M/S SHAMROCK INTERNATIONAL LTD, V. THE ITO WD 3(3)(2),

ITA 677/MUM/2005

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100674 (ITAT-MUMBAI)
• Duration Of Justice: 10 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 27-09-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 27-01-2005
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA P YADAV
• Keywords: Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI . , , BEFORE SHRI D. MANMOHAN , VP AND SHRI SANJAY ARORA, AM ./ I.T.A. N O. 677/MUM/2005 ( / ASSESSMENT YEAR: 2001 - 02 ) SHAMROCK INTERNATIONAL LTD. C/O. B. S. VASA, ADVOCATE, 213/215, JOLLY BHAVAN NO. 1, 10, NEW MARINE LINES, MUMBAI 400 020 / VS. ITO - WARD 3(3)(2), AAYKAR BHAVAN, M. K. ROAD, MUMBAI - 40 0 020 ./ ./ PAN/GIR NO. AAACS 5756 L ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI DHARMESH SHAH / RESPONDENT BY : SHRI AKHILENDRA P.YADAV / DATE OF HEARING : 05.05.2015 / DATE OF PRONOUNCEMENT : 05 .08.2015 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN A PPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - XXXII , MUMBAI (CI T(A) FOR SHORT) DATED 25.11.2004 , PARTLY ALLOWING THE A SSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2001 - 02 VIDE ORDER DATED 08.03.2004 . 2 ITA NO. 677/MUM/2005 (A.Y. 2001 - 02) SHAMROCK INTERNATIONAL LTD. VS. ITO 2. THE ONLY ISSUE ARISING IN THE INSTANT APPEAL IS THE MAINTAINABILITY OR OTHERWISE IN LAW OF THE DISALLOWANCE IN THE SUM OF ` .1,80,450/ - , OUT OF THE ASSESSEES CLAIM OF EXPENDITURE ON BUSINESS PROMOTION AT ` .12,98,170/ - . 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSESSM ENT PROCEEDINGS, THE ASSESSING OFFICER (A.O.) OBSERVED THE A UDITORS TO HAVE PER THE TAX AUDIT REPORT U/S.44AB FOR THE RELEVANT YEAR SPECIFIED BUSINESS PROMOTION AND TELEPHONE EXPENSES ( ` .3,07,495/ - ) AS BEING SUBJECT TO PERSONAL EXPENSES, THE EXTENT OF WHIC H COULD THOUGH NOT BE ASCERTAINED. FROM THE DETAILS OF THE BUSINESS PROMOTION EXPENSES FURNISHED, I.E., ON BEING CALLED DURING THE ASSESSMENT PROCEEDINGS, THE A.O. FURTHER FOUND THAT ` .3,37,557/ - PERTAIN TO HOTEL CHARGES, WHILE THE BALANCE ` .9,60,613/ - WER E MISCELLANEOUS IN NATURE, VIZ.: ` .90,000/ - MEDICAL EQUIPMENT FOR FOREIGN BUYER ` .4,09,047/ - MARKETING AND MARKETING PROMOTION EXPENSES ` .4,61,566/ - E XHIBITION AT MIL L ANO THE ASSESSEE, HOWEVER, BEING UNABLE TO FURNISH THE BILLS/VOUCHERS FOR THE EXPENDITU RE OF ` .9.61 LACS, AS WELL AS FOR ALL THE HOTEL CHARGES CLAIMED, AS ALSO FOR THE FACT OF THE SAME STOOD REPORTED TO BEAR EXPENDITURE NOT IN THE NATURE OF BUSINESS EXPENDITURE, THE A.O. ESTIMATED THE PERSONAL ELEMENT THEREIN FOR BEING DISALLOWED , AT 1/4 TH O F THE HOTEL EXPENSES AND 1/10 TH FOR THE BALANCE. THE SAME STOOD CONFIRMED IN APPEAL IN - AS - MUCH AS THE ASSESSEE COULD NOT MAKE ANY IMPROVEMENT IN ITS CASE. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. T HE ASSESSEES PRINCIPAL CLAIM BEFORE US AS WELL AS BEFORE THE FIRST APPELLATE AUTHORITY WAS THAT THERE COULD BE NO PERSONAL EXPENDITURE IN CASE OF A COMPANY. THE ARGUMENT IS MISPLACED. THE SAME IS CERTAINLY VALID WHERE, EVEN AS OBSERVED BY TH E LD. 3 ITA NO. 677/MUM/2005 (A.Y. 2001 - 02) SHAMROCK INTERNATIONAL LTD. VS. ITO CIT(A) QUA THE DISALLOWANCE OF TELEPHONE EXPENSES, WHERE A CLAIM OF EXPENDITURE IS ON A FACILITY PROVIDED BY THE COMPANY TO AN EMPLOYEE, WH O WOULD ALSO INCLUDE DIRECTORS , WHICH IS LIABLE TO BE USE D FOR PERSONAL PURPOSES . IT IS IN THAT CASE OR CONTEXT THAT THE H ONBLE C OURTS HAVE, AS IN D IT VS. GOPAL SRINIVASAN TRUST [2002] 253 ITR 759 (SC) AND DINESH MILLS LTD. VS. CIT [2002] 254 ITR 673 (GUJ) , HELD THAT A COMPANY COULD HAVE NO PERSONAL EXPENDITURE, SO THAT THE EXPENDITURE THEREON , THOUGH FOR THE PE RSONAL BENEFIT OF THE EMPLOYEE , WITH NO APPARENT BUSINESS PURPOSE, WOULD YET BE A BUSINESS EXPENDITURE IN THE HANDS OF THE PAYEE - COMPANY. THE SAME MAY LEAD TO A BENEFIT TO THE BENEFICIARY - EMPLOYEE , LIABLE TO BE ASSESSED AS A P E R QUISITE U/S.17 IN H IS HANDS, BUT NO DISALLOWANCE ON ACCOUNT THEREOF COULD BE MADE IN THE HANDS OF THE COMPANY. THE EXPRESSION PERSONAL EXPENDITURE OR PERSONAL ELEMENT , WHERE USED IN THE CONTEXT OF THE OTHER EXPENDITURE, EVEN AS OBSERVED DURING HEARING, IS FOR THE SAME AS NOT BEIN G FOR THE PURPOSE S OF THE BUSINESS, I.E., AN EUPHEMISM FO R NON - BUSINESS PURPOSE . T HERE IS NO AGREEMENT OR CONTRACTUAL BASIS FOR SUCH EXPENDITURE ; THE NEXUS OF WHICH FOR THE ASSESSEES BUSINESS IS NOT SHOWN. THE ESTIMATION TOWARD NON - BUSINESS EXPENDITURE IN SUCH A CASE ARISE S IN VIEW OF THE EXPENDITURE BEING NOT PROVED TO HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES, I.E., AS MANDATED BY SECTION 37(1). THE POWER OF ASSESSING AUTHORITY IN THE MATTER OF ASSESSMENT IS PL E NARY, SO THAT IN THE ABSENCE OF THE PROPER EVIDENCES, HE IS COMPETENT IN LAW TO ESTIMATE THE SAME, I.E., WHAT IN HIS VIEW SHOULD BE THE DISALLOWANCE TOWARD NON - BUSINESS EXPENDITURE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE MANNER IN WHICH THE ESTIMATION IS ARRIVED AT MAY INVOLVE SOME GUESS WORK , EVEN AS WHAT IS MADE AND IS RELEVANT IS THAT SOME EXPENDITURE, OUT OF THE ASSESSEES CLAIM FOR TOTAL EXPENDITURE, IS CONSIDERED AS HAVING NOT BEEN INCURRED FOR BUSINESS PURPOSES IN - AS - MU C H AS THE SAME REMAINS TO BE PROVED. THE ASS ESSEE HAS , EVEN BEFORE US , NOT BEEN ABLE TO MAKE ANY IMPROVEMENT IN ITS CASE. RATHER, THE FACT THAT THE A UDITORS HAVE ALSO COMMENTED ADV ER S EL Y ON SUCH EXPENDITURE INDICATES THAT THE RELEVANT BILLS/VOUCHERS WERE NOT AVAILABLE EVEN FOR THEIR EXAMINATION AND/ OR WERE NOT SATISFIED WITH THE ASSESSEES 4 ITA NO. 677/MUM/2005 (A.Y. 2001 - 02) SHAMROCK INTERNATIONAL LTD. VS. ITO EXPLANATION . WE, UNDER THE CIRCUMSTANCES , DECLINE INTERFERENCE. WE DECIDE ACCORDINGLY. 4. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 05 , 201 5 SD/ - SD/ - (D. MANMOHAN) (SANJAY ARORA) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI ; DATED : 05 . 0 8 .201 5 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI