D.C.I.T. Cir - 8,Kolkata, Kolkata V. M/s R.Piyarelall International Private Limited, Kolkata

ITA 628/KOL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100206 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 22-03-2013
• Court: TRIBUNAL
• Department Lawyers: S C DAS JCIT LD
• Assessee Lawyers: ASHIS H RUSTAGI FCA LD
• Keywords: Corroborative evidences; Commercial expediency
• Section: 143(3)

Judgement Text

ITA NO. 628/KOL/2013-A-AM M/S. R.PIYARELALL INTERNTIONAL P.LTD 1 IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, K OLKATA BEFORE : SHRI MAHAVIR SINGH,JUDICIAL MEMBER, AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. 628/KOL/2013 A.Y 2009-10 D.C.I.T, CIRCLE-8, KOLKATA VS. M/S. R.PIYARELALL INTERNATIONAL PVT. LTD PAN : AABCR 3157P (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI S.C DAS, JCIT, LD. SR .DR FOR THE RESPONDENT : SHRI ASHIS H RUSTAGI, FCA, LD.AR DATE OF HEARING: 30-11 -2015 DATE OF PRONOUNCEMENT: 4 -12-20 15 ORDER SHRI M.BALAGANESH, AM : THIS APPEAL OF THE REVENUE ARISES OUT OF THE ORD ER OF THE LEARNED CIT(A)-VIII, KOLKATA IN APPEAL NO. 97/CIT(A)-VIII/KOL/11-12 FOR AY 2009-10 DATED 06-12-2012 AGAINST THE ORDER OF ASSESSMENT PASSED BY THE LEARN ED AO U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ). 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED AO IS JUS TIFIED IS MAKING DISALLOWANCE OF TRAVELLING AND OTHER EXPENDITURE ON AN ESTIMATED BA SIS @ 20% . 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSES SEE IS ENGAGED IN THE BUSINESS OF EXPORT OF TRADING GOODS NECESSITATING FREQUENT TRAV EL TO FOREIGN COUNTRIES AND INCUR VARIOUS EXPENDITURES IN FOREIGN CURRENCY. THE ASS ESSEE INCURRED THE FOLLOWING EXPENDITURES IN FOREIGN CURRENCY , DETAILS OF WHICH WERE REFLECTED IN NOTE NO. 14 OF ITA NO. 628/KOL/2013-A-AM M/S. R.PIYARELALL INTERNTIONAL P.LTD 2 PART B OF NOTES ON ACCOUNTS (SCHEDULE 15) ATTACHED TO THE FINANCIAL STATEMENTS AND CLAIMED DEDUCTION FOR THE FOLLOWING EXPENSES AMONG OTHERS :- FOREIGN TRAVEL EXPENSES 13,88,227 SALES PROMOTION 98,020 LEGAL & CONSULTANCY 63,39,870 MEMBERSHIP & SUBSCRIPTION 2,14,574 80,40,691 4. THE LEARNED AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED THAT THE ASSESSEE HAD NOT FURNISHED ANY DOCUMENTARY EVIDENCES TO SUPPORT ITS CLAIM IN RESPECT OF THE AFORESAID EXPENDITURE. HE OBSERVED THAT THE ASSESSEE HAD MADE A GENERAL STATEMENT THAT THE ASSESSEE BEING IN EXPORT IMPORT BUSINESS , THE DIRECTORS AND OTHER PERSONNEL OF THE COMPANY OFTEN REQUIRE TO TRAVEL AB ROAD IN THE BUSINESS INTEREST OF THE COMPANY AND HENCE THE SAME HAS TO BE ALLOWED ON THE GROUND OF COMMERCIAL EXPEDIENCY. SIMILARLY IN RESPECT OF OTHER EXPEND ITURE AS DETAILED ABOVE, IT WAS CLAIMED THAT THE SAME ARE INCURRED WHOLLY AND EXCLU SIVELY FOR THE PURPOSE OF BUSINESS WHICH AGAIN WAS ONLY A GENERAL STATEMENT NOT SUPPOR TED BY ANY DOCUMENTARY EVIDENCES. THE LEARNED AO OBSERVED THAT SALES, GRO SS PROFIT AND NET PROFIT DURING THE YEAR HAD DECREASED IN COMPARISON TO THAT OF THE EAR LIER YEAR. IN THESE CIRCUMSTANCES, THE LEARNED AO RESORTED TO MAKE ESTIMATED DISALLOWA NCE OF 20% OF THE TOTAL EXPENDITURE AS ABOVE AND MADE AN ADDITION OF RS. 16 ,08,138/-. 5. DURING THE FIRST APPELLATE PROCEEDINGS, THE AS SESSEE FURNISHED THE DETAILS BEFORE THE LEARNED CIT(A) AND THE FOLLOWING SUBMISSIONS WE RE MADE BY THE ASSESSEE:- (I) EXPENSES IN RESPECT OF FOREIGN TRAVELLING HAD TO BE INCURRED BY THE ASSESSEE FOR PURPOSE OF CURRENCY PURCHASED AND USED IN FOREIGN TRAVELLING INCLUDED IN TOTAL AMOUNT OF EXPENDITURE TO THE TUNE OF RS. 34,24,684/- DURING THE YEAR. ITA NO. 628/KOL/2013-A-AM M/S. R.PIYARELALL INTERNTIONAL P.LTD 3 (II) THE AMOUNT OF RS. 98,020/- WAS INCURRED TO MEET PAR TICIPATION IN CHINA CONFERENCE HELD / ORGANIZED BY THE INDUSTRIAL & COM MERCIAL BANK OF CHINA IN ORDER TO MAINTAIN BUSINESS TREND BEING IN THE NATURE OF SALES PROMOTION. (III) LEGAL & CONSULTANCY CHARGES AMOUNTING TO RS. 70,59, 311/- OUT OF WHICH RS. 63,39,870/- WAS PAID IN FOREIGN CURRENCY TO CHALOS OCONNOR & DUFFY BESIDES RS. 17,16,914/- & RS. 46,22,956/- W ERE PAID TO WONG PARTNERSHIP. (IV) MEMBERSHIP AND SUBSCRIPTION TO THE EXTENT OF RS. 2, 14,574/- WERE PAID TO, INCLUSIVE OF RS. 85,172/- TO INTERNATIONAL MARI TIME BUREAU (LONDON), RS. 75,139/- TO SHANGHAI GANGLION E-COMMERCE COMPAN Y LIMITED AND RS. 39,935/- TO ICC INTERNATIONAL MARITIME BUREAU. 5.1. IT WAS CONTENDED THAT THE EXPENDITURE HAD TO BE INCURRED ACTUALLY FOR MAINTAINING AND /OR AUGMENTING BUSINESS RELATIONS AND UNDERSTAN DING THE BUSINESS TREND IN FOREIGN COUNTRY. IT WAS FURTHER ARGUED THAT THE OBSERVATI ON OF THE LEARNED AO THAT EXPENDITURE FOR THE YEARS CONTINUED TO REMAIN THE S AME GENERALLY IN CONDUCTING BUSINESS DEPENDING ON VARIOUS FACTORS FROM ALL CORN ERS OF THE BUSINESS IRRESPECTIVE OF OUTPUT IN HAVING MOTIVE BEHIND TO EARN PROFIT FROM BUSINESS. IT WAS ALSO SUBMITTED THAT THE QUANTUM AND REASONABLENESS OF EXPENDITURE UNDER ANY HEAD IN RUNNING BUSINESS CAUSE DO NOT HAVE RELEVANCY IN CONTINUITY OF BUSINE SS AND CANNOT BE CRITERIO FOR CONSIDERATION OF PURPOSE IN RELATION TO CONCERNING BUSINESS. THE LEARNED CITA FOUND THAT THE REPLIES AND ARGUMENTS OF THE ASSESSEE TO B E VAGUE AND WITHOUT ANY SUPPORTING EVIDENCES AND FOUND THAT THE DISALLOWANCE MADE BY T HE LEARNED AO ON AN ESTIMATED BASIS @ 20% OF FOREIGN TRAVEL EXPENDITURE TO BE REA SONABLE AND UPHELD THE ADDITION. ITA NO. 628/KOL/2013-A-AM M/S. R.PIYARELALL INTERNTIONAL P.LTD 4 5.2. IN RESPECT OF OTHER EXPENDITURE OF RS. 66,52, 464/- COMPRISING OF SALES PROMOTION, LEGAL & CONSULTANCY CHARGES AND MEMBERSHIP & SUBSCR IPTION, THE LEARNED CIT(A) OBSERVED THAT THE LEARNED AO HAD NOT POINTED OUT AN Y SPECIFIC ITEM OF DISALLOWABLE EXPENDITURE AND FOUND LOT OF FORCE IN THE ARGUMENTS OF THE ASSESSEE BASED ON THE DETAILS AND EVIDENCES FURNISHED BEFORE HIM AND GAVE A CATEG ORICAL FINDING THAT THE EXPENDITURE TOWARDS LEGAL AND CONSULTANCY CHARGES, MEMBERSHIP & SUBSCRIPTION WERE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND ACCORDINGLY DELETED 20% DISALLOWANCE MADE THEREON BY THE LEARNE D AO. HOWEVER, IN RESPECT OF SALES PROMOTION OF RS. 98,020/- , FOR WANT OF DETAI LS AND SUPPORTING EVIDENCES, HE FOUND THAT THE DISALLOWANCE MADE BY THE LEARNED AO ON AN ESTIMATED BASIS @ 20% OF SALES PROMOTION EXPENDITURE TO BE REASONABLE AND UP HELD THE ADDITION. 6. AGGRIEVED BY THE ABOVE, THE REVENUE HAD PREFER RED THIS APPEAL BEFORE US ON THE FOLLOWING GROUND:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN ALLOWING THE ASSESSEES APPEAL REGARDING AOS DISALLOWANCE OF EXPENDITURE UNDER TH E TRAVELLING AND OTHER EXPENSES. 7. THE LEARNED DR VEHEMENTLY RELIED ON THE ORDER OF THE LEARNED AO. IN RESPONSE TO THIS, THE LEARNED AR ARGUED THAT NO SPECIFIC ITE M OF DISALLOWABLE EXPENDITURE WAS POINTED OUT BY THE LEARNED AO WHILE MAKING DISALLOW ANCE ON AN ESTIMATED BASIS @ 20% OF LEGAL AND CONSULTANCY CHARGES AND MEMBERSHIP & SUBSCRIPTION. HE ALSO ARGUED THAT THE NECESSITY OF INCURRENCE OF EXPENDIT URE HAD TO BE VIEWED FROM THE POINT OF VIEW OF BUSINESSMAN AND NOT THAT OF REVENUE. H E ARGUED THAT TDS PROVISIONS HAVE BEEN DULY COMPLIED WITH BY THE ASSESSEE IN RESPECT OF LEGAL AND CONSULTANCY CHARGES PAID ABROAD IN TERMS OF SECTION 195 OF THE ACT AND ACCORDINGLY PRAYED FOR NON- INTERFERENCE IN THE ORDER OF THE LEARNED CIT(A). ITA NO. 628/KOL/2013-A-AM M/S. R.PIYARELALL INTERNTIONAL P.LTD 5 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE FACTS STATED HEREINABOVE REMAIN UNDISPU TED AND HENCE THE SAME ARE NOT REITERATED FOR THE SAKE OF BREVITY. WE FIND THAT T HE LEARNED CIT(A) HAVING NOT BEING SATISFIED WITH THE EVASIVE REPLIES GIVEN BY THE ASS ESSEE IN RESPECT OF FOREIGN TRAVEL EXPENSES AND SALES PROMOTION EXPENSES, HAD TAKEN IN TO ACCOUNT THE PRINCIPLE OF COMMERCIAL EXPEDIENCY VIS A VIS THE NATURE OF BUSIN ESS OF THE ASSESSEE AND FOUND IT REASONABLE TO CONFIRM THE DISALLOWANCE MADE ON AN E STIMATED BASIS @ 20% OF SUCH EXPENDITURE. IT IS UNDISPUTED THAT THE ASSESSEE HA D INDEED FURNISHED ALL THE DETAILS REGARDING LEGAL AND CONSULTANCY CHARGES AND MEMBERS HIP & SUBSCRIPTION BEFORE THE REVENUE AND HAD DULY COMPLIED WITH THE TDS PROVISIO NS CONTEMPLATED IN CHAPTER XVIIB OF THE ACT, WHEREVER APPLICABLE. THE GENUINI TY OF INCURRENCE OF THESE EXPENDITURE HAS NOT BEEN DOUBTED BY THE REVENUE. HENCE IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDIN GS RECORDED BY THE LEARNED CIT(A) IN THIS REGARD. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRNOUNED IN THE OPEN COURT ON 4 /12/2015 SD/- ( MAHAVIR SINGH, JUDICIAL MEMBER ) SD/- (M. BALAGANESH, ACCOUNTANT MEMBER) DATE 4 /12/2015 ITA NO. 628/KOL/2013-A-AM M/S. R.PIYARELALL INTERNTIONAL P.LTD 6 1. . THE APPELLANT: THE DCIT, CIR-8, AAYKAR BHAWAN 5 TH FL., P-7 CHOWRINGHEE SQ., KOL-69. 2 THE RESPONDENT-M/S. R.PIYARELALL INTERNATIONAL PVT . LTD 99A, PARK ST, KOL-16. 3 / THE CIT, 4.THE CIT(A) 5 . DR, KOLKATA BENCH 6 . GUARD FILE . TRUE COPY, BY ORDER, ASSTT REGISTRAR COPY OF THE ORDER FORWARDED TO:-