SILVER SHIELD ENERGY PVT.LTD., MUMBAI V. INCOME TAX OFFICER-2(3)-2, MUMBAI

ITA 5734/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62434 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 14-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SATBEER SINGH
• Assessee Lawyers: JASNEEM VARAWALA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC BEFORE SHRI D. MANMOHAN, VP (MZ) I.T.A.NO. 5734/MUM/2010 (ASSESSMENT YEAR : 2007-08) SILVER SHIELD ENERGY PRIVATE LIMITED C/O. SHROFF & CO., CONTRACTOR BUILDING GROUND FLOOR VAJU KOTAK MARG BALLARD ESTATE MUMBAI-400 038. VS. ITO 2(3)-2 581-A, AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. APPELLANT RESPONDENT PAN/GIR NO. : AACCS7799D ASSESSEE BY : SHRI JASNEEM VARAWALA DEPARTMENT BY : SHRI SATBEER SINGH DATE OF HEARING : 13.3.2012 DATE OF PRONOUNCEMENT : 18.5.2012 ORDER PER D.MANMOHAN (VP) :- THIS APPEAL IS FILED AT THE INSTANCE OF THE ASSESS EE-COMPANY AND IT PERTAINS TO A.Y. 2007-08. 2. THOUGH THE ASSESSEE-COMPANY RAISED TWO GROUNDS B EFORE THE TRIBUNAL, AT THE TIME OF HEARING LEARNED COUNSEL SU BMITTED THAT THE HE IS NOT INTERESTED IN PRESSING GROUND NO 2. THEREFORE G ROUND NO. 2 ID DISMISSED AS NOT PRESSED. 3. GROUND NO. 1 READS AS UNDER :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD COMMISSIONER OF INCOME-TAX (APPEALS)-6 WAS NOT JUSTI FIED IN CONFIRMING THE ADDITION ON ACCOUNT OF FOREIGN TRAVE L EXPENSES OF ` 3,52,271/-. 4. FACTS NECESSARY FOR THE DISPOSAL OF THIS ISSUE A RE STATED IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DESIGN A ND SUPPLY OF LIGHTING PRODUCTS. IN RESPECT OF THE PREVIOUS YEAR 2006-07 THE ASSESSEE INCURRED SILVER SHIELD ENERGY PRIVATE LIMITED 2 FOREIGN TRAVEL EXPENSES OF ` 3,52,271/- WHICH WAS CLAIMED AS DEDUCTION AGAINST BUSINESS INCOME. DURING THE COURSE OF ASSES SMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT TWO DIRECTORS I. E. MR. SATISH KAPOOR AND MR. SAROSH SHROFF VISITED BANGKOK ON 11.10.2006 AND RETURNED ON 15.10.2006. THE PURPOSE OF TRIP WAS STATED TO BE TO DISCUSS WITH THE SUPPLIERS FOR VARIOUS PROPOSED PROJECTS UNDERTAKEN BY THE ASSESSEE. THE PROPOSED PROJECTS ARE AS UNDER :- A) EVERSHINE GLOBAL CITY : THIS IS PRACTICALLY A WHOLE NEW CITY WITH SCHOOL, COLLEGE, HOSPITAL, RESIDENTIAL COMPLEX , SHOPPING MALL ETC. B) HOTELS (AGRA, JODHPUR, KOLKATA ETC.) C) RESORTS AND SPAS PLUS RESIDENTIAL COMPLEX OF 60 BUN GLOWS ON 100 ACRES. D) IT PARK AT CHENNAI E) RESIDENTIAL PARK IN BANGALORE KNOWN AS RUSTIQUE AND ANOTHER RESIDENTIAL PARK SPREAD OVER 100 ACRES IN BANGALORE . 5. THE ASSESSEE ALSO SUBMITTED THAT IT HAD DISCUSSE D WITH M/S. C&P LIGHTING WHO ARE ONE OF THE BIG SUPPLIER IN SOUTH E AST ASIA FOR VARIOUS PROJECTS. THE DIRECTORS MET REPRESENTATIVE OF M/S. GREEN LIGHT PRODUCT AND M/S. DAVIS LIGHTING WHO ARE THEIR REGULAR SUPPL IERS. THERE WAS ANOTHER ROUND OF TRAVEL TO BANGKOK FROM 27.2.2007 T O 4.3.2007. IN THIS REGARD IT WAS SUBMITTED THAT DURING THE PREVIOUS TR IP IN OCTOBER, 2006 THE ASSESSEE INTERACTED WITH M/S. C.P. LIGHTING AND FELT THAT IT WOULD BE BETTER TO WORK WITH THEM. BESIDES SOME OF THE ARCHI TECTS/PROJECTS OWNERS HAD SPECIFICALLY ASKED THE DIRECTORS TO GIVE THEM L IGHTING COST ESTIMATES ON A ROOM BASIS FOR WHICH, THEY NEEDED HELP OF M/S. C&P LIGHTING WHO IN TURN, SHOWED VARIOUS SAMPLES WHICH ARE GENERALLY US ED IN HOTELS. THE DIRECTORS HAVE ALSO AVAILED OPPORTUNITY TO MET LIGH TING DESIGNER PERSON I.E. M/S. BE-LIT. IT WAS ALSO CONTENDED THAT THE TR AVEL WAS NOT WITHOUT ANY PURPOSE SINCE TRIPS TO BANGKOK WERE BASICALLY T O MEET M/S. C&P LIGHTING CO. LTD., M/S. GREEN LIGHT PRODUCT, M/S. D AVIS LIGHTING AND M/S. BE-LIT. 5. THE ASSESSING OFFICER EXAMINED THE DETAILS FURNI SHED BEFORE HIM. IN HIS OPINION THE ASSESSEE FAILED TO PRODUCE EVIDE NCE REGARDING THE EXPENSES WHICH ARE WHOLLY AND EXCLUSIVELY INCURRED FOR THE BUSINESS SILVER SHIELD ENERGY PRIVATE LIMITED 3 PURPOSES. HE NOTICED THAT THE PLACES VISITED BY THE DIRECTORS HAVE NO CONNECTION WITH THE BUSINESS OF THE ASSESSEE AND NO EVIDENCE WAS PLACED ON RECORD TO PROVE THAT THE PLACES VISITED HAD ANY CONNECTION WITH THE ASSESSEES PRESENT BUSINESS. ASSESSEE WAS ALSO CALL ED UPON TO FURNISH EVIDENCE TO SHOW THAT THE FOREIGN TOURS UNDERTAKEN BY THE DIRECTORS BENEFITED THE ASSESSEE-COMPANY BY WAY OF TRANSACTIO NS WITH THE PARTIES IN THE FUTURE ASSESSMENT YEARS. IN RESPONSE TO THE DIRECTIONS OF THE ADDL. CIT RANGE 2(3), MUMBAI THE ASSESSEE COULD NOT FURNI SH ANY DOCUMENTARY EVIDENCE. M/S. SANJAY PURI ARCHITECT PVT. LTD. PREP ARED LIGHTING DRAWING FOR HOTELS AT KOLKATA. M/S. C&P LIGHTING SENT THRE E SAMPLES TO THE ASSESSEE FOR APPROVAL FOR WHICH THE ASSESSEE HAD PA ID FREIGHT CHARGES. SIMILARLY DRAWINGS OF THE PROPOSED HOTELS WERE SENT TO M/S. LIGHT BOX FOR WHICH THEY SENT THEIR FREE PROPOSAL. VERIFICATION O F E-MAIL SHOWS I.E. PROPOSAL RECEIVED FROM LIGHT BOX, ROOM LIGHTING DES IGN WAS NOT MENTIONED. UNDER THESE CIRCUMSTANCES, THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE FAILED TO PROVE ANY BUSINESS NEXU S WITH PROPOSED PROJECTS SUCH AS EVERSHINE GLOBAL CITY, RESORTS ETC . AT LONAVALA, HOTELS AT JODHPUR, AGRA, KOLKATA AND IT PARK AT CHENNAI. H E ALSO OBSERVED THAT THE ASSESSEE WAS UNABLE TO SUBSTANTIATE, WITH THE D OCUMENTARY EVIDENCE, THE MAIN ACHIEVEMENT OF THE VISIT VIS--VIS THE ASS ESSEES BUSINESS. IT WAS EMPHASIZED THAT THERE WAS NO NEXUS WITH THE PROJECT S IN HAND WITH THE ASSESSEES VISIT TO BANGKOK. THE ASSESSING OFFICER THEREFORE CONCLUDED THAT THE EXPENDITURE CAN NEITHER BE CONSIDERED AS P ERSONAL IN NATURE OR CAPITAL IN NATURE BUT CERTAINLY NOT INCURRED FOR TH E PURPOSE OF BUSINESS. HE ACCORDINGLY DISALLOWED THE FOREIGN TRAVEL EXPENS ES AMOUNTING TO ` 3,52,271/-. 6. ON AN APPEAL FILED BY THE ASSESSEE, LEARNED CIT( A) OBSERVED THAT DETAILED REASONS WERE GIVEN BY THE ASSESSING OFFICE R FOR DISALLOWING THE SAID CLAIM, IN THE ABSENCE OF ANY MATERIAL TO SUPPO RT THE NEXUS BETWEEN EXPENDITURE AND THE BUSINESS CARRIED ON BY THE ASSE SSEE. HE THEREFORE UPHELD THE ORDER OF THE ASSESSING OFFICER. 7. FURTHER AGGRIEVED, THE ASSESSEE IS IN APPEAL BEF ORE THE TRIBUNAL. LEARNED COUNSEL FOR THE ASSESSEE FILED A PAPER BOOK CONSISTING OF 178 SILVER SHIELD ENERGY PRIVATE LIMITED 4 PAGES AND BY ADVERTING MY ATTENTION TO PAGE NO. 48 & 49 IT WAS SUBMITTED THAT THE ASSESSEE CORRESPONDED WITH MR. E RIC REGARDING THE VISIT OF DIRECTORS TO BANGKOK AND THE PURPOSE WAS S TATED TO BE TO MEET SOME LIGHTING DESIGNERS FROM THAILAND WHICH IS BE-L IT AND OTHERS. PAGE NO. 127 TO 131 REFERS TO THE QUOTATIONS RECEIVED FR OM M/S. C&P LIGHTING CO. LIMITED. PAGE 170 ONWARDS IS A DETAILED DO LET TER ADDRESSED TO THE ASSESSING OFFICER TO SUBMIT THAT THOUGH THE DESIGNS ARE BEING DRAWN BY THE INDIAN ARCHITECTS BUT TO CARRY OUT THE WORK THE ARCHITECTS HAVE SHORT LISTED PRODUCTS OF M/S. C&P LIGHTING AND THUS TRIP WAS IN CONNECTION WITH THE BUSINESS CARRIED ON BY THE ASSESSEE. HE H AS ALSO REFERRED TO THE ORDERS PASSED BY THE LEARNED CIT(A) AS WELL AS THE TRIBUNAL IN ASSESSEES OWN CASE IN THE EARLIER YEAR TO SUBMIT THAT THE ASS ESSEE HAD UNDERTAKEN CONTRACTS IN THE PAST AND IN PRINCIPLE IT WAS ALLOW ED THOUGH A PORTION OF THE EXPENDITURE WAS DISALLOWED BY THE TAX AUTHORIT IES. LEARNED COUNSEL STRONGLY SUBMITTED THAT MERELY BECAUSE THERE IS NO DIRECT EVIDENCE IT CANNOT BE ASSUMED THAT THE EXPENDITURE WAS INCURRED FOR NON-BUSINESS PURPOSES. 8. ON THE OTHER HAND LEARNED DEPARTMENTAL REPRESENT ATIVE CONTENDED THAT EXCEPT E-MAIL MESSAGE THERE IS NOTHI NG ON RECORD TO SUGGEST THAT THE ASSESSEE MET ANY OF THE ABOVE MENT IONED PARTIES IN CONNECTION WITH ITS BUSINESS AND THE ASSESSEE WAS N OT ABLE TO PROVE THAT IT HAD TAKEN THE BENEFIT OF THEIR TOURS EVEN IN THE SUBSEQUENT YEARS. HE THUS STRONGLY RELIED UPON THE ORDERS PASSED BY THE ASSESSING OFFICER/LEARNED CIT(A). 9. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S AND PERUSED THE RECORD. AS RIGHTLY POINTED OUT BY THE ASSESSING OF FICER AS WELL AS LEARNED CIT(A) EXCEPT E-MAIL MESSAGE THERE IS NOTHING ON RE CORD TO SUGGEST THAT THE ASSESSEE VISITED THE PRODUCT SUPPLIERS IN CONNE CTION WITH THE BUSINESS. THERE IS NEITHER ANY CORRESPONDENCE WIT H THE BANGKOK PARTIES WITH REGARD TO INTENDING VISIT NOR ANY CORR ESPONDENCE SUBSEQUENT TO THE VISIT STATING THAT A PERSONAL EXAMINATION AN D DISCUSSION HAS CULMINATED INTO BUSINESS TRANSACTIONS OF ANY PARTIC ULAR PRODUCT. DESPITE THE SPECIFIC MENTION BY THE ASSESSING OFFICER, EVEN TILL DATE NO MATERIAL IS SILVER SHIELD ENERGY PRIVATE LIMITED 5 PLACED BEFORE THE TRIBUNAL TO SHOW THAT THE ASSESSE ES VISIT HAD HELPED IN PURCHASE OF PRODUCTS OR IT HAS ANY BUSINESS NEXUS W ITH THE PROPOSED PROJECTS OR FUTURE PROJECTS. HAVING REGARD TO THE C IRCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT THE ORDERS PASSED BY THE TAX AUTHORITIES DO NOT CALL FOR ANY INTERFERENCE. I THEREFORE DISMISS THE APPEAL FILED BY THE ASSESSEE. ORDER HAS BEEN PRONOUNCED ON 18 TH DAY OF MAY, 2012. SD/- (D. MANMOHAN) VICE-PRESIDENT DATED : 18 TH MAY, 2012. COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR CONCERNED, MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI PS