DCIT CIR 3(1), MUMBAI V. AON GLOBAL INSURANCE SERVICES P.LTD, MUMBAI

ITA 989/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3781 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 13-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure
• Section: 143(3)

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENC H, MUMBAI . . , . , ! '#$ ' BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI D. KARUNAKARA RAO, AM ' ./I.T.A. NO.989/M/2012 ( %& ' / ASSESSMENT YEAR :2007-2008) DCIT - CIRCLE - 3(1), ROOM NO.607, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI 400 020. & / VS. M/S. AON GLOBAL INSURANCE BROKERS PVT. LTD. (FORMERLY KNOWN AS M/S. AON GLOBAL INSURANCE SERVICES PVT. LTD.), 302, DALAMAL HOUSE, JAMNALAL BAJAJ MARG, NARIMAN POINT, MUMBAI 400 021. $( ! ' ./PAN : AAECA 1565 H ( () /APPELLANT) .. ( *+() / RESPONDENT) () , - ' / APPELLANT BY : SHRI MANOJ KUMAR, DR * +() , - ' / RESPONDENT BY : SHRI MANDAR VAIDYA ' & , .! /DATE OF HEARING : 08.5.2013 /0' , .! /DATE OF PRONOUNCEMENT : 15.5.2013 #1 #1 #1 #1 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 13.2.2012 IS AG AINST THE ORDER OF CIT (A)- 5, MUMBAI DATED 11.11.2011 FOR THE ASSESSMENT YEAR 2007-2008. 2. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING EFFE CTIVE GROUND WHICH READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD CIT (A) ERRED IN DELETING THE ADDITION OF RS. 22,49,000/- MADE BY WAY OF DISALLOW ANCE OUT OF FOREIGN TRAVEL EXPENSES WITHOUT APPRECIATING THE FACT THAT THE DISALLOWANC E WAS MADE AS, DESPITE THE OPPORTUNITIES PROVIDED TO IT, THE ASSESSEE HAD FAILED TO FURNISH ANY EVIDENCE TO SHOW THAT THE EXPENDITURE CLAIMED W AS INCURRED FOR THE PURPOSE OF ITS BUSINESS. 3. RELEVANT FACTS OF THE ADDITION ARE THAT THE ASSE SSEE IS ENGAGED IN THE BUSINESS OF PROVIDING DIRECT AND REINSURANCE BROKIN G SOLUTIONS AND SERVICES TO ITS 2 CLIENTS. ASSESSEE FILED THE RETURN OF INCOME DECLA RING THE TOTAL INCOME OF RS. 7,92,79,360/-. AS A RESULT OF ASSESSMENT U/S 143(3 ) OF THE ACT, ASSESSED INCOME WAS DETERMINED AT RS. 8,15,28,360/-. DURING THE AS SESSMENT PROCEEDINGS, ASSESSING OFFICER NOTICED THAT THE ASSESSEE CLAIMED EXPENSES TO THE TUNE OF RS. 2,28,58,000/- UNDER THE HEAD TRAVELLING & CONVEYAN CE, OUT OF WHICH RS. 89,96,001/- PERTAINS TO OVERSEAS TRAVELS EXPENDIT URE. ASSESSEE WAS ASKED TO FURNISH THE COMPLETE DETAILS REGARDING THE TRAVELLI NG AND CONVEYANCE. NOT SATISFIED WITH THE SUBMISSIONS OF THE ASSESSEE, AO MADE AD-HO C DISALLOWANCE OF RS. 22,49,000/- (IE 25% OF RS. 89,96,001/-) ON THE GROU ND THAT FULL AND COMPLETE DETAILS WERE NOT SUBMITTED. AGGRIEVED, ASSESSEE FILED AN AP PEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLAT E AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) DELETED TH E SAID ADDITION BY HOLDING THAT THE DISALLOWANCE MADE ON ESTIMATE BASIS ARE UNSUSTA INABLE. CIT (A) ALSO NOTICED THAT, FOR THE AY 2006-2007 WHERE AN IDENTICAL CLAIM IS MADE, THE ASSESSEES CLAIM FOR TRAVELLING AND CONVEYANCE EXPENSES WAS ALLOWED AS B USINESS EXPENSES. PARA 3, 3.1 AND 3.2 OF THE CIT (A)S ORDER ARE RELEVANT IN THIS REGARD. AGGRIEVED WITH THE DECISION OF THE CIT (A), REVENUE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. BEFORE THE TRIBUNAL, LD DR RELIED DUTIFULLY ON T HE ORDER OF THE AO. 6. PER CONTRA, SHRI MANDAR VAIDYA, LD COUNSEL FOR THE ASSESSEE RE LIED ON THE ORDER OF THE CIT (A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE AO/CIT(A). REFERRING TO THE AY 2006-07, WHERE SIMILAR CLAIM IS ACCEPTED BY THE AO, LD COUNSEL MENTIONED THAT THE REVENUE SHOULD FOLLOW THE PRINCI PLE OF CONSISTENCY AND ALLOW THE CLAIM OF THE ASSESSEE IN THIS YEAR TOO. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE PAPERS FILED BEFORE US. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE INCURRED EXPENSES OF RS. 2,28,58,000/- UND ER THE HEAD TRAVELLING & CONVEYANCE. AO DISALLOWED THE CLAIM OF THE ASSESS EE, FOR THE REASON THAT THE ASSESSEE HAS NOT FURNISHED THE FULL AND CORRECT DET AILS OF THE SAID EXPENDITURE, AND 3 NOT ON ANY OTHER GROUND. BEFORE THE CIT (A), THE AS SESSEE SUBMITTED THAT ALL THE FOREIGN TRAVEL DETAILS WERE DULY AUDITED BY THE INT ERNAL AUDIT OF THE ASSESSEE- COMPANY AND DEMONSTRATED BEFORE THE CIT (A) THAT TH E SAID FOREIGN TRAVELLING EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR T HE PURPOSE OF BUSINESS. PARA 3, 3.1 AND 3.2 OF THE CIT (A)S ORDER ARE RELEVANT IN THIS REGARD AND THE SAME READ AS UNDER: 3. GROUND NO.1 RELATES TO DISALLOWANCE OF FOREIGN TRAVEL EXPENSES OF RS. 22,49,000/- BEING 25% OF RS. 89,96,011/- BY TREATIN G THE SAME AS EXPENDITURE INCURRED FOR NON-BUSINESS PURPOSES. THE AO OBSERVE D THAT DETAILS FURNISHED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS HAD BEE N CAREFULLY PERUSED BY HIM. IN RESPECT OF DETAILS FILED FOR LOCAL TRAVEL THE AO HA S SATISFIED. HOWEVER, IN RESPECT OF FOREIGN TRAVEL, THE AO WAS NOT SATISFIED FOR THE RE ASON THAT THE APPELLANT HAD NOT MENTIONED ANY SPECIFIC REASON FOR EACH AND EVERY JO URNEY. IT IS ALSO OBSERVED THAT SOME PERSON MIGHT HAVE USED TOURIST VISA FOR FOREIG N TRIPS AND ALSO THEIR FAMILY MEMBERS OR RELATIVE MIGHT HAVE ACCOMPANIED WITH THE M. ON THIS GROUND, THE AO DISALLOWED ON ESTIMATE BASIS 25% OF TOTAL OVERSEAS TRAVEL EXPENSES AS HAVING INCURRED FOR NON-BUSINESS PURPOSES. 3.1. THE APPELLANT IN ITS SUBMISSION HAS SUBMITTED AS UNDER: 2.3. ..IT IS SUBMITTED THAT THE ABOVE CONTENTION OF THE AO IS NOT CORRECT SINCE THE APPELLANT HAVE ALREADY SUBMITTED ALL THE DETAILS AND ESPECIALLY OF THE FOREIGN TRAVEL AS APPROVED BY THE LINE MANAGERS / DEPARTMENT HEADS AS PER THE INTERNAL CONTROL POLICY. IT IS FURTHER SUB MITTED THAT ALL EMPLOYEES ALWAYS TRAVEL ON BUSINESS VISAS AND ARE NEVER ACCOM PANIED AT ANY TIME BY THEIR SPOUSES OR RELATIVES, A FACT WHICH IS ALREADY ON THE RECORDS. IN THE PAST, THE APPELLANT COMPANY HAS ALREADY SUBM ITTED THE TRAVELLING DETAILS IN THE SIMILAR MANNER AND NOTHING HAS BEEN DISALLOW ED IN THE PAST. 2.4. THE APPELLANT COMPANY SUBMITS HEREWITH DETAILS REGARDING FOREIGN TRAVELLING EXPENSES (PAGE NOS. 43 TO 51) MENTIONING REASONS FOR EACH AND EVERY JOURNEY. IT IS SUBMITTED THAT THE SAID EXPENSES WERE INCUR RED WHOLLY & EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND ALL SUC H FOREIGN TRAVELS / TOURS ARE APPROVED BY THE LINE MANAGER / DEPARTMENT HEADS AS PER T & E POLICY AND PROCESS MANUAL OF THE APPELLANT COMPANY (PAGE NOS. 2 5 TO 42). ALL THE OFFICIALS OF APPELLANT HAVE TRAVELLED ON BUSINESS V ISAS AND NONE OF THEM WERE ACCOMPANIED AT ANY TIME BY THEIR SPOUSE AND / OR RE LATIVE. 3.2. I HAVE CONSIDERED THE SUBMISSION OF THE AR AND PERUSED THE ASSESSMENT ORDER. THE AO HAS MADE DISALLOWANCE ON ESTIMATE BASIS WITH OUT GIVING ANY SPECIFIC DETAILS OF EXPENDITURE NOT BEING FOR BUSINESS PURPOSES. IT IS ALSO SEEN THAT IN THE PRECEDING ASSESSMENT YEARS IE AY 2006-2007 THE APPELLANT HAS CLAIMED TRAVELLING AND CONVEYANCE EXPENSES FOR RS. 1,86,68,000/- AND THE S AME WAS ALLOWED BY THE AO AS BUSINESS EXPENSES AS NON ADDITION HAS BEEN MADE IN THE BODY OF ASSESSMENT ORDER DT 28.10.2008 PASSED U/S 143(3) OF THE IT ACT BY THE D CIT, CIRCLE 3(1), MUMBAI. THUS, THE CLAIM OF THE APPELLANT HAS BEEN ACCEPTED IN THE EARLIER YEAR. IN VIEW OF THE ABOVE, THE ADDITION MADE BY THE AO IS DIRECTED TO BE DELET ED AND THIS GROUND OF APPEAL IS ALLOWED. 8. FROM THE ABOVE WRITTEN SUBMISSIONS OF THE ASSESS EE VIDE PARA 2.3 AND 2.4 IMPORTED BY THE CIT(A), IT IS THE CLAIM OF THE ASSE SSEE THAT THE ASSESSEE SPENT THE 4 IMPUGNED EXPENDITURE ON FOREIGN TRAVEL ONLY ON THE EMPLOYEES OF THE COMPANY AND ONLY FOR BUSINESS PURPOSES OF THE ASSESSEE AND CERT AINLY NOT ON THE THEIR SPOUSES. THERE IS NO PERSONAL EXPENDITURE INCURRED. EACH AN D EVERY TRAVEL IN QUESTION IS DULY APPROVED BY THE MANAGERS OF THE COMPANY AND THE BUS INESS PURPOSE OF THE SAME IS NEVER DISPUTED. ASSESSEE SUBMITTED RELEVANT INFORMA TION IN SUPPORT OF THE CLAIM OF THE ASSESSEE. ON THE CONTRARY, AO DOES NOT HAVE ANY ADVERSE EVIDENCE TO DEMONSTRATE THE PERSONAL / NON-BUSINESS NATURE OF A NY OF THE FOREIGN TRIPS. FURTHER, WE FIND THAT, IN SUBSTANCE, THE CLAIM OF THE ASSESS EE IS IDENTICAL TO THE ONE CLAIMED IN THE AY 2006-07 AND THE SAID CLAIM OF THE ASSESSE E WAS ACCEPTED WITHOUT ANY DISTURBANCE. THEREFORE, IN OUR CONSIDERED OPINION, THE ABOVE CONCLUSIONS OF THE CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. ACCORDI NGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED . 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . 2 .3 4$ , !24 , 4. 56 ORDER PRONOUNCED IN THE OPEN COURT ON 15.5.2013. . #1 , /0' ! 7#&3 15.5.2013 0 , 8 SD/- SD/- (H.L. KARWA) (D. KARUNAKARA RAO ) / PRESIDENT ! '#$ / ACCOUNTANT MEMBER MUMBAI; 7#& DATED 15/05/2013 . %& . ' ./ OKK , SR. PS #1 #1 #1 #1 , ,, , *%.9: *%.9: *%.9: *%.9: ;:'. ;:'. ;:'. ;:'. / COPY OF THE ORDER FORWARDED TO : 1. () / THE APPELLANT 2. *+() / THE RESPONDENT. 3. < ( ) / THE CIT(A)- 4. < / CIT 5. :=8 *%.%& , , / DR, ITAT, MUMBAI 6. 8 > / GUARD FILE. 5 '+:. *%. //TRUE COPY// #1& ' #1& ' #1& ' #1& ' / BY ORDER, ? ?? ? / '5 '5 '5 '5 4 4 4 4 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI