ACIT, New Delhi v. M/s. Siddhomal Air products Ltd., New Delhi

ITA 2432/DEL/2010 | 2006-2007
Pronouncement Date: 29-07-2011 | Result: Dismissed

Appeal Details

RSA Number 243220114 RSA 2010
Assessee PAN AAACS2915F
Bench Delhi
Appeal Number ITA 2432/DEL/2010
Duration Of Justice 1 year(s) 2 month(s) 8 day(s)
Appellant ACIT, New Delhi
Respondent M/s. Siddhomal Air products Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 29-07-2011
Date Of Final Hearing 21-07-2011
Next Hearing Date 21-07-2011
Assessment Year 2006-2007
Appeal Filed On 21-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA HONBLE VICE PRESI DENT & SHRI I.P. BANSAL JUDICIAL MEMBER ITA NO. 2432/DEL/2010 ASSESSMENT YEARS: 2006-07 ACIT VS. SIDDHOMAL AIR PRODUCTS LTD. CIRCLE 8(1) ROOM NO. 163 40 SIDDHOMAL BUILDING C.R. BUILDING NEW DELHI. GALI RAJA KIDARNATH AAACS2915F (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. SURJANI MOHANTY SR. DR RESPONDENT BY : SH. SANJEEV JA IN CA ORDER PER I.P. BANSAL J.M. THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DI RECTED AGAINST THE ORDER PASSED BY LD. CIT(A) DATED 22.2.2010 FOR A.Y. 2006-07. GROUNDS OF APPEAL READ AS UNDER: - 1. LD. CIT(APPEALS) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN RESTRICTING THE DISALLOWANCE OF RS. 13 53 654/- MADE BY THE AO ON ACCOUNT OF FOREIGN TRAVEL EXPENSES. 2. LD. CIT(APPEALS) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE DISALLOW ANCE OF RS. 19 76 681/- MADE BY THE AO ON ACCOUNT OF LEG AL & PROFESSIONAL EXPENSES. 3. THE APPELLANT CRAVES TO AMEND MODIFY ALTER AD D OR FOREGO ANY GROUND OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. ITA NO. 2432/D/2010 2 2. APROPOS GROUND NO. 1 THE AO HAS FOUND THAT THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS. 13 93 567/- ON ACCOUNT O F TRAVELING EXPENSES WHICH INCLUDED FOREIGN TRAVEL EXPENSES OF RS. 13 53 654/- ON THE VISITS UNDERTAKEN BY SHRI S.K. JAIN DIRECTOR OF THE ASSES SEE COMPANY AND SHRI SATISH AJMERA TO VISIT THE COUNTRIES OF UK & U SA. THE AO OBSERVED THAT ASSESSEE COMPANY IS ENGAGED IN THE PURCHASE AN D SALE OF SHARES AND MUTUAL FUNDS. THOUGH THE ASSESSEE HAS FURNISHE D MONTH WISE DETAILS OF TRAVELING EXPENDITURE BUT BUSINESS CONNE CTION OF THE FOREIGN VISIT REMAINED UNPROVED. HE DISBELIEVE TO THE SUBM ISSION OF THE ASSESSEE THAT DIRECTORS HAVE VISITED FOREIGN COUNTR Y TO CARRY ON THE BUSINESS OF SALE AND PURCHASE OF SHARES AND MUTUAL FUNDS OF THE INDIAN COMPANIES. THEREFORE AO DISALLOWED A SUM OF RS. 1 3 53 654/-. 3. APROPOS GROUND NO. 2 THE ASSESSEE HAD CLAIMED A SUM OF RS. 19 76 681/- ON ACCOUNT OF LEGAL AND PROFESSIONAL CH ARGES. THE ASSESSEE WAS REQUIRED TO FILE COPIES OF BILLS RAISED FOR PRO FESSIONAL CHARGES AND HE FOUND THAT THESE PAYMENTS WERE MADE FOR NO. (1) CER TIFICATION OF BOOK VALUE OF UNQUOTED EQUITIES/PREFERENCE SHARES; (2) I SSUE OF CERTIFICATE REGARDING DIRECTORS INTEREST IN UNINCORPORATED BOD IES FOR SUBMISSION TO RBI ETC. FROM THESE VOUCHERS THE AO OBSERVED THAT THE SERVICES RENDERED DO NOT HAVE ANY REMOTE CONNECTION WITH ASS ESSEES LINE OF BUSINESS. HENCE HE DISALLOWED THE SAID AMOUNT. ITA NO. 2432/D/2010 3 4. BEFORE CIT(A) APROPOS FIRST GROUND THE SUBMISS ION OF THE ASSESSEE AS RECORDED IN THE ORDER OF CIT(A) IS AS U NDER: - THE COMPANY DURING THE PERIOD UNDER CONSIDERATION HAS PURCHASED 1 42 857 SHARES OF POWERTEC CORPORATION USA FOR A TOTAL AMOUNT OF RS. 4 43 60 000/- AND IN THIS CONNECTION DIRECTOR SUBHODH KUMAR JAIN AND INVESTMENT ADVISOR SATISH AJMERA WENT TO USA IN NOV DEC. 2005. THE PAYMENT WAS MADE ON 15/02/06 THROUGH STANDARD CHARTERED BANK SANSAD MARG BRANCH NEW DELHI FROM THE ACCOUNT OF THE APPELLANT. SH. AJMERA IS N OT ANYWAY RELATED DIRECTLY OR INDIRECTLY TO THE DIRECT OR SH. S.K. JAIN. SUCH INVESTMENTS ARE STILL RETAINED BY THE APPELLANT. OVER AND ABOVE SUCH PURCHASE THE APPELLANT HAS PURCHASED SHARES/SECURITIES WORTH RS. 7 10 84 297/- OF DOMESTIC SECURITIES DURING THE RELEVANT PERIOD. THE BASIS IDEA WAS TO ASSESS THE VIABILITY OF THE COMPANY AND ALSO TO VISIT ITS FACT ORY AT DELAWARE USA. THE DIRECTOR SH. JAIN HAS ALSO VISITED LONDON TWICE ONCE IN DEC. 2005 AND NEXT IN MARCH 2006 FOR THE PURPOSE OF EXPLORING POSSIBILIT Y OF INVESTMENT BUT THE SAME DID NOT MATERIALIZE. THE APPELLANT HAS ALSO INCURRED LOCAL TRAVEL IN CALCUTT A AND MUMBAI FOR OFFICIAL PURPOSES AND A COST OF RS. 39 913/- WAS INCURRED AND THE LD. AO HAS DISALLOWED THE SAID AMOUNT ALSO. NEITHER IN THE RELEVANT ASST T. YEAR NOR TILL DATE THE APPELLANT HAS RECEIVED ANY DIVIDEND NOR OTHER AMOUNT OUT OF INVESTMENT MADE O F RS. 4.43 CR. HOWEVER THE COMPANY UNDER CONSIDERATION WAS ENGAGED IN POWER SECTOR BUSINESS AND IT WAS CONSIDERED WORTHWHILE TO PURCHASE THE SHARE. ITA NO. 2432/D/2010 4 5. APROPOS SECOND GROUND THE SUBMISSION OF THE ASS ESSEE AS RECORDED IN THE ORDER OF CIT(A) IS AS UNDER: - THE AO HAS STATED IN HIS ORDER DATED 28/11/08 THAT NO DETAILS WERE FURNISHED. IT IS NOT CORRECT IN AS MUCH AS HE HAS IN THE NEXT PARA HAS ADMITTED THE LETTER OF THE APPELLANT DATED 20/10/08 AND HE HAS GIVEN EXCERPT FROM THE SAID LETTER DATED 20/10/08 B UT PARA 7 PAGE 2 OF THE SAID LETTER CLEARLY NOTED SUBMISSION OF DETAILS OF TRAVELING EXPENSES AS WELL AS COPY OF BILLS OF LEGAL PROFESSIONAL CHARGES. THE A O HAS IGNORED THE SAME. THE PAYMENTS WERE MADE TO M/S ORIK AN USA COMPANY LEGAL CONSULTANT FOR DUE DILIGENCE FOR SHARE PURCHASE IN POWERTEC AND THE PAYMENT WAS MADE IN US DOLLAR. RS. 35 264/- OUT OF RS. 19 76 681/- WAS PAID TO SHANTI PRASAD & COMPANY NEW DELHI (THE FIRM OF THE LD. AR) FOR CERTIFICATION CHARGES. 6. LD. CIT(A) HAS ACCEPTED BOTH THE SUBMISSIONS OF THE ASSESSEE AND HAS DELETED THE DISALLOWANCE. DEPARTMENT IS AG GRIEVED AND HAS FILED AFOREMENTIONED GROUNDS OF APPEAL. 7. IT WAS SUBMITTED BY LD. DR THAT ASSESSEE DID NOT FILE PROPER DETAILS BEFORE AO AND HENCE DISALLOWANCES WERE RIGHTLY MADE BY THE AO AND THE SAME HAVE BEEN WRONGLY DELETED BY LD. CIT(A). 8. ON THE OTHER HAND LD. AR REFERRING TO THE SUBMI SSION MADE BEFORE CIT(A) SUBMITTED THAT EACH AND EVERY DETAIL WAS FUR NISHED BY THE ASSESSEE BEFORE THE AO WHICH WAS NOT CONSIDERED BY THE AO. HE ITA NO. 2432/D/2010 5 FURTHER SUBMITTED THAT ALL THE DOCUMENTS SUBMITTED BY THE ASSESSEE AGAIN TO CIT(A) WERE ALSO FORWARDED TO AO BY THE CI T(A) AND THE EVIDENCE WITH REGARD TO THE SAME IS PLACED AT PAGE 85 OF THE PAPER BOOK WHEREIN CIT(A) HAS ASKED THE AO TO FURNISH THE REPO RT. IT IS A LETTER DATED 31.03.2009 WRITTEN BY THE CIT(A) TO THE AO. HE SUBMITTED THAT AO DID NOT SUBMIT ANY RESPONSE AND ULTIMATELY CIT(A) H AS DECIDED THE APPEAL VIDE ORDER DATED 22.2.2010. HE SUBMITTED TH AT ALL THE DETAILS ARE INCORPORATED IN THE PAPER BOOK. FOREIGN VISIT OF T HE DIRECTOR OF THE ASSESSEE WAS WITH RESPECT TO PURCHASE OF 1 42 857 S HARES OF POWERTEC CORPORATION WHICH WERE PURCHASED FOR AN AMOUNT OF R S. 4 43 60 000/- AND IN THAT RESPECT FOREIGN VISIT OF THE DIRECTOR W AS UNDERTAKEN WITH WHOM SH. SATISH AJMERA HAD ACCOMPANIES WHO WAS AN I NVESTMENT CONSULTANT. SIMILARLY FOR ANOTHER DISALLOWANCE LD. DR SUBMITTED THAT ALL THE COPIES OF BILLS RAISED BY THE RESPECTIVE PERSON S WERE SUBMITTED TO THE AO AND ALL THESE EXPENSES ARE CONNECTED WITH THE LI NE OF BUSINESS OF THE ASSESSEE AS ASSESSEE IS A NON-BANKING FINANCIAL COR PORATION REGISTERED WITH RBI AND TO COMPLETE THE FORMALITIES OF RBI TH E LEGAL REPORTS WERE REQUIRED TO BE OBTAINED. HE SUBMITTED THAT NONE OF THE EXPENDITURE WAS PERSONAL IN NATURE THEREFORE LD. CIT(A) HAS RIGHT LY DELETED BOTH THESE ADDITIONS. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF MATERIAL PLACED BEFORE US. THE ASSESSEE HAS EXPLAI NED THE PURPOSE OF THE VISIT OF DIRECTOR AND INVESTMENT CONSULTANT TO USA & UK AND THE SAME HAS BEEN SHOWN TO BE CONNECTED WITH THE BUSINE SS OF THE ITA NO. 2432/D/2010 6 ASSESSEE AND WHICH HAS BEEN SHOWN TO BE RESULTED IN TO THE PURCHASE OF SHARES OF POWERTEC CORPORATION USA. SIMILARLY AS PER REQUIREMENT OF THE BUSINESS OF THE ASSESSEE IT HAS TO SUBMIT THE LEGAL REPORTS TO THE RBI FOR WHICH THE CHARGES WERE PAID BY THE ASSESSEE WHICH WERE SUPPORTED BY THE BILLS AND VOUCHERS AND THOSE WERE SUBMITTED TO THE AO AND CIT(A). NO MATERIAL HAS BEEN BROUGHT ON RECORD TO SUGGEST THAT ANY OF THESE EXPENDITURE RELATE TO PERSONAL EXPENDITURE . THEREFORE WE DECLINE TO INTERFERE IN THE DELETION MADE WITH RESP ECT TO BOTH THESE EXPENDITURES. 10. IN THE RESULT THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JULY 2011. SD/- SD/- (G.E. VEERABHADRAPPA) (I.P. BANSAL ) VICE PRESIDENT JUDICIAL MEMBER DATED: 29.7.11 *KAVITA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR