSESSMENT YEAR: 2011-12 PAGE | 2 OFFICER (HEREINAFTER REFERRED TO AS THE AO) IN ADDING BACK AN AMOUNT OF INR 21,15,106/- ON THE ALLEGED GROUND THAT THERE IS NO DIRECT NEXUS BETWEEN THE TRAVEL EXPENDITURE INCURRED BY THE APPELLANT WITH THE AUCTIONEERING BUSINESS OF THE APPELLANT WITHOUT APPRECIATING THE FACT THAT THE SAID EXPENDITURE WAS DIRECTLY RELATED TO ITS BUSINESS AS IT HAD GENERATED BROKERAGE INCOME OF THE APPELLANT TO THE TUNE OF INR 4,61,47,508/- DURING THE RELEVANT YEAR. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW AND WITHOUT PREJUDICE TO GROUND NO.1 ABOVE, THE LD. CIT(A) GROSSLY ERRED IN ADDING BACK AN AMOUNT OF INR 21,15,106/- ON THE ALLEGED GROUND THAT THERE IS NO DIRECT NEXUS BETWEEN THE TRAVEL EXPENDITURE INCURRED BY THE APPELLANT WITH THE AUCTIONEERING BUSINESS OF THE APPELLANT IGNORING THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT OF INDIA WHEREIN IT HAS BEEN HELD THAT AN EXPENDITURE SHOULD BE ALLOWED EVEN IF THE SAME RESULTS IN INDIRECTLY FACILITATING THE CARRYING ON THE BUSINESS OF THE APPELLANT. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD TO AND/OR AMEND, ALTER, MODIFY OR RESCIND THE GROUNDS HEREINABOVE BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 3. THE BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSESSEE COMPANY HAS SPENT EXPENSES TO THE TUNE OF RS.21,15,106/- FOR FOREIGN TRAVEL. THE AO OBSERVED, DURING THE ASSESSMENT PROCEEDINGS, THAT THE MANAGING DIRECTOR AND OTHER OFFICIALS OF THE COMPANY HAVE UNDERGONE FOREIGN TOURS TO UK, AUSTRALIA, DUBAI AND SRI LANKA. DURING THE PROCEEDINGS, THE AO ASKED THE REASONS OF FOREIGN TRAVEL AND THE ASSESSEE SUBMITTED THE REASONS THEREOF. HOWEVER, THE AO IGNORED THE SUBMISSIONS OF THE ASSESSEE AND HELD THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TEA AND COFFEE AUCTIONEERING, FINANCING AND RUBBER HANDLING AND NOT ENGAGED IN THE BUSINESS OF EXPORTING TEA, COFFEE OR ANY OTHER ITEMS. THE AO NOTED THAT THE FOREIGN TRAVEL EXPENSES INCURRED BY THE HIGH OFFICIALS OF THE ASSESSEE COMPANY CANNOT BE SAID TO HAVE BEEN INCURRED FOR ANY DIRECT BENEFIT OF THE ASSESSEE COMPANY AND HENCE, IT CANNOT BE STATED THAT THE EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE COMPANY. THEREFORE, THE AO DISALLOWED THE ENTIRE FOREIGN TRAVEL EXPENSES OF RS.21,15,106/-. M/S. J. THOMAS & CO. PVT. LTD. ITA NO.569/KOL/2016 ASSESSMENT YEAR: 2011-12 PAGE | 3 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO HAS CONFIRMED THE ADDITION MADE BY THE AO. THE CIT(A) HELD THAT ASSESSEE HAD NOT FURNISHED ANY DETAILS OF TANGIBLE BENEFITS DERIVED FROM THE FOREIGN TRAVEL. IT WAS ONLY GENERALLY STATED BY THE ASSESSEE THAT PROSPECTIVE FOREIGN BUYERS ARE IDENTIFIED AND THE INFORMATION IS PASSED ONTO THE CLIENTS WHO HAVE EXPORT LICENSES WHICH HELP THE AUCTION BUYERS TO PURCHASE THE DESIRED QUANTITY TO SATISFY THE FOREIGN MARKET. THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT THE ENTIRE EXPENSES HELPED TO GENERATE REVENUE FROM SELLING THE REQUIRED QUANTITY OF TEA THROUGH AUCTION. THE ASSESSEE ALSO SUBMITTED THAT THE DETAILS OF BROKERAGE EARNED BY IT FROM VARIOUS CLIENTS. BUT THE LD. CIT(A) HELD THAT DETAILS OF BROKERAGE CANNOT BE AND HAVE NOT BEEN LINKED WITH ANY SPECIFIC INFORMATION GATHERED BY THE ASSESSEE THROUGH ITS DIRECTORS OR EMPLOYEES WHILE ON THEIR FOREIGN TRAVEL. THEREFORE, AS PER LD. CIT(A) THE NEXUS BETWEEN THE FOREIGN TRAVEL EXPENSES AND THE ASSESSEES BUSINESS WAS MISSING AND THEREFORE, HE CONFIRMED THE ADDITION MADE BY THE AO. 5. NOT BEING SATISFIED WITH THE ORDER OF THE CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE US.THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED BEFORE US THE DETAILS OF DIFFERENT PURCHASES BY EXPORTER THROUGH AUCTION VIS-A-VIS BROKERAGE EARNED BY ASSESSEE(VIDE P.B.19). THE LD. COUNSEL STATED THAT THERE WAS DIRECT NEXUS BETWEEN THE FOREIGN TRAVEL AND THE BUSINESS OF THE ASSESSEE. APART FROM THIS, THE LD. COUNSEL STATED THAT THE ASSESSEES ISSUE UNDER CONSIDERATION IS FULLY COVERED BY THE JUDGMENT OF HONBLE ITAT, KOLKATA IN ASSESSEES OWN CASE IN ITA NOS.2066/KOL/2014 & 2071/KOL/2014, A.Y.2010-11 DATED 01.11.2017, WHEREIN IT WAS HELD THAT THE SENIOR EMPLOYEES OF THE ASSESSEE COMPANY VISITED FOREIGN COUNTRIES AND IT HAS GENERATED REVENUE TO THE ASSESSEE IN THE FORM OF BROKERAGE INCOME. THE SAID EXPENSES ON FOREIGN TRAVEL HAVE BEEN INCURRED OUT OF COMMERCIAL EXPEDIENCY AND IT SHOULD BE VIEWED FROM A BUSINESSSMANS POINT OF VIEW. THE HONBLE TRIBUNAL FURTHER HELD THAT ASSESSEE INCURRED SIMILAR FOREIGN EXPENSES IN EARLIER YEAR ALSO. THE REVENUE HAD ACCEPTED THE SAME TILL M/S. J. THOMAS & CO. PVT. LTD. ITA NO.569/KOL/2016 ASSESSMENT YEAR: 2011-12 PAGE | 4 ASSESSMENT YEAR 2009-10 BY ALLOWING THE SAME AS BUSINESS EXPENDITURE. THE SCRUTINY ASSESSMENT ORDERS FOR THE ASSESSMENT YEARS 2007-08 AND 2009-10 FRAMED U/S 143(3) OF THE ACT DATED 31.12.2009 AND 30.12.2011 RESPECTIVELY WERE FILED BY THE LD. COUNSEL IN THIS REGARD. 6. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 7.HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD, WE NOTE THAT THE SENIOR EMPLOYEES OF THE ASSESSEE COMPANY VISITED FOREIGN COUNTRIES AND IT HAS GENERATED REVENUE TO THE ASSESSEE IN THE FORM OF BROKERAGE INCOME. THE SAID EXPENSES ON FOREIGN TRAVEL HAVE BEEN INCURRED OUT OF COMMERCIAL EXPEDIENCY AND IT SHOULD BE VIEWED FROM A BUSINESSSMANS POINT OF VIEW. BESIDES, THE ASSESSEE HAD INCURRED SIMILAR FOREIGN EXPENSES IN EARLIER YEAR ALSO. THE REVENUE HAD ACCEPTED THE SAME AS BUSINESS EXPENDITURE. WE ALSO NOTE THAT ASSESSEES CASE UNDER CONSIDERATION IT IS FULLY COVERED BY THE COORDINATE BENCH OF KOLKATA IN ITA NOS.2066/KOL/2014 & 2071/KOL/2014 DATED 01.11.2017 (SUPRA). IN VIEW OF THE AFORESAID FINDINGS AND RESPECTFULLY FOLLOWING THE JUDGMENT OF COORDINATE BENCH IN ASSESSEES OWN CASE(SUPRA), WE DIRECT THE AO TO DELETE THE DISALLOWANCE MADE TOWARDS FOREIGN TRAVEL EXPENSES TO THE SUM OF RS. 21,15,106/-. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE, IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13/12/2017. SD/- (N. V. VASUDEVAN) SD/- (DR. A.L.SAINI) /JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; DATED 13/12/2017 RS(SPS) M/S. J. THOMAS & CO. PVT. LTD. ITA NO.569/KOL/2016 ASSESSMENT YEAR: 2011-12 PAGE | 5 / COPY OF THE ORDER FORWARDED TO : //TRUE COPY// BY ORDER SENIOR PRIVATE SECRETARY, HEAD OF OFFICE/D.D.O, I.T.A.T, KOLKATA BENCHES, KOLKATA . 1. / THE APPELLANT M/S. J. THOMAS & CO. PVT. LTD. 2. / THE RESPONDENT-DCIT, CIR-4, KOLKATA 3. ( ) / THE CIT(A), :KOLKATA. 4. / CIT 5. , , / DR, ITAT, KOLKATA 6. / GUARD FILE.