BABA STEELS PRIVATE LIMITED, MUMBAI V. INCOME TAX OFFICER WARD 14(1)(2), MUMBAI

ITA 6653/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4546 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 26-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUMAR PADAMPA NI BORA
• Assessee Lawyers: LALCHAND CHAU DHARY
• Keywords: TDS
• Section: 143(3); 37(1); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE R.C.SHARMA,ACCOUNTANT MEMBER & SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.6653/MUM/2018(A.Y.2012-13) BABA STEEL PVT. LTD., 311-A, BHAVESHWAR ARCADE, LBS MARG, GHATKOPAR WEST, MUMBAI 400 086 PAN: AACCB 3186B ...... APPELLANT VS. INCOME TAX OFFICER, WARD 14(1)(2), ROOM NO.457, 4 TH FLOOR, AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400 020 ..... RESPONDENT APPELLANT BY : SHRI LAL CHAND CHAUDHARY RESPONDENT BY : SHRI KUMAR PADAMP ANI BORA DATE OF HEARING : 12/12/2019 DATE OF PRONOUNCEMENT : 13/02/2020 ORDER PER VIKAS AWASTHY, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX(APPEALS)-21, MUMBAI [ IN SHORT THE CIT( A) ] DATED 27/07/2018 FOR THE ASSESSMENT YEAR 2012-13. 2. THE BRIEF FACTS AS EMANATING FROM THE RECORDS AR E: THE ASSESSEE IS ENGAGED IN MANUFACTURING AND TRADING OF STEEL WIRES AND BARS. IN SCRUTINY ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER MADE DISALLOWANC E IN RESPECT OF FOREIGN TRAVEL 2 ITA NO.6653/MUM/2018(A.Y.2012-13) EXPENDITURE RS.78,000/-, EMPLOYEES TRAINING EXPENDI TURE RS.23,28,336/- AND MISMATCH OF TDS RS.24,800/-. AGGRIEVED AGAINST THE ASSESSMENT ORDER DATED 27/02/2015 PASSED UNDER SECTION 143(3) OF THE INCO ME TAX ACT, 1961( IN SHORT THE ACT) THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) GRANTED PART RELIEF TO THE ASSESSEE. THE CIT(A) REJECTED ASSESSEES CLAIM OF EMPLOYEES TRAINING EXPENSES AND FOREIGN TRAVEL EXPENSES IN ENTIRETY. THE CIT(A) DELETED THE ADDITION OF RS.24,800/- ON ACCOUNT OF MISMATCH OF TDS. AGAINST THE ADDITIO NS CONFIRMED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 3. SHRI LAL CHAND CHAUDHARY, APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE CIT(A) HAS REJECTED ASSESSEES CLAIM OF FOREI GN TRAVEL EXPENSES AND EMPLOYEES TRAINING EXPENSES MERELY ON THE GROUND THAT THE EXP ENDITURE WAS INCURRED ON THE HIGHER STUDIES AND TRAVEL EXPENSES OF SON OF THE D IRECTOR. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE CONTENDED THAT MER ELY FOR THE REASON THAT FOREIGN TRAVEL EXPENSES AND EMPLOYEE TRAINING EXPENSES WAS INCURRED BY THE ASSESSEE IN RESPECT OF EMPLOYEE WHO HAPPENS TO BE SON OF THE DI RECTOR CANNOT BE DISALLOWED. TO SUPPORT HIS CONTENTION, THE LD. AUTHORIZED REPRESEN TATIVE FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF TRIBUNAL IN THE CASE OF J.B.ADVANI & CO LTD. VS. JCIT, 1 SOT 830(MUM). THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER PLACED ON RECORD AGREEMENT FOR SPONSORSHIP OF HIGHER EDUCATIO N OF MR. ABHISHEK SANJAY AGRAWAL AND THE ASSESSEE COMPANY. THE LD. AUTHORI ZED REPRESENTATIVE SUBMITTED THAT MR. ABHISHEK SANJAY AGRAWAL WAS ON THE ROLLS OF ASSESSEE COMPANY AS MARKETING ASSISTANT SINCE APRIL,2010 AND WAS DRAWI NG MONTHLY SALARY OF RS.15,000/-. AFTER HIS FOREIGN EDUCATION AND TRAINING HE REJOINE D THE ASSESSEE COMPANY AND THERE WAS INCREASE IN THE ANNUAL TURNOVER OF THE ASSESSEE COMPANY. 3 ITA NO.6653/MUM/2018(A.Y.2012-13) 4. ON THE OTHER HAND, SHRI KUMAR PADAMPANI BORA, REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER AND PRAYED F OR DISMISSING THE APPEAL OF ASSESSEE. THE LD. DEPARTMENTAL REPRESENTATIVE SUB MITTED THAT ASSESSEE HAD INCURRED EXPENDITURE ON THE EDUCATION AND FOREIGN T RAVEL EXPENDITURE OF THE SON OF DIRECTOR. THE EXPENDITURE IS NOT ALLOWABLE IN THE HANDS OF THE ASSESSEE COMPANY, HENCE, THE SAME WAS ADDED BACK. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY RIVAL SIDE S AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. IT IS AN UNDISPUTED F ACT THAT FOREIGN TRAVEL EXPENSES AND EMPLOYEES TRAINING EXPENSES WAS IN RESPECT OF MR. A BHISHEK SANJAY AGRAWAL SON OF ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS PLACED ON RECORD VARIOUS DOCUMENTS TO SHOW THAT MR. ABHISHEK SANJAY AGRAWAL WAS ON THE ROLLS OF THE COMPANY AND WAS DRAWING SALARY PRIOR TO HIS FOREIGN TRAINING/EDUCATION SPONSORED BY THE ASSESSE E. AFTER COMPLETING COMPLETION FOREIGN TRAINING/EDUCATION, SHRI ABHISHEK SANJAY AG RAWAL JOINED THE ASSESSEE COMPANY IN ACCORDANCE WITH SPONSORSHIP AGREEMENT D ATED 05/01/2011. 6. THE ASSESSEE HAS PLACED HEAVY RELIANCE ON THE D ECISION RENDERED IN THE CASE OF J.B.ADVANI & CO. LTD.(SUPRA) TO CONTEND THAT SUCH T RAINING AND FOREIGN TRAVEL EXPENDITURE IS ALLOWABLE UNDER SECTION 37(1) OF THE ACT. THE RELEVANT EXTRACT OF THE FINDINGS OF THE TRIBUNAL ON THIS ISSUE ARE AS UNDER :- 7. ON A CAREFUL READING OF THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE FACTS OF THE PRESENT CASE ARE ALMOST IDENTICAL TO THE FACTS OF T HE CASE CONSIDERED IN THE CASE OF SAKAL PAPERY (P.) LTD. (SUPRA). IN THAT CASE ALSO IT WAS THE DAUGHTER OF THE DIRECTOR OF THE ASSESSEE- COMPANY WHO WAS SENT ABROAD FOR HIGHER STUDIES IN J OURNALISM. IN THE PRESENT CASE, MISS RESHMA A. LALWANI IS THE DAUGHTER OF ONE OF THE DIR ECTORS OF THE ASSESSEE-COMPANY BUT ALSO AN EMPLOYEE OF THE ASSESSEE-COMPANY, THE ASSESSEE-C OMPANY IN A BETTER FOOTING IN THE PRESENT CASE. NOT ONLY THAT. MISS RESHMA LALWANI ON RETURNING TO INDIA CONTINUED TO WORK FOR THE ASSESSEE-COMPANY IN COMPLIANCE OF THE AGREE MENT SHE HAD ENTERED INTO WITH THE ASSESSEE-COMPANY BEFORE LEAVING INDIA. SHE HAS BEEN FURTHER MADE AS A DIRECTOR OF THE 4 ITA NO.6653/MUM/2018(A.Y.2012-13) ASSESSEE-COMPANY. THEREFORE THE RELATION OF MISS RE SHMA LALWANI TO ONE OF THE DIRECTORS OF THE ASSESSEE-COMPANY AS SUCH NEED NOT DISQUALIFY HE R FROM BEING SENT ABROAD FOR HIGHER STUDIES BY THE ASSESSEE-COMPANY. THE ONLY REASON., POINTED OUT BY THE ASSESSING OFFICER TO DISTINGUISH THE PRESENT CASE FROM THE DECISION IN S AKAL PAPERS (P.) LTD.'S CASE (SUPRA) IS THAT THE SUBJECT STUDIED BY MISS RESHMA LALWANI DOES NOT HAVE A DIRECT RELATION TO THE ACTIVITIES CARRIED ON BY THE ASSESSEE-COMPANY. THE ASSESSEE-CO MPANY IS BASICALLY ENGAGED IN MANUFACTURING ACTIVITIES AND MISS RESHMA LALWANI HA D GONE ABROAD FOR HIGHER STUDIES IN BUSINESS ADMINISTRATION. WE DO NOT AGREE WITH THE V IEW OF THE ASSESSING OFFICER THAT THE SUBJECT BUSINESS ADMINISTRATION DOES NOT HAVE ANY C ONNECTION WITH THE BUSINESS CARRIED ON BY THE ASSESSEE-COMPANY. IF WE ACCEPT THE PROPOSITI ON MADE BY THE ASSESSING OFFICER, THE RESULT WOULD BE THAT, THE EXPENDITURE ON FORE IGN STUDY INCURRED BY AN ASSESSEE IN RESPECT OF 'TECHNICAL SUBJECTS' ALONE WOULD BE ALLOWED AS D EDUCTION. IT IS NOT PROPER TO SAY THAT MANAGEMENT STUDIES ARE NOT RELEVANT FOR CARRYING ON A BUSINESS. THEREFORE, THE DISTINCTION MADE BY THE ASSESSING OFFICER ON THE BASIS OF THE S UBJECT STUDIED ABROAD IS WITHOUT ANY CONVICTION. BUT FOR THE DIFFERENCE IN THE SUBJECTS STUDIED ABROAD, THE FACTS OF THE CASE IN SAKAL PAPERS (P.) LTD. (SUPRA) ARE EXACTLY SIMILAR TO THE FACTS INVOLVED IN THE PRESENT CASE. MISS RESHMA LALWANI BEING AN EMPLOYEE OF THE ASSESSEE-CO MPANY. THE CASE OF THE ASSESSEE- COMPANY IS ON A BETTER FOOTING. IN ADDITION TO THIS , THE DECISION OF THE TRIBUNAL IN THE CASE OF JTO \. DM. HARISH & CO. CASE (SUPRA) LENT SUPPORT T O THE ARGUMENT OF THE ASSESSEE. IN THE SAID CASE ALSO IT WAS THE SON OF A PARTNER OF THE A SSESSEE-FIRM, WHO WENT ABROAD FOR HIGHER STUDIES IN LAW. THEREFORE, THE RELATION OF THE STUD ENT WITH THE DIRECTOR OR PARTNER OF THE ASSESSEE NEED NOT WEIGH THAT MUCH AGAINST THE ASSES SE. THUS, TAKING INTO CONSIDERATION FACTS OF THE CASE AND THE DECISION OF TRIBUNAL ABOVE, THE APPEAL OF THE ASSESSEE DESERVES TO BE ALLOWED . THE EXPENDITURE CLAIMED BY THE ASSESSEE ON FOREIGN TRAVEL AND TRAINING/EDUCATION O F AN EMPLOYEE IS THUS, ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON THURSDAY T HE 13 TH DAY OF FEBRUARY, 2020. SD/- SD/- (R.C.SHARMA) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 13/02/2020 VM , SR. PS(O/S) 5 ITA NO.6653/MUM/2018(A.Y.2012-13) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON . SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR.PS/PS