The ACIT, Circle-6,, Ahmedabad v. M/s. Budhalal & Co.,, Ahmedabad

ITA 2055/AHD/2008 | 2002-2003
Pronouncement Date: 07-01-2011 | Result: Dismissed

Appeal Details

RSA Number 205520514 RSA 2008
Assessee PAN AAAFB8263A
Bench Ahmedabad
Appeal Number ITA 2055/AHD/2008
Duration Of Justice 2 year(s) 7 month(s) 8 day(s)
Appellant The ACIT, Circle-6,, Ahmedabad
Respondent M/s. Budhalal & Co.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 07-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 07-01-2011
Date Of Final Hearing 28-12-2010
Next Hearing Date 28-12-2010
Assessment Year 2002-2003
Appeal Filed On 29-05-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' BEFORE SHRI T K SHARMA JM & SHRI A N PAHUJA AM ITA NOS.2055 & 2056/AHD/2008 (ASSESSMENT YEARS:-2002-03 & 2005-06) ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE-6 CU SHAH CHAMBERS ASHRAM ROAD AHMEDABAD V/S M/S BUDHALAL & CO. 408 BALAJI ESTATE ISANPUR AHMEDABAD PAN : AAAFB 8263 A [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI R K DHANESTA DR ASSESSEE BY:- SHRI MUKESH M PATEL AR O R D E R A N PAHUJA: THESE TWO APPEALS BY THE REVENUE AGAINST TWO SEPARATE ORDERS BOTH DATED 18-03-2008 OF THE LD. CI T(APPEALS)-XI AHMEDABAD RAISE THE FOLLOWING GROUNDS:- ITA NO.2055/AHD/2008: AY 2002-03: 1. THE LD COMMISSIONER OF INCOME TAX (A)-XI AHMEDABA D HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE O F RS.13 33 320/- ON ACCOUNT OF LOW G.P. 2. THE LD. COMMISSIONER OF INCOME TAX (A)-XI AHMED ABAD HAS ERRED IN LAW AND ON FACTS IN NOT JUSTIFYING THE INVOCATIO N OF THE PROVISIONS OF SECTION 145(3) OF THE IT. ACT 1961 AND THEREBY DELETING THE ADDITION MADE ON ACCOUNT OF LOW G.P. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. COMMISSIONER OF INCOME TAX (A)-XI AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 4. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A)-XI AHMEDABAD MAY BE SET ASIDE AND T HAT OF THE ASSESSING OFFICER BE RESTORED . ITA NO.2056/AHD/2008: AY 2005-06: 1. THE LD. COMMISSIONER OF INCOME TAX (A)-XI AHMEDABA D HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE O F RS.8 11 902/- ON ACCOUNT OF INTEREST PAID TO PARTNERS UNDER SECTION 40A(2)(B) OF THE INCOME TAX ACT 1961. ITA NOS.2055 & 2056/A/08 2 2. THE LD. COMMISSIONER OF INCOME TAX (A)-XI AHMED ABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE O F RS.73 844/- ON ACCOUNT OF INTEREST PAID TO DEPOSITORS. 3. THE LD. COMMISSIONER OF INCOME TAX (A)-XI AHMED ABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE O F RS.L 26 705/- ON ACCOUNT OF DISALLOWANCE OF FOREIGN TRAVEL EXPENSES. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. COMMISSIONER OF INCOME TAX (A)-XI AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 5. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A)-XI AHMEDABAD MAY BE SET ASIDE AND T HAT OF THE ASSESSING OFFICER BE RESTORED. ITA NO.2055/AHD/2008: AY 2002-03: 2 ADVERTING FIRST TO GROUND NOS.1 & 2 IN THIS APPEA L FOR AY 2002- 03 FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT THE RETURN DECLARING INCOME OF RS.2 45 00 280/- FILED ON 23-10-2002 BY THE ASSESSEE MANUFACTURING CHEWING TOBACCO UNDER THE BRAND NAME OF BUDHALAL NI TAMAKU AFTER BEING PROCESSED ON 28.2.2003 U/S 143(1)(A) OF THE INCOME-TAX ACT 1961 [HEREINAFTER REFERRED TO AS TH E ACT] WAS TAKEN UP FOR SCRUTINY. THE ASSESSMENT IN THIS CASE WAS COMPLETED ON THE RETURNED INCOME ON 16.2.2005. SUBSEQUENTLY O N EXAMINATION OF RECORDS THE LD. CIT-III AHMEDABAD FOUND THE A FORESAID ORDER DATED 16.2.2005 ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE AND ACCORDINGLY VIDE HIS ORDER DATED 09-01 -2007 U/S 263 OF THE ACT DIRECTED THE ASSESSING OFFICER (AO) TO EXAMINE THE ISSUE OF FALL IN GROSS PROFIT CLAIM OF SHORTAGE IN TOBAC CO AND PACKING MATERIAL AND GENUINENESS OF ADVANCES RECEIVED BY TH E ASSESSEE FROM CUSTOMERS AND THEREAFTER MAKE A FRESH ASSESSM ENT AFTER GIVING OPPORTUNITY TO THE ASSESSEE. IN PURSUANCE TO THESE DIRECTIONS OF THE LD. CIT THE AO ON ENQUIRIES NOTICED THAT GP RATE IN THE YEAR UNDER CONSIDERATION DECLINED TO 24.92% VIS--VIS 28.13% O F THE PRECEDING YEAR. TO A QUERY BY THE AO THE ASSESSEE EXPLAINED THAT : ITA NOS.2055 & 2056/A/08 3 (A) THE AVERAGE PURCHASE PRICE OF RAW TOBACCO INCR EASED DURING THE YEAR UNDER CONSIDERATION FROM RS.36.67 T O 37.48 PER KG AS COMPARED TO THE LAST YEAR. (B) THE COST OF PACKING MATERIAL ALSO INCREASED BY 19% DURING THE YEAR AS COMPARED TO THE LAST YEAR DUE TO USE OF HIGHER QUALITY OF PACKING MATERIAL RESULTING IN INCREASE IN COST FROM RS.1.35 TO RS.2.07 PER KG;AND (C) THE QUANTITY OF CONSUMPTION OF PACKING MATERIAL I.E. MILKY BAGS INCREASED DURING THE YEAR UNDER CONSIDERATION AS THE GAUGE OF THE MATERIAL INCREASED. HOWEVER THE AO DID NOT ACCEPT THE AFORESAID SUBMIS SIONS OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE PURCHASED RAW TOBACCO EXCLUSIVELY FROM ITS SISTER CONCERN M/S BAPU TOBACC O COMPANY AND ITS AVERAGE COST MARGINALLY INCREASED FROM RS.36.67 TO RS.37.4 8 PER KG. WHILE THE ASSESSEE SIMULTANEOUSLY INCREASED THE AVERAGE SALE PRICE DUR ING THE YEAR. ACCEPTING THE SUBMISSION OF THE ASSESSEE REGARDING INCREASE IN CO ST OF PACKING MATERIAL BY 2.16% THE AO CONCLUDED THAT FALL IN GP RATE WAS M UCH MORE THAN THE INCREASE IN COST OF RAW MATERIAL AND PACKING MATERIAL WHILE IT WAS DIFFICULT TO ASCERTAIN AS TO WHETHER THE PURCHASES WERE AT THE PREVAILING MARKET RATES. ACCORDINGLY THE AO ESTIMATED GP @ 26% AS AGAINST 28.13% DECLARED DURING THE IMMEDIAT ELY PRECEDING YEAR AND ADDED AN AMOUNT OF RS.13 33 320/ - (32088120 - 30754800) TO THE TOTAL INCOME . 3. ON APPEAL THE ASSESSEE CONTENDED THAT GP RAT E IN THE FY 2000- 01 WAS EXCEPTIONALLY HIGH AND THE RATE COMPARED FA VORABLY WITH THE GP OF FY 1998-99 AND FY 1999-00 AS DETAILED HEREUNDER: FY 1998-99 1999-2000 2000-01 2001-02 RATE OF GP 24.30% 25.51% 28.13% 24.92% WHILE REFERRING TO A DETAILED NOTE SUBMITTED VIDE LETTER DATED 24/02/2005 THE ASSESSEE SUBMITTED FOLLOWING WORKING OF INCREASE I N SALES PRICES VIS--VIS COST : PARTICULARS FY 00-01 FY 01-02 INCREASE IN % ---------------------- ----------- ----------- --- ------------- SALES PRICE 875.92 904.50 3.26 % TOBACCO COST 496.83 526.17 5.91 % ITA NOS.2055 & 2056/A/08 4 PACKING MATERIALS 127.87 169.33 32.42 % COST COST OF FINISHED 627.70 695.50 11.33 % GOODS THE ASSESSEE EXPLAINED THAT THEY COULD INCREASE THE SALE PRICE BY 3.26% ONLY AS AGAINST THE INCREASED COST OF 11.33% RESULTING IN REDUCTION IN GROSS PROFIT. RAW MATERIAL-TOBACCO COST INCREASED BY 5.91% WHILE PACK ING COST BY 32.42%. SINCE NO DEFECTS WERE POINTED OUT BY THE AO HE WAS NOT JUSTIFIED IN REJECTING THE BOOK RESULTS HAVING RECOURSE TO THE PROVISIONS OF SEC. 1 45(3) OF THE ACT AND ESTIMATING GP @26% THE ASSESSEE ARGUED. INTER ALIA THE ASSESSEE RELIED UPON DECISIONS IN NARENDRA MAFATALAL MEHTA VS. ITO 59 TT J 165 (MUM.) AND PUSHPANJALI DYES & PRINTING MILLS PVT. LTD. VS. JT. CIT 72 TTJ 86(AHD.). IN THE LIGHT OF THESE SUBMISSIONS THE LE ARNED CIT(A) DELETED THE ADDITION IN THE FOLLOWING TERMS:- 3.2.1. ON CAREFUL CONSIDERATION OF THE SUBMISSION S MADE BY THE AR OF THE APPELLANT I AM OF THE OPINION THAT THE ADDI TION MADE ON ACCOUNT OF SUPPRESSED GP IS NOT JUSTIFIED IN VIEW OF THE FACTS OF THE APPELLANT'S CASE AND MORE PARTICULARLY WHEN THE APPELLANT HAD LOGICA LLY EXPLAINED THE ELABORATE REASONS FOR THE FALL IN GP DURING THE YEA R UNDER CONSIDERATION. FURTHER I AM OF THE VIEW THAT THE APPELLANT'S CASE IS ALSO SQUARELY COVERED BY THE RATIO OF THE ABOVE ITAT DECISIONS (SUPRA) WH ICH ARE RELIED UPON BY THE AR OF THE APPELLANT. HAVING CONSIDERED THE FACT S AND CIRCUMSTANCES OF THE CASE I AM OF THE VIEW THAT WITHOUT POINTING OU T ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE TH E INVOCATION OF THE PROVISIONS OF SECTION 145(3) IS NOT JUSTIFIED. 3.2.2. THEREFORE HAVING CONSIDERED THE FACTS AND CI RCUMSTANCES OF THE CASE AND IN THE LIGHT OF THE ABOVE DISCUSSION AS W ELL AS THE RATIO LAID DOWN IN THE ABOVE REFERRED ITAT DECISIONS I AM OF THE O PINION THAT THE ACTION OF THE ASSESSING OFFICER IS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SEC. 145(3) AND THEREBY MAKING AN ADDITION OF RS.13 33 3 20/- ON ACCOUNT OF SUPPRESSED GP. THEREFORE THE AO IS DIRECTED TO DEL ETE THE ADDITION MADE BY HIM AT RS.13 33 320/-. THUS THIS GROUND OF APPE AL IS ALLOWED. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINS T THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LEARNED DR SUPPORTED THE ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE SUPP ORTED THE FINDINGS OF THE LD. CIT(A). ITA NOS.2055 & 2056/A/08 5 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY GP RATE IN THE YEAR UNDER CONS IDERATION DECLINED TO 24.92% VIS--VIS 28.13% OF THE PRECEDING YEAR WHILE THE LD. CIT(A) CONCLUDED THAT THE ASSESSEE HAD LOGICALLY EXPLAINED WITH ELABORATE REASONS THE FALL IN GP DURING THE YEAR UNDER CONSIDERATION AND THE AO DID NOT POINT OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS MAINTAINE D BY THE ASSESSEE. WE FIND FROM THE ASSESSMENT ORDER THAT THE AO DID NOT POI NT OUT ANY DEFECTS IN THE BOOKS OF ACCOUNT WHILE IGNORING THE BOOK RESULTS NO R BROUGHT ANY MATERIAL ON RECORD REGARDING THE GENUINENESS OF PURCHASES SALE S OR EXPENDITURE INCURRED BY THE ASSESSEE BEFORE DISCARDING THE BOOK RESULTS . HONBLE GAUHATI HIGH COURT IN ALUMINIUM INDUSTRIES (P) LTD. V. CIT (I.T.R. NO. 12 OF 1990) OBSERVED THAT A LOWER RATE OF GROSS PROFIT DECLARED BY THE ASSESSEE AS CO MPARED TO THE PREVIOUS YEAR WOULD NOT IN ITSELF BE SUFFICIENT TO JUSTIFY ANY AD DITION. THE MERE FACT THAT THE PERCENTAGE OF LOSS OR GROSS PROFIT IS HIGH OR LOW I N A PARTICULAR YEAR DOES NOT NECESSARILY LEAD TO INFERENCE THAT THERE HAS BEEN S UPPRESSION. LOW PROFIT IS NEITHER A CIRCUMSTANCE NOR MATERIAL TO JUSTIFY ADDI TION OF PROFITS. THE RATIO OF THE JUDGMENTS IN DHAKESWARI COTTON MILLS LTD. V. CIT [1 954] 26 ITR 775 (SC); RAGHUBIR MANDAL HARIHAR MANDAL V. STATE OF BIHAR [1 957] 8 STC 770 (SC); STATE OF KERALA V. C. VELUKUTTY [1966] 60 ITR 239 (SC); STATE OF ORISSA V. MAHARAJA SHRI B.P. SINGH DEO [1970] 76 ITR 690 (SC); BRIJ BHUSAN LAL PARDUMAN KUMAR V. CIT [1978] 115 ITR 524 (SC); CHOUTHMAL AGARWALLA V. CIT [1962] 46 ITR 262 (ASSAM); R.V.S. AND SONS DAIRY FARM V. CIT [2002] 257 ITR 764 (MAD); INTERNATIONAL FOREST CO. V. CIT [1975] 101 ITR 721 (J & K) ; M. DURAI RAJ V. CIT [1972] 83 ITR 484 (KER); RAMCHANDRA RAMNIVAS V. STATE OF ORISSA [197 0] 25 STC 501 (ORISSA); ACTION ELECTRICALS V. DEPUTY CIT [2002] 258 ITR 188 (DELHI) AND KAMAL KUMAR SAHARIA V. CIT [1995] 216 ITR 217 (GAUHATI) INDICATE THAT THE AO IS NOT FETTERED BY ANY TECHNICAL RULES OF EVIDEN CE AND PLEADINGS AND HE IS ENTITLED TO ACT ON MATERIAL WHICH ARE NOT ACCEPTABL E IN EVIDENCE IN A COURT OF LAW BUT WHILE MAKING THE ASSESSMENT UNDER THE PRINCIPLE S OF BEST JUDGMENT THE INCOME-TAX OFFICER IS NOT ENTITLED TO MAKE A PURE G UESS WITHOUT REFERENCE TO ANY EVIDENCE OR MATERIAL. THERE MUST BE SOMETHING MORE THAN A MERE SUSPICION TO SUPPORT THE ASSESSMENT. LOW PROFIT IN A PARTICULAR YEAR IN ITSELF CANNOT BE A GROUND FOR INVOKING THE POWERS OF BEST JUDGMENT ASS ESSMENT WITHOUT SUPPORT OF ITA NOS.2055 & 2056/A/08 6 ANY MATERIAL ON RECORD. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V S. AMITBHAI GUNWANTBHAI 129 ITR 573 HELD THAT IF THER E WAS NO CHALLENGE TO THE TRANSACTIONS REPRESENTED IN THE BOOKS THEN IT IS NO T OPEN TO REVENUE TO CONTEND THAT WHAT IS SHOWN BY THE ENTRIES IS NOT THE REAL S TATE OF AFFAIRS. SECONDLY EVEN IF FOR SOME REASON THE BOOKS ARE REJECTED IT IS NOT O PEN TO THE AO TO MAKE ANY ADDITION ON ESTIMATE BASIS OR ON PURE GUESS WORK. T HE AO WITHOUT RECORDING ANY FINDING THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE INCORRECT RENDERING IT IMPOSSIBLE TO DEDUCE THE PROFITS PROC EEDED TO REJECT THE BOOK RESULTS INVOKING THE PROVISIONS OF SEC. 145 OF THE ACT. NO SPECIFIC DISCREPANCIES OR DEFECTS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE HAV E BEEN POINTED OUT BEFORE US NOR WAS ANY MATERIAL BROUGHT TO OUR NOTICE TO ESTA BLISH THAT PURCHASES WERE INFLATED OR RECEIPTS SUPPRESSED. IN THESE CIRCUMSTA NCES THERE WAS NO JUSTIFICATION IN INVOKING THE PROVISIONS OF SECTION 145 OF THE ACT [ VIKRAM PLASTICS 239 ITR 161(GUJ). SINCE THE AO HAD NOT RECORDED ANY FINDINGS FOR REJECTING THE BOOK RESULTS AND APPLYING THE GROSS P ROFIT RATE OF 26% IN THE YEAR UNDER CONSIDERATION WE ARE OF THE OPINION THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. EVEN THE REVENUE HAVE NOT PL ACED BEFORE US ANY MATERIAL CONTROVERTING THE AFORESAID FINDINGS OF FACTS RECOR DED BY THE LD. CIT(A). IF THERE WAS NO CHALLENGE TO THE TRANSACTIONS REPRESENTED IN THE BOOKS THEN IT IS NOT OPEN TO REVENUE TO CONTEND THAT WHAT IS SHOWN BY THE ENT RIES IS NOT THE REAL STATE OF AFFAIRS. IN THE LIGHT OF THESE OBSERVATIONS OF THE HONBLE JURISDICTIONAL HIGH COURT WE UPHOLD THE FINDINGS OF THE LD. CIT(A). CONSEQUE NTLY GROUND NOS.1 & 2 ARE DISMISSED. ITA NO.2056/AHD/2008: AY 2005-06: 6. COMING NOW TO GROUND NOS.1 & 2 IN THE APPEAL OF THE REVENUE FOR THE AY 2005-06 FACTS IN BRIEF AS PER RELEV ANT ORDERS ARE THAT THE RETURN DECLARING INCOME OF RS.3 20 33 280/- F ILED ON 27-10-2005 BY THE ASSESSEE AFTER BEING PROCESSED ON 3.1.2006 U/S 143(1)(A) OF THE ACT WAS TAKEN UP FOR SCRUTINY WITH THE ISSUE O F A NOTICE U/S 143(2) OF THE ACT ON 17.1.2007. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE RECE IVED LOANS AND DEPOSITS FROM SHRI RAMESHCHANDRA B PATEL (HUF) AN ENTITY COVERED ITA NOS.2055 & 2056/A/08 7 U/S 40A(2)(B) TO THE EXTENT OF RS.22 15 136/- AND P AID INTEREST OF RS.2 95 326/- THEREON @ 12%. SIMILARLY THE ASSES SEE ALSO PAID INTEREST OF RS.19 48 565/- @ 12% ON THE CREDIT BALA NCE OF THE PARTNERS CAPITAL ACCOUNT AND @ 7% ON TRADE DEPOSIT S FROM ITS STOCKISTS. BESIDES THE ASSESSEE ALSO ADVANCED LO ANS OF RS.46.48 LAKHS TO ONE M/S WESTERN INDIA SEA BRINS LTD. @ 9% ONLY. ACCORDINGLY THE AO OBSERVED THAT THE ASSESSEE PAI D HIGHER RATE OF INTEREST @ 12%PA TO THE DEPOSITORS AND TO THE PART NERS COVERED U/S 40A(2)(B) OF THE ACT. TO A QUERY BY THE AO THE ASSESSEE EXPLAINED VIDE LETTER DATED 24-11-2007 THAT INTER EST WAS PAID @ 7% ON TRADE DEPOSITS WHICH WERE OF THE NATURE OF SECURI TY DEPOSITS OBTAINED FROM THEIR DEALERS AND THEREFORE COULD NOT BE CONSIDERED AT PAR WITH THE NORMAL LOANS AND ADVANCES RECEIVED BY THEM FROM THE PERSONS COVERED U/S 40A(2)(B) OF THE ACT. IT WAS ALSO CONTENDED THAT IN SEVERAL BUSINESS CIRCLE S EVEN NO INTEREST WAS PAID ON SUCH TRADE DEPOSITS AND WHENEVER INTEREST WAS RE QUIRED TO BE PAID IT WAS PAID AT NOMINAL RATES. AS REGARDS HIGHER RATE OF INTERES T PAID TO THE PARTNERS IT WAS SUBMITTED THAT THIS WAS PAID IN ACCORDANCE WITH TH E TERMS AND CONDITIONS OF THE PARTNERSHIP DEED AND WAS WELL WITHIN THE LIMITS PRE SCRIBED U/S 40(B) OF THE ACT. THEREFORE IT COULD NOT BE CONSIDERED AS VIOLATION OF SECTION 40A(2)(B) OF THE ACT. FOR THE INTEREST PAID TO THE HUF OF ONE OF THE PAR TNER @ 12% IT WAS POINTED OUT THAT THIS HAD BEEN PAID ON THE BASIS OF PAST PRACTI CE OF THE ASSESSEE'S FIRM. ACCORDINGLY IT WAS ARGUED THAT INTEREST PAID TO TH E PARTNERS AND THE OTHER PERSON COVERED U/S 40A(2)(B) OF THE ACT WAS NOT EXCESSIVE OR UNREASONABLE & THEREFORE NO DISALLOWANCE WAS CALLED FOR. AFTER CONSIDERING T HESE SUBMISSIONS THE AO CONCLUDED THAT IF THE ASSESSEE WAS FOLLOWING A POLICY OF PROVIDING A LOWER RATE OF INTEREST ON TRADE DEPOSITS THE SAME POLI CY SHOULD ALSO HAVE BEEN APPLIED ON THE RATE OF INTEREST PAID ON CAPITAL CON TRIBUTION OF THE PARTNER WHICH WERE MORE OR LESS AKIN TO NATURE OF THE TRADE DEPOS ITS RESULTING IN VIOLATION OF PROVISIONS OF SECTION 40 A(2)(B) OF THE ACT. ACCORD INGLY WHILE RELYING ON THE DECISION IN THE CASE OF ANANDJI SHAH VS. CIT 181 I TR 171(KERALA) THE AO CONSIDERED THE INTEREST @7% ON THE CAPITAL CONTRI BUTION OF THE PARTNERS AS FAIR AND REASONABLE AND DISALLOWED THE BALANCE INTEREST @ 5% (12- 7) AS EXCESSIVE ITA NOS.2055 & 2056/A/08 8 AND UNREASONABLE U/S 40A(2)(B) OF THE ACT RESULTIN G IN DISALLOWANCE OF RS. 8 11 902/- 6.1 APART FROM ABOVE SINCE THE ASSESSEE PAID IN TEREST @ 12% PA ON THE LOAN RECEIVED FROM SHRI RAMESHCHANDRA B P ATEL (HUF) AN ENTITY COVERED U/S 40A(2)(B) OF THE ACT WHILE INTER EST WAS CHARGED @ 9% PA ON THE LOANS AND ADVANCES TO M/S WESTERN INDI A SEA BRINS LTD. AN OUTSIDER PARTY THE AO RELYING ON THE DECI SION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SHATRUJA D IAMONDS (2003) 261 ITR 258 DISALLOWED AN AMOUNT OF RS.73 844/- ON THE GROUND THAT THE JUSTIFICATION GIVEN BY THE ASSESSEE ON T HE BASIS OF THEIR PAST PRACTICE WAS GENERAL VAGUE AND WITHOUT ANY SU BSTANCE. 7. ON APPEAL THE LD. CIT(A) DELETED THE DISALL OWANCE IN THE FOLLOWING TERMS: 3.2.1. HAVING CONSIDERED THE FACTS AND CIRCUMSTANC ES OF THE CASE I AM OF THE VIEW THAT THE REASONING GIVEN BY THE A.O. FOR I NVOKING THE PROVISIONS OF SEC. 40A(2)(B) ON THE FACTS OF THE CASE APPEARS TO BE NOT JUSTIFIED. THE APPELLANT IS RIGHT IN CONTENDING THAT THE COMPARISO N OF SECURITY DEPOSITS WITH PARTNERS' CAPITAL FOR DETERMINING THE REASONAB LENESS OF INTEREST PAID IN THE CONTEXT OF THE PROVISIONS OF SEC. 40A(2)(B) IS CLEARLY NOT JUSTIFIED. IN FACT THE A.O. OUGHT TO HAVE APPRECIATED THAT THE I NTEREST RATE OF 12% PER ANNUM PRESCRIBED U/S. 40(B) FOR PAYMENT OF INTEREST ON PARTNERS' CAPITA! CANNOT BE CONSIDERED AS EXCESSIVE OR UNREASONABLE. EVEN IN RESPECT OF THE INTEREST PAID ON DEPOSIT IN THE NAME OF THE HUF OF THE PARTNER THERE IS NO CONVINCING GROUND FOR INVOKING THE PROVISIONS OF SEC. 40A(2)(B) IN VIEW OF THE EXPLANATION OF THE APPELLANT JUSTIFYING AS T O WHY IT HAS CHARGED INTEREST AT 9% PER ANNUM ON THE LOAN ADVANCED TO TH E OUTSIDE PARTY M/S. WESTERN INDIA SEAS BRINE LTD.. 3.2.2. THEREFORE CONSIDERING THE FACTS AND CIRCUMS TANCES OF THE CASE AS DISCUSSED ABOVE AND ALSO RELYING UPON THE DECISIONS OF THE HON'BLE IT.AT IN CASE OF RANJIT SOAP AND THE DECISION OF HON'BLE MADRAS ITAT IN THE CASE OF DCIT VS. INDIA CINE AGENCIES - IT APPEALS N O. 499 & 500 (MAD) OF 1991 DATED FEBRUARY 10 1995 I AM INCLINED TO ACCE PT THE ARGUMENTS ADVANCED BY THE AUTHORIZED REPRESENTATIVE. HENCE T HE A. 0. IS DIRECTED TO DELETE THE ADDITION MADE BY HIM AT RS.8 11 902/-. S IMILARLY THE ADDITION MADE BY THE A. 0. AT RS.73 844/- IS ALSO DELETED. 8. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED DR SUPPORTE D THE ORDER OF THE ITA NOS.2055 & 2056/A/08 9 AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE SUPPO RTED THE FINDINGS OF THE LD. CIT(A). 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. THE ISSUE IN THE FIRST GROUND RAISED BY THE REVENUE IS AS TO WHETHER OR NOT THE QUESTION OF ALLOWING OR DISALLOWING INTEREST OR PAR T THEREOF TO A PARTNER IS COVERED BY THE PROVISIONS OF SECTION 40A(2)(A) OF THE ACT? FOR THIS MATTER WE MAY REFER TO THE PROVISIONS OF SECTION 40A(2) (A) OF THE ACT T HE RELEVANT PORTION OF WHICH READS AS FOLLOWS '40A(2)(A). WHERE THE ASSESSEE INCURS ANY EXPENDITU RE IN RESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON REF ERRED TO IN CLAUSE (B) OF THIS SUB-SECTION AND THEASSESSING OFFICER IS OF THE OPI NION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MAD E OR THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF THE ASSESSEE OR THE BENEF IT DERIVED BY OR ACCRUING TO HIM THEREFROM SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED AS A DEDUCTION.' A MERE GLANCE AT THE AFORESAID PROVISION REVEALS T HAT THE EXPENDITURE MENTIONED THEREIN IS IN RELATION TO ANY PERSON REFERRED TO IN CLAUSE (B) OF THE SUB-SECTION AND THE EXPENDITURE HAS TO BE CONSIDERED IN RELATION TO THE FAIR MARKET VALUE OF THE GOODS SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF THE ASSESSEE OR THE BENEFIT DERIVED BY OR ACCRUING TO THE ASSESSEE THEREFROM. HONBLE JURISDI CTIONAL HIGH COURT RECENTLY OBSERVED IN CORONATION FLOUR MILLS VS. ACIT 188 TAX MAN 257 THAT IN RELATION TO THE DISALLOWANCE UNDER THE PROVISIONS OF SECTION 40 A(2) OF THE ACT A PLAIN READING OF THE PROVISION REVEALS THAT WHERE AN ASSE SSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT IS REQUIRED TO BE MADE OR HAS BEEN MADE TO ANY PERSON REFERRED TO IN CLAUSE ( B ) OF SECTION 40A(2) OF THE ACT AND THE ASSESSING OFFICER IS OF THE OPINION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO ( A ) FAIR MARKET VALUE OF THE GOODS SERVICES OR FACIL ITIES FOR WHICH THE PAYMENT IS MADE; OR ( B ) THE LEGITIMATE NEEDS OF THE BUSINESS OF THE ASSES SEE; OR ( C ) THE BENEFITS DERIVED BY OR ACCRUING TO THE ASSESS EE ON RECEIPT OF SUCH GOODS SERVICES OR FACILITIES THEN THE ASSESSING O FFICER SHALL NOT ALLOW AS A DEDUCTION SO MUCH OF THE EXPENDITURE AS IS SO CONSI DERED BY THE ASSESSING ITA NOS.2055 & 2056/A/08 10 OFFICER TO BE EXCESSIVE OR UNREASONABLE. THEREFORE IT BECOMES APPARENT THAT THE ASSESSING OFFICER IS REQUIRED TO RECORD A FINDING A S TO WHETHER THE EXPENDITURE IS EXCESSIVE OR UNREASONABLE IN RELATION TO ANY ONE OF THE THREE REQUIREMENTS PRESCRIBED WHICH ARE INDEPENDENT AND ALTERNATIVE T O EACH OTHER. ALL THE THREE REQUIREMENTS NEED NOT EXIST SIMULTANEOUSLY. IN A GI VEN CASE IF ANY ONE CONDITION IS SHOWN TO BE SATISFIED THE PROVISION CAN BE INVOK ED AND APPLIED IF THE FACTS SO WARRANT. THUS ONLY SO MUCH OF THE EXPENSES IF PAID TO A PERSON REFERRED TO IN CLAUSE (B) ARE ALLOWABLE WHICH ARE FOUND TO BE NOT EXCESSIVE AND UNREASONABLE AND THE EXCESSIVE OR UNREASONABLE PORTION HAS TO BE DISALLOWED. IT IS WELL SETTLED THAT THE PROVISIONS OF SECTION. 40A(2)(A) OF TH E ACT CANNOT HAVE ANY APPLICATION UNLESS IT IS FIRST CONCLUDED THAT THE EXPENDITURE W AS EXCESSIVE OR UNREASONABLE AS HELD IN THE CASE OF UPPER INDIA STEEL MANUFACTUR ING AND ENGINEERING CO. PRIVATE LIMITED 117 ITR 569(SC). THE PROVISIONS OF SECTION 40A(2)(A) CAME UP FOR CONSIDERATION BEFORE THE HONBLE KARNATAKA HIGH COURT IN T. T. PVT. LTD. V. ITO [1980] 121 ITR 551 AND VENKATARAMAIAH J. AT PAGES 567 TO 570 OF THE REPORTED JUDGMENT CONSIDERED THE SCOPE OF THE AFORESAID PRO VISION IN THE LIGHT OF THE EXTANT PROVISIONS OF SECTION 40 AND OBSERVED THAT THE GOODS SERVICES AND FACILITIES REFERRED TO IN SECTION 40A(2) (A) ARE TH OSE WHICH HAVE A MARKET VALUE AND WHICH ARE COMMERCIAL IN CHARACTER. IN THE CASE OF CHHAJED STEEL CORPORATION VS. ASSTT. CIT (2000) 69 TTJ (AHD) 232 : (2001) 77 ITD 419 (AHD) IT WAS HELD THAT THE PROVISIONS OF SS. 40(B) AND 40A(2) OPERATE IN D IFFERENT FIELDS AND THE PROVISIONS OF S. 40A HAVE NO APPLICATION IN THE CAS ES WHERE S. 40(B) HAS BEEN APPLIED. LIKEWISE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF N.M. ANNIAH & CO. VS. CIT 1975 CTR (KAR) 78 : (1975) 101 ITR 348 (KAR) HELD THAT S. 40A HAS NO APPLICATION TO THE MATTERS CONTAINED IN S. 40(B) AND THE OVERRIDING EFFECT GIVEN TO S. 40A IS ONLY IN RESPECT OF MATTERS NOT COVERED BY S. 40(B). IN THE INSTANT CASE THE AO CONCLUDED THAT INTEREST PAID TO PARTNERS IS EXCESSIVE OR UNREASONABLE VIS--VIS INTEREST PAID ON TRADE DEPOSITS . LIKEWI SE INTEREST PAID TO HUF OF ONE OF THE PARTNERS HAS BEEN FOUND TO BE EXCESSIVE VIS A -VIS INTEREST CHARGED ON LOANS AND ADVANCES TO WESTERN INDIA SEAS BRINS LTD.. BUT THERE IS NOTHING TO SUGGEST THAT THE AO FOUND THE PAYMENT OF SUCH INTEREST E XCESSIVE HAVING REGARD TO EITHER ( A ) FAIR MARKET VALUE OF THE SERVICES OR FACILITIES; OR ( B ) THE LEGITIMATE NEEDS OF THE BUSINESS OF THE ASSESSEE; OR ( C ) THE BENEFITS DERIVED BY OR ACCRUING TO THE ITA NOS.2055 & 2056/A/08 11 ASSESSEE ON RECEIPT OF SUCH SERVICES OR FACILITIES. NOT A WHISPER HAS BEEN MADE BY THE AO IN RESPECT OF ANY OF THESE THREE INGREDI ENTS IN HIS ASSESSMENT ORDER. THERE IS NOTHING TO SUGGEST THAT THE AO EVER BROUGH T ANY MATERIAL ON RECORD ON THIS ASPECT IN RESPECT OF THE FAIR MARKET VALUE OF THE FACILITIES FOR WHICH THE PAYMENT HAD BEEN MADE BEFORE CONCLUDING THAT EXPE NDITURE WAS EXCESSIVE OR UNREASONABLE. WE ARE OF THE OPINION THAT DISALLOWAN CE UNDER S. 40A(2) IS TO BE CONSIDERED VIS-A-VIS THE MARKET VALUE OF THE SERVIC ES OR FACILITIES OR ON FULFILLMENT OF ANY OF THE OTHER INGREDIENTS MENTIONED HEREINB EFORE AND NOT THE INDIVIDUAL ACTION OF THE ASSESSEE IN CHARGING OR PAYING INTERE ST. IN VIEW THEREOF WE ARE NOT INCLINED TO INTERFERE WITH THE CONCLUSION DRAWN BY THE LD. CIT(A). THEREFORE GROUND NOS. 1 & 2 IN THIS APPEAL ARE DISMISSED. 10. GROUND NO.3 IN THIS APPEAL RELATES TO DELETION OF DISALLOWANCE OF RS.1 26 705/- ON ACCOUNT OF FOREIGN TRAVEL EXPE NDITURE OF SHRI PRANAV R PATEL PARTNER OF THE FIRM. THE AO FOUND T HAT THE ASSESSEE INCURRED EXPENDITURE OF RS.1 26 705/- ON FOREIGN TR AVEL SHRI PRANAV R PATEL PARTNER OF THE FIRM AND CLAIMED THE SAME A S BUSINESS EXPENSES. TO A QUERY BY THE AO THE ASSESSEE INFORM ED THAT THE PARTNER ATTENDED AN INTERNATIONAL TRADE FAIR I.E. D RUPA 2004 IN GERMANY AND THE EXPENSES PERTAINED TO THE SAME ONLY . THE ASSESSEE SUBMITTED CERTAIN BROCHURES AND OTHER DETA ILS ABOUT THE EXHIBITION IN ITS SUPPORT. ON PERUSAL OF THE SAME THE AO OBSERVED THAT THE SAID TRADE EXHIBITION RELATED TO PRINTI NG INDUSTRIES AND DID NOT RELATE TO THE BUSINESS OF THE ASSESSEE. BUT TH E ASSESSEE EXPLAINED THAT THE EXHIBITION DRUPA 2004 WAS NOT A SEMINAR FOR PRINTING INDUSTRY ONLY AND IT WAS ONE OF THE LARGES T INTERNATIONAL TRADE FAIR FOR PRINTING AND PACKING INDUSTRY. IT WAS ARGUED THAT SUCH FOREIGN TRAVEL EXPENDITURE WAS INCURRED IN CON NECTION WITH ITS BUSINESS ACTIVITY ONLY AND CORRECTLY CLAIMED AS AL LOWABLE EXPENSES. HOWEVER THE AO WHILE RELYING ON DECISIONS IN COOP ER ENGINEERING LTD. VS. CIT 135 ITR 597 (MUMBAI) SARABHAI TECHNOLO GICAL DEVELOPMENT SYNDICATE PVT. LTD. VS. CIT 254 ITR 84 (GUJ) AMBICA MILLS LTD. VS. CIT 54 ITR 167(GUJ) GUJRAT MC-GAW RA VINDRAKUMAR ITA NOS.2055 & 2056/A/08 12 LABORATORIES VS. CIT 207 ITR 239(GUJ) AND SARASWATI INDUSTRIAL SYNDICATE LTD. VS. CIT(A) 84 ITR 544(P&H) CONCLUDED THAT THE FOREIGN TRAVEL EXPENSES OF RS.1 26 705/- INCURRED FOR THE P ARTNER TRAVEL TOWARDS DRUPA 2004 EXHIBITION WAS IN NO WAY RELATED TO THE ASSESS EE'S OWN BUSINESS ESPECIALLY WHEN THE PARTNER ALSO VISITED OTHER TOURIST PLACES LIKE ZURICH SWITZERLAND GENEVA UK & PARIS ETC. AND THE REAL PURPOSE OF SUCH TRAVEL WAS PERSONAL. ACCORDINGLY THE FOREIGN TRAVEL OF RS . 1 26 705/- WAS HELD AS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 11. ON APPEAL THE LEARNED CIT(A) DELETED THE DISAL LOWANCE IN THE FOLLOWING TERMS: 4.2.1. HAVING CONSIDERED THE FACTS AND CIRCUMSTANC E OF THE CASE I AM OF THE OPINION THAT THE A.O.'S VIEW IN DISALLOWING THE AFORESAID EXPENDITURE ON THE GROUND THAT THE SAME WAS NOT INCURRED FOR PURPO SES OF THE APPELLANT'S BUSINESS DOES NOT SEEM TO BE JUSTIFIED. THE APPELLA NT HAS QUITE LOGICALLY EXPLAINED THAT PRINTING AND PACKING WAS AN INTEGRAL PART OF ITS BUSINESS ACTIVITY AND THAT THE VISIT TO THE DRUPA TRADE FAIR BY ITS PARTNER WAS CERTAINLY OF AN ADVANTAGE TO THE BUSINESS OF THE FI RM MOREOVER AS POINTED OUT BY THE APPELLANT THAT THE EXPENDITURE INCURRED IN CONNECTION WITH THE VISIT TO U.K. WHICH DID NOT RELATE TO THE APPELLAN T'S BUSINESS WAS ALREADY DEBITED TO THE PARTNER'S CAPITAL ACCOUNT AS PERSONA L EXPENDITURE. HOWEVER WHILE MAKING THE ABOVE ADDITION THE ASSESSING OFFI CER HAS NOT BROUGHT ON RECORD ANY MATERIAL EVIDENCE TO SHOW THAT THE SAID EXPENDITURE HAVE BEEN INCURRED FOR PERSONAL TRIP OF THE PARTNER. THEREFOR E HAVING CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE I AM OF THE VI EW THAT THERE IS NO JUSTIFICATION FOR MAKING THE DISALLOWANCE ON ACCOUN T OF FOREIGN TRAVEL EXPENSES. THE A.O. IS THEREFORE DIRECTED TO ALLOW THE FOREIGN TRAVEL EXPENDITURE OF RS.1 26 705 AS BUSINESS REVENUE EXPE NDITURE. THIS GROUND IS THEREFORE ALLOWED. 12. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED DR WHILE I NVITING OUR ATTENTION TO THE FINDINGS OF THE AO POINTED OUT TH AT THE PARTNER OF THE ASSESSEE FIRM VISITED NOT ONLY GERMANY BUT EVEN Z URICH GENEVA PARIS AND UK ETC. SINCE THE PURPOSE OF VISIT TO TH ESE PLACES AND COMPLETE DETAILS OF EXPENDITURE INCURRED BY THE AS SESSEE AT EACH OF THESE PLACES IS NOT EVIDENT FROM THE IMPUGNED ORDER NOR THE LD. CIT(A) RECORDED ANY FINDINGS ON VISIT TO THESE PLAC ES THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ENTIRE DISALLOWA NCE. ON THE OTHER ITA NOS.2055 & 2056/A/08 13 HAND THE LD. AR ON BEHALF OF THE ASSESSEE CONTENDE D THAT EXPENDITURE ON VISIT TO UK WAS SEPARATELY DEBITED T O THE CAPITAL ACCOUNT OF THE PARTNER AND THEREFORE EXPENDITURE ON VISIT TO DRUPA FAIR WAS ALLOWABLE. 13. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS. AS IS APPARENT FROM THE FACTS OF THE CASE THE AO DISALL OWED THE CLAIM FOR EXPENDITURE INCURRED ON FOREIGN VISIT OF THE PARTN ER OF THE FIRM ON THE GROUND THAT EXPENSES OF RS.1 26 705/- INCURRED BY THE PARTNER TOWARDS DRUPA 2004 FAIR FOR PRINTING AND PACKING INDUSTRY IN G ERMANY WAS IN NO WAY RELATED TO THE ASSESSEE'S OWN BUSINESS WHILE THE PARTNER AL SO VISITED OTHER TOURIST PLACES LIKE ZURICH SWITZERLAND GENEVA UK & PARIS ETC.. O N APPEAL THE LD. CIT(A) DELETED THE DISALLOWANCE ON THE GROUND THAT PRI NTING AND PACKING WAS AN INTEGRAL PART OF BUSINESS ACTIVITY OF THE ASSESSEE AND THAT THE VISIT TO THE DRUPA TRADE FAIR BY ITS PARTNER WAS CERTAINLY OF AN ADVAN TAGE TO THE BUSINESS OF THE FIRM. THE LD. CIT(A) ALSO FOUND THAT THE EXPENDITU RE INCURRED IN CONNECTION WITH THE VISIT TO U.K. WAS SEPARATELY DEBITED TO THE PA RTNER'S CAPITAL ACCOUNT AS PERSONAL EXPENDITURE. THE LEARNED DR DID NOT PLACE ANY MATERIAL BEFORE US CONTROVERTING THESE FINDINGS OF THE LD. C IT(A) EXCEPT POINTING OUT THAT THE PARTNER VISITED MANY OTHER PL ACES LIKE ZURICH GENEVA AND PARIS ETC. AND THERE IS NOTHING TO SUGG EST THAT EXPENDITURE ON VISIT TO THESE PLACES WAS IN ANY WA Y CONNECTED WITH THE BUSINESS OF THE ASSESSEE. SINCE THE PURPOSE OF VISIT TO THESE PLACES APART FROM GERMANY IS NOT EVIDENT FROM THE IMPUGNED ORDERS NOR COMPLETE DETAILS OF EXPENDITURE INCURRED BY TH E ASSESSEE AT EACH OF THESE PLACES IS AVAILABLE BEFORE US AND NOR EVEN THE LD. CIT(A) RECORDED ANY FINDINGS IN RESPECT OF EXPENDIT URE ON VISIT TO THESE PLACES WE ARE OF THE OPINION THAT THE LD. CI T(A) WAS NOT JUSTIFIED IN DELETING THE ENTIRE DISALLOWANCE. THE EXPENDITURE ON VISIT TO TRADE FAIR IN GERMANY HAVING BEEN INCURRED FOR THE BUSINESS ACTIVITIES OF THE ASSESSEE IS ALLOWABLE THERE BEING NO MATERIAL BE FORE US TO TAKE A DIFFERENT VIEW IN THE MATTER. SINCE COMPLETE DETAILS OF EXPENSE S INCURRED BY THE PARTNER ON VISIT TO THE PLACES LIKE ZURICH GENEVA AND PARIS E TC. ARE NOT AVAILABLE BEFORE US ITA NOS.2055 & 2056/A/08 14 WE RESTORE THE MATTER TO THIS EXTENT TO THE FILE O F THE AO WITH THE DIRECTIONS TO EXAMINE THE DETAILED BREAK UP OF EXPENSES INCURRED BY THE PARTNER AT EACH OF THE PLACES AND ALLOW ONLY EXPENSES WHICH RELATE T O VISIT OF THE PARTNER TO TRADE FAIR IN GERMANY AFTER ALLOWING SUFFICIENT OPPORTUN ITY TO THE ASSESSEE. THE EXPENSES INCURRED BY THE PARTNER AT OTHER PLACES ME NTIONED ABOVE ARE NOT ALLOWABLE THERE BEING NO EVIDENCE THAT EXPENDITUR E INCURRED AT SUCH PLACES HAS ANY CONNECTION WITH THE BUSINESS OF THE ASSESSEE. T O THAT EXTENT ORDER OF THE LD. CIT(A) IS MODIFIED .WITH THESE OBSERVATIONS GROUND NO. 3 IN THE APPEAL OF THE REVENUE IS DISPOSED OF.. 14. GROUND NOS. 3 & 4 IN THE APPEAL FOR THE AY 2 002-03 & GROUND NO. 4 & 5 IN THE APPEAL FOR THE AY 2005-06 BEING ME RE PRAYER DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND ARE THEREFOR E DISMISSED 15. IN THE RESULT APPEAL FOR THE AY 2002-03 IS DISMISSED WHILE THAT FOR THE AY 2005-06 IS PARTLY ALLOWED FOR STATISTICA L PURPOSES AS INDICATED ABOVE. ORDER PRONOUNCED IN THE COURT TODAY ON 7-1-2011 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 7-1-2011 COPY OF THE ORDER FORWARDED TO: 1. M/S BUDHALAL & CO. 408 BALAJI ESTATE ISANPUR AHMEDABAD 2. ASSISTANT COMMISSIONER OF INCOME-TAX CIRCL-6 AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-XI AHMEDABAD 5. DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD