GARWARE FINANCE CORPORATION LTD, MUM V. DCIT, CC-6(4), MUM

ITA 67/MUM/2023

AI Insights

M/s Garware Finance Corporation Ltd. appealed against the disallowances made by the Assessing Officer on foreign travel and business promotion expenses for the assessment years 2017-18 and 2018-19. The disallowances were initially upheld by the Ld CIT(A). The tribunal, after reviewing the submissions and evidence presented, including ledgers and invoices, found that the expenses were justified as they were incurred for business purposes and were reasonable in relation to the company's sales and profitability. The tribunal also noted that the director, Mr. Nihal Garware, who is a non-resident Indian, was required to travel for business affairs, which justified the foreign travel expenses.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123561 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 08-03-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 09-01-2023
• Other Referred Cases: Kanu Kitchen Kuulture (P.) Ltd. v. DCIT [2014] 49 taxmann.com 64 (Delhi-Trib.), Spica Finstock Ltd. v. ACIT [2010] 1 ITR (Trib.) 437 (Ahmedabad), Technologies India (P.) Ltd. v. ACIT [2013] 33 taxmann.com 594 (Chennai-Trib.)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 132; 153A; 139(1); 64

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G” MUMBAI BEFORE SHRI ABY T VARKEY (JUDICIAL MEMBER) AND SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) ITA No. 67/MUM/2023 Assessment Year: 2017-18 & ITA No. 68/MUM/2023 Assessment Year: 2018-19 M/s Garware Finance Corporation Limited, 1-A Kapur Mahal, Netaji Subhash Road, Marine Drive, Mumbai-400020. Vs. DCIT Central Circle-6(4), 1925, 19 th floor, Air India Building, Nariman Point, Mumbai-400021. PAN No. AAACG 2804 M Appellant Respondent Assessee by : Mr. Ryan Saldanha, AR Revenue by : Dr. Kishor Dhule, CIT-DR Date of Hearing : 09/03/2023 Date of pronouncement : ___/03/2023 ORDER PER OM PRAKASH KANT, AM These two appeals by the assessee are directed against two separate orders, both dated 15.12.2022, passed by the Ld. Commissioner of Income-tax (Appeals)-54, Mumbai [in short ‘the Ld. CIT(A)’] for assessment years 2017-18 and 2018-19 respectively. Being identical ground heard together and disposed off by way this consolidated order for convenience and avoid repetition of assessment year 2017 1. The Id CIT(A) erred in upholding the disallowance of foreign travelling expenses of AO without appreciating the fact that: • The ledger and invoices were submitted. • The expenditure on Foreign Travel was genuinely done towards business / marketing activities of the Director of the assessee company. • The foreign travel expenditure pertained to Director Mr Nihal Garware who was an NRI • Such travel expenditure is reasonable and commensurate with the sales of the company. • The profitability of the company is extremely high from any given parameter. 2. The Id C business promotion expenses of Rs. 1,81,075/ the AO without appreciating the fact that: • The ledger and invoices were submitted. • The expenditure on Business Promotion was genuinely done towards busin of the assessee company. • The nature of the expenditure is cost of Taj Mahal Hotel ChambersMembership. • Such business promotion expenditure is reasonable and commensurate with the sales of the company. M/s Garware Finance Corporation Ltd. Being identical grounds raised in both these appeals er and disposed off by way this consolidated order for convenience and avoid repetition of facts. The ground assessment year 2017-18 are reproduced as under: The Id CIT(A) erred in upholding the disallowance of foreign travelling expenses of Rs.5,41,634/- made by the AO without appreciating the fact that: • The ledger and invoices were submitted. • The expenditure on Foreign Travel was genuinely done towards business / marketing activities of the Director of the assessee company. foreign travel expenditure pertained to Director Mr Nihal Garware who was an NRI • Such travel expenditure is reasonable and commensurate with the sales of the company. • The profitability of the company is extremely high from any given parameter. The Id CIT(A) erred in upholding the disallowance of business promotion expenses of Rs. 1,81,075/ the AO without appreciating the fact that: • The ledger and invoices were submitted. • The expenditure on Business Promotion was genuinely done towards business / marketing activities of the Director of the assessee company. • The nature of the expenditure is cost of Taj Mahal Hotel ChambersMembership. • Such business promotion expenditure is reasonable and commensurate with the sales of the company. M/s Garware Finance Corporation Ltd. ITA Nos. 67 & 68/M/2023 2 raised in both these appeals, same were er and disposed off by way this consolidated order for acts. The grounds of appeal for The Id CIT(A) erred in upholding the disallowance of made by the • The expenditure on Foreign Travel was genuinely done towards business / marketing activities of the Director of the foreign travel expenditure pertained to Director Mr • Such travel expenditure is reasonable and commensurate • The profitability of the company is extremely high from any IT(A) erred in upholding the disallowance of business promotion expenses of Rs. 1,81,075/- made by • The expenditure on Business Promotion was genuinely ess / marketing activities of the Director • The nature of the expenditure is cost of Taj Mahal Hotel • Such business promotion expenditure is reasonable and • The profitability of the company is extremely high from any given parameter. 3. The appellant prays that aforesaid disallowance of travel and business promotion expenses made may be deleted. 2. In the case of the assessee a defect memo specifying the defect that In response, the assessee submitted that a certificate that there was no Managing Director and therefore defect removed and appeal is admitted 3. Briefly stated, facts of the case are that the assessee company was engaged in the business of providing consultancy and financial services, trading in shares etc. For the year under consideration, the assessee filed return of income u/s 139(1) of the Income Act, 1961 (in short ‘the Act’) declaring total income Rs.1,00,18,070/-. A search action u/s out in the case of the assessee on 09.03.2021 along with other cases on “Nihal Garware Act was issued. In the assessment completed u/s 153A of the Act dated 28.03.2022, the Assessing Officer made disallowance of travelling expense amounting to Rs.5,41,634/ promotion expenses of amounting to Rs.1,81,075/ 4. On further appeal, the Ld. CIT( Aggrieved, the assessee is in appeal before the Tribunal by way of raising grounds as reproduced above. M/s Garware Finance Corporation Ltd. fitability of the company is extremely high from any given parameter. The appellant prays that aforesaid disallowance of travel and business promotion expenses made may be In the case of the assessee a defect memo ct that the appeal was filed by the Director only In response, the assessee submitted that a certificate that there was no Managing Director and therefore defect removed and appeal is admitted for adjudication. facts of the case are that the assessee company was engaged in the business of providing consultancy and financial shares etc. For the year under consideration, the assessee filed return of income u/s 139(1) of the Income (in short ‘the Act’) declaring total income . A search action u/s 132 of the Act was carried n the case of the assessee on 09.03.2021 along with other Nihal Garware” and consequently notice u/s 153A of the In the assessment completed u/s 153A of the Act dated 28.03.2022, the Assessing Officer made disallowance of travelling expense amounting to Rs.5,41,634/- promotion expenses of amounting to Rs.1,81,075/-. On further appeal, the Ld. CIT(A) upheld the disallowance. the assessee is in appeal before the Tribunal by way of raising grounds as reproduced above. M/s Garware Finance Corporation Ltd. ITA Nos. 67 & 68/M/2023 3 fitability of the company is extremely high from any The appellant prays that aforesaid disallowance of travel and business promotion expenses made may be In the case of the assessee a defect memo was issued the appeal was filed by the Director only. In response, the assessee submitted that a certificate to the effect that there was no Managing Director and therefore defect stands facts of the case are that the assessee company was engaged in the business of providing consultancy and financial shares etc. For the year under consideration, the assessee filed return of income u/s 139(1) of the Income-tax (in short ‘the Act’) declaring total income at 132 of the Act was carried n the case of the assessee on 09.03.2021 along with other and consequently notice u/s 153A of the In the assessment completed u/s 153A of the Act dated 28.03.2022, the Assessing Officer made disallowance of and business . upheld the disallowance. the assessee is in appeal before the Tribunal by way of 5. We have heard rival submission of the parties on the issue dispute and perused the relevant material on record. As far Ground No. 1 relating to disallowance of foreign travelling expense is concerned, we find that assessee claimed total travelling expenses of Rs.10,17,746/- out of which amount of Rs.7,55,783/ related to foreign travel. In the return of income filed suo motu made disallowance of Rs.2,14,149/ expenses. However, the Assessing Officer observed that assessee failed to explain business expediency on foreign travels and therefore, he disallowed for balance foreign travellin Rs.5,46,334/-. The Ld. CIT(A) noted the submission of the assessee that foreign travel expenses who is a non-resident Indian and who resides outside India According to assessee, he was business affairs of the assessee company and therefore expenditure of foreign travel was justified. 5.1 Before us, the assessee has submitted ledger and invoices of the expenses claimed assessee company, w consideration the assessee Rs.1,34,50,653/-. The main expenses claimed pertain to prior period expenses of Rs.11,00,340/ Rs.10,70,746/-. In our opinion of the assessee company and M/s Garware Finance Corporation Ltd. We have heard rival submission of the parties on the issue dispute and perused the relevant material on record. As far Ground No. 1 relating to disallowance of foreign travelling expense is concerned, we find that assessee claimed total travelling expenses out of which amount of Rs.7,55,783/ related to foreign travel. In the return of income filed made disallowance of Rs.2,14,149/- related to expenses. However, the Assessing Officer observed that assessee failed to explain business expediency on foreign travels and therefore, he disallowed for balance foreign travellin . The Ld. CIT(A) noted the submission of the assessee that foreign travel expenses relate to director Shri Nihal Garware resident Indian and who resides outside India According to assessee, he was required to freque business affairs of the assessee company and therefore expenditure of foreign travel was justified. Before us, the assessee has submitted ledger and invoices of the expenses claimed. On perusal of the financial sta ompany, we find that during the year under consideration the assessee has shown revenue from operations of . The main expenses claimed pertain to prior period expenses of Rs.11,00,340/- and travel expenses of . In our opinion looking to the business operations of the assessee company and suo motu disallowance made by the M/s Garware Finance Corporation Ltd. ITA Nos. 67 & 68/M/2023 4 We have heard rival submission of the parties on the issue-in- dispute and perused the relevant material on record. As far as Ground No. 1 relating to disallowance of foreign travelling expense is concerned, we find that assessee claimed total travelling expenses out of which amount of Rs.7,55,783/- was related to foreign travel. In the return of income filed, the assessee related to travel expenses. However, the Assessing Officer observed that assessee failed to explain business expediency on foreign travels and therefore, he disallowed for balance foreign travelling expenses of . The Ld. CIT(A) noted the submission of the assessee Shri Nihal Garware resident Indian and who resides outside India. required to frequently attend business affairs of the assessee company and therefore expenditure Before us, the assessee has submitted ledger and invoices of n perusal of the financial statements of the e find that during the year under shown revenue from operations of . The main expenses claimed pertain to prior travel expenses of looking to the business operations disallowance made by the assessee, additional Assessing Officer is not justified being a non was necessary for him the assessee company assesseeas how to manage affairs of the assessee relied upon the Ld. CIT(A) by the distinguishable of facts. In the case of Kanu Kitchen Kuulture (P.) Ltd. v. DCIT [2014] 49 taxmann.com 64 (Delhi Assessing Officer and the case of [2010] 1 ITR (Trib.) 437 (Ahmedabad) the personal benefit of the assessee company. In the case of Technologies India (P.) Ltd. v. ACIT [2013] 33 taxmann.com 594 (Chennai-Trib.) travel expenses incurred for the purpose of business. ratio of these decisions cannot be applied over the facts of the instant case. 5.2 Before us, the Ld. Counsel of the assessee submitted that appeal for assessment year 2013 been restored to the file of the 2635/Mum/2018 and also to be set aside to the file of the after verification of the vouchers and evidence in support thereof. M/s Garware Finance Corporation Ltd. disallowance on foreign travel expenses by the Assessing Officer is not justified being a non-resident director necessary for him to travel to India for looking after affairs of the assessee company. The Assessing Officer cannot dictate to the how to manage affairs of the assessee. The case laws relied upon the Ld. CIT(A) by the distinguishable of facts. In the nu Kitchen Kuulture (P.) Ltd. v. DCIT [2014] 49 taxmann.com 64 (Delhi-Trib.) full details were not filed before the Assessing Officer and the case of Spica Finstock Ltd. v. ACIT [2010] 1 ITR (Trib.) 437 (Ahmedabad) expenses were incurred for enefit of the assessee company. In the case of Technologies India (P.) Ltd. v. ACIT [2013] 33 taxmann.com there was no evidence to show to that foreign travel expenses incurred for the purpose of business. ese decisions cannot be applied over the facts of the Before us, the Ld. Counsel of the assessee submitted that appeal for assessment year 2013-14 involving identical issue has been restored to the file of the Ld CIT(A) in m/2018 and therefore he submitted that this issue may also to be set aside to the file of the Ld. CIT(A) for deciding afresh after verification of the vouchers and evidence in support thereof. M/s Garware Finance Corporation Ltd. ITA Nos. 67 & 68/M/2023 5 disallowance on foreign travel expenses by the resident director ,it to travel to India for looking after affairs of The Assessing Officer cannot dictate to the . The case laws relied upon the Ld. CIT(A) by the distinguishable of facts. In the nu Kitchen Kuulture (P.) Ltd. v. DCIT [2014] 49 full details were not filed before the Spica Finstock Ltd. v. ACIT expenses were incurred for enefit of the assessee company. In the case of SPI Technologies India (P.) Ltd. v. ACIT [2013] 33 taxmann.com show to that foreign travel expenses incurred for the purpose of business. Therefore, the ese decisions cannot be applied over the facts of the Before us, the Ld. Counsel of the assessee submitted that 14 involving identical issue has Ld CIT(A) in ITA No. therefore he submitted that this issue may for deciding afresh after verification of the vouchers and evidence in support thereof. 5.3 We find that in AY 2013 file of Ld CIT(A) as same was dismissed in for non-filing of appeal in electronic format. have already held that disallowance of travel expenses is not justified in view of suo expenses amount in proportion of business turnover and business expediency etc . In view of the facts and circumstances of the case, we set aside the finding of ld CIT(A) and delete the addition made by the Assessing Officer. accordingly allowed. 6. The ground No. 2 of the appeal relates to disallowance of business promotion expenses of Rs.1,81,075/ submission of the parties. expenses incurred for business promotion included expenses meetings organized in hotels by the Director of the company opinion, the assessee has justified the business expediency of the expenses. The Ld DR submitted that the assessee should produce the persons with whom he held meeting to support his contention of business expediency. We are of the view that possible for the assessee to produce all those persons with whom the director of the company h quantum of expenses not find the expense as excessive and hence, we set finding of Ld CIT(A) and delete the addition made by the AO. M/s Garware Finance Corporation Ltd. We find that in AY 2013-14 appeal has been restored to the file of Ld CIT(A) as same was dismissed in limine by the LD CIT(A) of appeal in electronic format. In the present case we have already held that disallowance of travel expenses is not justified in view of suo-moto disallowance, quantum of expenses amount in proportion of business turnover and business view of the facts and circumstances of the case, set aside the finding of ld CIT(A) and delete the addition made by the Assessing Officer. The Ground No. 1 of appeal of the assessee is The ground No. 2 of the appeal relates to disallowance of business promotion expenses of Rs.1,81,075/-. We have heard rival submission of the parties. The assessee has mainly claimed that red for business promotion included expenses organized in hotels by the Director of the company opinion, the assessee has justified the business expediency of the expenses. The Ld DR submitted that the assessee should produce ns with whom he held meeting to support his contention of business expediency. We are of the view that possible for the assessee to produce all those persons with whom the director of the company had meeting in hotels. Looking to the of expenses, as compared to the business turnover, we do not find the expense as excessive and hence, we set finding of Ld CIT(A) and delete the addition made by the AO. M/s Garware Finance Corporation Ltd. ITA Nos. 67 & 68/M/2023 6 14 appeal has been restored to the by the LD CIT(A) the present case we have already held that disallowance of travel expenses is not moto disallowance, quantum of travel expenses amount in proportion of business turnover and business view of the facts and circumstances of the case, set aside the finding of ld CIT(A) and delete the addition made by of appeal of the assessee is The ground No. 2 of the appeal relates to disallowance of We have heard rival The assessee has mainly claimed that red for business promotion included expenses for organized in hotels by the Director of the company. In our opinion, the assessee has justified the business expediency of the expenses. The Ld DR submitted that the assessee should produce ns with whom he held meeting to support his contention it may not be possible for the assessee to produce all those persons with whom . Looking to the , as compared to the business turnover, we do not find the expense as excessive and hence, we set-aside the finding of Ld CIT(A) and delete the addition made by the AO. 6.1 The grounds identical to the ground are decided mutatis mutandis 7. In the result, appeals of the Order pronounced in the open Court Sd/- (ABY T VARKEY JUDICIAL MEMBER Mumbai; Dated: 30/03/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// M/s Garware Finance Corporation Ltd. raised in assessment year 2018 rounds raised in assessment year 2017 mutatis mutandis. In the result, appeals of the assessee are allowed. Order pronounced in the open Court on 30/03/2023. Sd/ ABY T VARKEY) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai M/s Garware Finance Corporation Ltd. ITA Nos. 67 & 68/M/2023 7 raised in assessment year 2018-19 being raised in assessment year 2017-18, same are allowed. /03/2023. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai