MAFATLAL FABRICS P. LTD, MUMBAI V. DCIT CIR 1(2), MUMBAI

ITA 972/MUM/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6215 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 14-10-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 12-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HARIGOVIND SINGH
• Assessee Lawyers: NISHA GOPALANI
• Keywords: Business expenditure
• Section: 14A; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B BEFORE SHRI D. MANMOHAN (VP) & SHRI J. SUDHAKAR RED DY (AM) I.T.A.NO. 972/MUM/2009 (ASSESSMENT YEAR : 2005-06) M/S. MAFATLAL FABRICS PVT. LTD. 4 TH FLOOR, MAFTLAL HOUSE BACKBAY RECLAMATION MUMBAI-400 020. PAN AAACP4133C VS. DCIT, CIRCLE 1(2) AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. APPELLANT RESPONDENT ASSESSEE BY : MS. NISHA GOPALANI DEPARTMENT BY : SHRI HARI GOVIND SINGH ORDER PER D. MANMOHAN, VP :- THIS APPEAL IS FILED AT THE INSTANCE OF THE ASSESS EE COMPANY. 2. AT THE TIME OF HEARING LEARNED COUNSEL APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT GROUND NO. 7&8 ARE GENERAL IN NATURE WHEREAS GROUND NO. 6 IS NOT PRESSED AND ACCORDINGLY THESE G ROUNDS ARE REJECTED. 3. AS REGARDS GROUND NO. 2 TO 5, CONCERNING DISALLO WANCE OF EXPENDITURE U/S. 14A OF THE ACT, LEARNED COUNSEL FO R THE ASSESSEE AS WELL AS LEARNED DR SUBMITTED THAT IN THE LIGHT OF THE DE CISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MAN UFACTURING COMPANY LTD., VS. DCIT AND ANOTHER (2010) 328 ITR 8 1 (BOM.) MATTER REQUIRES TO BE RECONSIDERED BY THE ASSESSING OFFICE R. BY RESPECTFULLY FOLLOWING AFORECITED DECISION WE DIRECT THE ASSESSI NG OFFICER TO RECOMPUTE THE AMOUNT DISALLOWABLE U/S. 14A OF THE ACT. 4. AS REGARDS GROUND NO. 1, REFERABLE TO DISALLOWAN CE OF FOREIGN TRAVEL EXPENSES OF RS.2,57,148/- INCURRED ON THE WI FE OF THE DIRECTOR OF THE ASSESSEE COMPANY, ASSESSEE CONTENDED THAT IDENT ICAL ISSUE WAS CONSIDERED BY THE ITAT IN ASSESSEES OWN CASE FOR A .Y. 2003-04 (ITA NO. 718/MUM/2007 DATED 5.2.2009) WHEREIN ISSUE WAS SET ASIDE TO THE FILE M/S. MAFTLAL FABRICS PVT. LTD. 2 OF THE ASSESSING OFFICER FOR FRESH DECISION IN ACCO RDANCE WITH LAW AFTER ALLOWING THE ASSESSEE REASONABLE OPPORTUNITY OF BEI NG HEARD AND, HENCE ISSUE IN THIS YEAR ALSO REQUIRES TO BE SET ASIDE. SUBSEQUENT TO THE DATE OF HEARING LEARNED COUNSEL FILED WRITTEN SUBMISSION AL ONG WITH CASE LAW IN SUPPORT OF HER CONTENTION THAT COURTS HAVE TAKEN JU DICIAL NOTICE OF THE CUSTOM IN FOREIGN COUNTRIES OF INVITING WIFES OF EX ECUTIVES TO THE CONFERENCE. 5. IT MAY BE NOTICED HERE THAT IN RESPECT OF A.Y. 2 003-04 AN EX-PARTE ORDER WAS PASSED BY LEARNED CIT(A) IN 2006 AND THE CASE OF THE ASSESSEE COMPANY WAS THAT IT HAD NO OPPORTUNITY TO FURNISH S UFFICIENT EVIDENCE TO PROVE THAT THE EXPENDITURE WAS INCURRED FOR THE PUR POSE OF BUSINESS. IT MAY FURTHER BE NOTICED THAT THERE IS NO INDICATION IN THE ORDER OF THE APPELLATE TRIBUNAL (SUPRA) THAT THE EXPENDITURE WAS INCURRED ON THE WIFE OF THE DIRECTOR. IT WAS SUBMITTED BEFORE THE TRIBUN AL (SUPRA) THAT IDENTICAL DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS SET ASIDE BY THE ITAT IN RESPECT OF THE APPEAL FOR A.Y. 2001-02 (ITA NO. 392 2/MUM/2005). UNDER THESE CIRCUMSTANCES, MATTER WAS RESTORED TO THE FIL E OF THE ASSESSING OFFICER. WE THEREFORE CALLED UPON THE LEARNED COUNS EL TO EXPLAIN AS TO WHY WAS THE CIRCUMSTANCE THAT PROMPTED ITAT WHILE D ISPOSING OF THE APPEAL FOR A.Y. 2001-02, TO SET ASIDE THE ISSUE TO FILE OF THE ASSESSING OFFICER AND ALSO REQUESTED LEARNED COUNSEL FOR THE ASSESSEE TO FURNISH COPY. ALONG WITH WRITTEN SUBMISSION, COPY OF THE OR DER OF THE ITAT FOR A.Y. 2001-02 WAS FURNISHED, WHERE THE CASE OF THE A SSESSEE WAS THAT SUFFICIENT OPPORTUNITY WAS NOT AFFORDED BY THE TAX AUTHORITIES TO PROVE THE NEXUS BETWEEN EXPENDITURE AND THE BUSINESS OF THE A SSESSEE. 6. ON THE OTHER HAND, LEARNED DR SUBMITTED THAT IN THE ASSESSMENT YEAR UNDER CONSIDERATION, THERE WAS DETAILED DISCUS SION BY THE ASSESSING OFFICER AS WELL AS LEARNED CIT(A) WITH REGARD TO TH E NATURE OF EXPENDITURE; THE ASSESSING OFFICER OBSERVED THAT THE EXPENDITURE WAS PERTAINING TO FOREIGN TRIP OF MRS. R. MAFATLAL, WIFE OF SHRI VISH AL MAFATLAL, I.E., TO SINGAPORE/CHINA/SINGAPORE/MUMBAI, AND THE DETAILS F URNISHED BEFORE M/S. MAFTLAL FABRICS PVT. LTD. 3 THEM DO NOT INDICATE AS TO WHAT PROMPTED THE COMPAN Y TO TAKE A DECISION TO INCUR EXPENDITURE ON FOREIGN TRIP OF MR S. R. MAFATLAL. INITIAL ONUS IS UPON THE ASSESSEE TO PROVE THAT THE EXPENDI TURE INCURRED WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE COMPANY, WHEREAS NO BUSINESS CONNECTION WAS SHOWN B ETWEEN EXPENDITURE AND BUSINESS OF THE ASSESSEE. UNDER THE SE CIRCUMSTANCES, ASSESSING OFFICER OBSERVED AS UNDER; NOTHING IS BROUGHT ON RECORD TO SHOW THAT THERE WA S ANY PURPOSE OF THE ASSESSEE COMPANY FOR WHICH SHE HAD T AKEN THE FOREIGN TOUR. SHE HAS ACCOMPANIED MR. VISHAL MA FTLAL ONLY AS THE STATUS OF HIS WIFE. THEREFORE EXPENDITURE IN CURRED BY THE ASSESSEE COMPANY PERTAINING TO HER FOREIGN VISI T UNDER CONSIDERATION IS DISALLOWED IN VIEW OF THE PROVISIO NS OF SECTION 37(1) OF THE I.T. ACT. 7. ON APPEAL FILED BY THE ASSESSEE, IN THE ABSENCE OF ANY EVIDENCE FURNISHED ALONG WITH THE APPEAL PAPERS OR EVEN DURI NG THE COURSE OF APPELLATE PROCEEDINGS (THOUGH THE ASSESSEE WAS REPR ESENTED BY THE CHARTERED ACCOUNTANT), LEARNED CIT(A) OBSERVED AS U NDER :- I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT. THERE IS NOTHING ON RECORD TO SUGGEST THAT THE DIRE CTOR OF THE COMPANY WAS REQUIRED TO TAKE HIS WIFE FOR MEETING N EW BUYERS. THE RELEVANCE OF SMT. R. MAFTLAL FOR THE BU SINESS DEALS, IF ANY, UNDERTAKEN DURING THE COURSE OF SUCH TOUR IS NOT SUBJECT TO VERIFICATION AND IS NOT SUPPORTED BY ANY EVIDENCE. THE BOMBAY HIGH COURT IN THEIR DECISION IN THE CASE OF CIT VS. BHOR INDUSTRIES, 284 ITR 319 HAVE HELD THAT FOREIGN TOUR EXPENSES OF THE WIFE OF THE DIRECTORS ARE NOT ALLOW ABLE AS BUSINESS EXPENDITURE. THE APPELLANT CANNOT DRAW ANY SUPPORT FROM THE BOMBAY HIGH COURT DECISION IN THE CASE OF CIT VS. ALFA LAVAL (I) LTD., 282 ITR 445, BECAUSE IN THAT C ASE THE APPELLANT HAD CONTENDED THAT THE DIRECTOR WAS INVIT ED TO CERTAIN CONFERENCE ABROAD WHICH HE WAS REQUIRED TO ATTEND ALONGWITH HIS WIFE. THE FACTS OF THE PRESENT CASE A RE DIFFERENT AND DIRECTLY COVERED BY THE LATER DECISION OF THE B OMBAY HIGH COURT IN THE CASE OF BHOR INDUSTRIES. ACCORDINGLY T HE ORDER OF THE ASSESSING OFFICER ON THIS GROUND IS CONFIRMED A ND THE APPEAL IS DISMISSED. M/S. MAFTLAL FABRICS PVT. LTD. 4 8. LEARNED DR SUBMITTED THAT THE FACTUAL FINDING OF THE ASSESSING OFFICER AS WELL AS LEARNED CIT(A) WAS NOT CONTROVERTED BY THE ASSESSEE AT ANY STAGE AND EVEN BEFORE THE TRIBU NAL NO MATERIAL WHATSOEVER WAS FURNISHED EXCEPT MERELY SEEKING EASY RECOURSE OF GOING BACK TO THE ASSESSING OFFICER IN THE LIGHT OF THE DECISION OF ITAT FOR A.Y. 2003-04 AND THUS, IN THE LIGHT OF THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF BHORE INDU STRIES P. LTD., 284 ITR 319, EXPENDITURE INCURRED BY THE ASSESSEE C ANNOT BE ALLOWED AS A DEDUCTION. 9. HAVING REGARD TO THE RIVAL SUBMISSIONS. WE ARE O F THE VIEW THAT THE PLEA OF THE REVENUE DESERVES TO BE ACCEPTED. AS REG ARDS CLAIM OF DEDUCTION OF ANY EXPENDITURE THE INITIAL ONUS IS UP ON THE ASSESSEE TO PROVE THAT THE EXPENDITURE WAS INCURRED FOR THE PUR POSE OF BUSINESS. ORDER OF THE ITAT CITED BEFORE US DO NOT INDICATE A S TO WHETHER DETAILS WERE FURNISHED BEFORE THE ASSESSING OFFICER OR LEAR NED CIT(A) WHEREAS IN THE YEAR UNDER CONSIDERATION, DESPITE SUFFICIENT OP PORTUNITIES TO THE ASSESSEE NO EVIDENCE WHATSOEVER WAS FURNISHED TO PR OVE THAT THE EXPENDITURE WAS INCURRED ON THE FOREIGN TRAVEL OF T HE WIFE OF THE ONE OF THE DIRECTORS BASED ON BUSINESS CONSIDERATIONS. SIN CE, FACTUAL FINDINGS OF THE ASSESSING OFFICER AS WELL AS LEARNED CIT(A) WER E NOT CONTROVERTED, IN THE LIGHT OF THE DECISION OF HON'BLE BOMBAY HIGH CO URT CITED SUPRA, WE ARE OF THE VIEW THAT THE ORDER PASSED BY LEARNED CI T(A) DOES NOT SUFFER FROM ANY INFIRMITY. ACCORDINGLY GROUND NO. 1 IS HER EBY REJECTED. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DAY OF NOVEMBER, 2010. SD/- (J. SUDHAKAR REDDY) ACCOUNTANT MEMBER SD/- (D. MANMOHAN) VICE PRESIDENT DATED : 30 TH NOVEMBER, 2010 M/S. MAFTLAL FABRICS PVT. LTD. 5 COPY TO 1. M/S. MAFTLAL FABRICS PVT. LTD., 4 TH FLOOR, MAFTLAL HOUSE, BACKBAY RECLAMATION, MUMBAI-400 020. PAN AAACP4133C 2. DCIT, CIRCLE 1(2), AAYAKAR BHAVAN, M.K. ROAD, MU MBAI-400 020. 3. CIT(A)-1, ROOM NO. 529, AAYAKAR BHAVAN, 5 TH FLOOR, M.K. ROAD, MUMBAI 020. 4. CIT-1, MUMBAI. 5. DR B BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI PS