PREMIER COLORSCAN INSTRUMENTS P. LTD, MUMBAI v. ACIT 10(3), MUMBAI

ITA 2810/MUM/2010 | 2007-2008
Pronouncement Date: 26-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 281019914 RSA 2010
Assessee PAN AAACP4757C
Bench Mumbai
Appeal Number ITA 2810/MUM/2010
Duration Of Justice 1 year(s) 3 month(s) 17 day(s)
Appellant PREMIER COLORSCAN INSTRUMENTS P. LTD, MUMBAI
Respondent ACIT 10(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 26-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Date Of Final Hearing 26-07-2011
Next Hearing Date 26-07-2011
Assessment Year 2007-2008
Appeal Filed On 09-04-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C : MUMBAI BEFORE SHRI D.MANMOHAN VICE PRESIDENT AND SHRI PRAMOD KUMAR ACCOUNTANT MEMBER ITA. NO. 2810/MUM/2010 ASSESSMENT YEAR 2007-2008 PREMIER COLORSCAN INSTRUMENTS PVT. LTD. MUMBAI 400 078 PAN AAACP 4757C VS. ACIT 10 (3) MUMBAI (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI ANANT N. PAI FOR RESPONDENT : SHRI G.P. TRIVEDI DATE OF HEARING : 26-7-2011 DATE OF PRONOUNCEMENT : 26-7-2011 ORDER PER D. MANMOHAN V.P. 1. THIS APPEAL IS FILED AT THE INSTANCE OF THE ASS ESSEE- COMPANY AND IT PERTAINS TO THE ASSESSMENT YEAR 2007 -2008. THOUGH SEVERAL GROUNDS WERE RAISED IN THE GROUNDS OF APPEA L ANNEXED TO FORM-36 AT THE TIME OF HEARING LEARNED COUNSEL DID NOT PRESS GROUND NOS. 1 AND 3 TO 5. UNDER THE CIRCUMSTANCES WE REJE CT THOSE GROUNDS AS NOT PRESSED. 2. GROUND NO.2 READS AS UNDER : ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING THE AD-HOC 10% DISALLOWANCE OF RS.3 12 301 MADE BY THE LEARNED ASSESSING OFFICER OUT OF CONVEYANCE AND TRAVELLING EXPENSE CLAIMED BY YOUR APPELLANT. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVE LOPMENT SALES EXPORT AND CONSULTANCY IN SOFTWARE AND TRAIN ING. FOR THE YEAR ITA.NO.2810/M/2010 PREMIER COLOURSCAN INSTRUMENTS P. LTD. 2 UNDER CONSIDERATION RETURN OF INCOME WAS FILED DEC LARING TOTAL INCOME OF RS.1 24 87 045/- WHICH WAS ORIGINALLY PROCESSED UNDER SECTION 143(1) OF THE ACT AND THEREAFTER TAKEN-UP FOR SCRU TINY BY ISSUING A NOTICE UNDER SECTION 143 (2) OF THE ACT. DURING THE COURSE OF SCRUTINY PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE CLAIMED AN EXPENDITURE OF RS.31 23 014/- UNDER THE HEAD CO NVEYANCE AND TRAVELLING. ASSESSEE WAS ASKED TO FURNISH DETAILS OF SUCH EXPENSES. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE DI D NOT FURNISH PROPER DETAILS AND THEREFORE DISALLOWED 10% OF THE EXPENDITURE AS HAVING NOT BEEN SUPPORTED WITH NECESSARY EVIDENCE. IN OTHERWORDS NATURE OF EXPENDITURE AND NEED FOR INCURRING SUCH E XPENDITURE WAS NOT DISPUTED. BUT THE CASE OF THE ASSESSING OFFICER WAS THAT ALL THE EXPENDITURE WERE NOT SUPPORTED BY PROPER EVIDENCE. 4. AGGRIEVED ASSESSEE CONTENDED BEFORE THE CIT(A) THAT DISALLOWANCE OF RS.3 12 301/- ON ADHOC BASIS IS NOT IN ACCORDANCE WITH LAW. IT WAS CONTENDED THAT THE COMPANY DEALS I N COLOR MATCHING SOFTWARE SPECTROPHOTOMETER AND TRADING LABORATORIE S EQUIPMENTS AND THE SERVICES WERE RENDERED NOT ONLY IN INDIA BUT AL SO ABROAD. THE COMPANY WAS ALSO ACTING AS AN AGENT FOR THEIR FOREI GN PRINCIPALS AND IN THAT CAPACITY TECHNICIANS AND REPRESENTATIVES HA VE TO VISIT FREQUENTLY TO RENDER SERVICES TO THE CUSTOMERS SAL ES PROMOTION AND FUTURE ORDERS. UNDER THE CIRCUMSTANCES ADHOC DISAL LOWANCE IS NOT WARRANTED. CHART OF THE EXPENSES AND DETAILS THEREO F WERE FURNISHED BEFORE THE CIT(A) TO STATE THAT FOREIGN TRAVELLING EXPENDITURE WAS TO THE TUNE OF RS.25.60 LAKHS LOCAL TRAVELLING EXPENDITUR E WERE TO THE TUNE OF RS.3.25 LAKHS AND CONVEYANCE EXPENSES WERE TO THE T UNE OF RS.2.36 LAKHS. 5. LEARNED CIT(A) OBSERVED THAT THE CHART REGARDIN G FOREIGN TRAVEL TO SEVERAL COUNTRIES SUCH AS GERMANY ITALY HUNGARY ROMANIA MALAYSIA AND NIGERIA ETC. WERE STATED TO BE FOR TH E PURPOSE OF SOLICITING NEW CUSTOMERS BUT NO EVIDENCE THEREOF WA S PRODUCED. WHAT WAS THE BUSINESS THAT WAS ACQUIRED OUT OF THESE VIS ITS COULD NOT BE ITA.NO.2810/M/2010 PREMIER COLOURSCAN INSTRUMENTS P. LTD. 3 PRODUCED. SIMILARLT VISITS TO TURKEY BANGLADESH E GYPT IS NOT SUPPORTED BY PROPER DETAILS. IN THE SAME VEIN IN T HE CASE OF TRAVELLING EXPENSES (LOCAL) UNDER THE COLUMN NAME OF THE PART Y VISITED NO DETAILS HAVE BEEN GIVEN. FURTHER NO DETAILS REGARD ING CONVEYANCE EXPENSES HAVE BEEN FILED. HAVING REGARD TO THE CIRC UMSTANCES LEARNED CIT(A) WAS OF THE OPINION THAT THE DISALLOWANCE OF 10% MADE BY THE ASSESSING OFFICER IS REASONABLE. 6. FURTHER AGGRIEVED ASSESSEE IS IN APPEAL BEFORE US. LEARNED COUNSEL APPEARING ON BEHALF OF THE ASSESSE E SUBMITTED THAT THE ASSESSING OFFICER HAD NOWHERE DISPUTED THE NATU RE OF EXPENDITURE. EXCEPT THE VISIT TO ROMANIA ASSESSEE COULD FURNISH EVIDENCE TO SHOW THAT THERE WAS BUSINESS CONNECTION AND MERELY BECAU SE MINOR OUT-OF- POCKET EXPENDITURE COULD NOT BE SUPPORTED BY PROPER BILLS DISALLOWANCE IS NOT CALLED FOR IN THE CASE OF A COM PANY. IT WAS FURTHER CONTENDED THAT THERE CANNOT BE ANY PERSONAL EXPENDI TURE IN THE HANDS OF THE COMPANY AND ANY EXPENDITURE INCURRED B Y THE COMPANY HAS TO BE TREATED AS BUSINESS EXPENDITURE. 7. ON THE OTHER HAND LEARNED DR STRONGLY RELIED U PON THE ORDERS PASSED BY THE TAX AUTHORITIES AND SUBMITTED THAT UNDER SECTION 37 (1) OF THE ACT AN OBLIGATION IS CAST UP ON THE ASSESSEE TO PROVE THAT THE EXPENDITURE IS WHOLLY AND EXCLUSIVEL Y INCURRED FOR THE PURPOSE OF BUSINESS AND IN THE ABSENCE OF PROPER DE TAILS THE TAX AUTHORITIES WERE JUSTIFIED IN DISALLOWING 10% OF TH E TOTAL EXPENDITURE ON ADHOC BASIS. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE RECORD. AT THE OUTSET IT MAY BE NOTICE D THAT THE INITIAL BURDEN IS UPON THE ASSESSEE TO PROVE THAT THE EXPEN DITURE IS WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINES S SO AS TO CLAIM SUCH EXPENDITURE UNDER SECTION 37 (1) OF THE ACT. B UT ONCE IT IS PROVED THERE IS NO FURTHER OBLIGATION UPON THE ASS ESSEE-COMPANY TO SHOW THAT SUCH EXPENDITURE WAS NECESSARY FOR THE PU RPOSE OF ITA.NO.2810/M/2010 PREMIER COLOURSCAN INSTRUMENTS P. LTD. 4 BUSINESS. IF THE ASSESSING OFFICER IS OF THE OPINIO N THAT THE EXPENDITURE WAS NOT WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS HE IS ENTITLED TO DISALLOW THE ENTIRE CLAIM OR PART OF A CLAIM WHICH WAS REFERABLE TO A PARTICULAR TRIP ETC. WHICH WAS FOUND TO BE NOT FOR THE PURPOSE OF BUSINESS. SIMILARLY IF ANY EXPENDITURE IS NOT SUPPORTED BY SPECIFIC DETAILS SUCH CLAIM COULD HAV E BEEN DISALLOWED INSTEAD OF RESORTING TO AN ADHOC ESTIMATE. IN THE I NSTANT CASE ASSESSING OFFICER HAD RESORTED TO AN ADHOC ESTIMATE WHICH IN OUR OPINION IS NOT JUSTIFIED. HOWEVER LEARNED COUNSEL ADMITTED THAT WITH REFERENCE TO THE VISIT TO ROMANIA THERE WAS NO EVID ENCE TO PROVE THAT IT WAS FOR THE PURPOSE OF BUSINESS. THOUGH HE HAS CONT ENDED THAT EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS IT IS NOT DISPUTED THAT SOME PETTY EXPEND ITURE WAS NOT FULLY SUPPORTED BY VOUCHERS. CONSIDERING THE CIRCUMSTANCE S WHEN THE BENCH EXPRESSED ITS VIEW THAT TO AVERT FURTHER LITI GATION - BY SENDING BACK THE ISSUE FOR PROPER VERIFICATION OF THE EXPEN DITURE INCURRED BY THE ASSESSEE - AN ADHOC DISALLOWANCE OF RS.50 000/- WOULD MEET THE ENDS OF JUSTICE. LEARNED COUNSEL ADMITTED FOR THIS PROPOSAL. THOUGH LEARNED D.R. STRONGLY SUPPORTED THE ORDERS PASSED B Y THE ASSESSING OFFICER AND CIT(A) CONSIDERING THE CIRCUMSTANCES O F THE CASE HE HAS NOT RAISED ANY SERIOUS OBJECTION WITH REGARD TO THE VIEW EXPRESSED BY THE BENCH. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS. HAVING REG ARD TO THE CIRCUMSTANCES OF THE CASE WE ARE OF THE VIEW T HAT SUSTAINING AN ADDITION OF RS.50 000/- AS AGAINST RS.3 12 301/- WO ULD MEET THE ENDS OF JUSTICE. WE DIRECT THE ASSESSING OFFICER TO REST RICT THE DISALLOWANCE TO RS.50 000/-. ITA.NO.2810/M/2010 PREMIER COLOURSCAN INSTRUMENTS P. LTD. 5 ORDER PRONOUNCED ACCORDINGLY IN THE OPEN COURT ON 26/7/2011 IN THE PRESENCE OF BOTH THE PARTIES. . SD/- SD/- (PRAMOD KUMAR) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI DATE 26 TH JULY 2011 VBP/- COPY TO 1. PREMIER COLORSCAN INSTRUMENTS PVT. LTD. UNIT NO. 5065 5 TH FLOOR BHANDUP INDUSTRIAL ESTATE PANNALAL SILK MILL C OMPOUND LBS MARG BHANDUP (W) MUMBAI 400 078 PAN AAA CP 4757C 2. ACIT 10 (3) MUMBAI 3. CIT(A)-22 MUMBAI 4. CIT-10 MUMBAI 5. DR C BENCH 6. GUARD FILE TRUE COPY BY ORDER ASST. REGISTRAR ITAT MUMBAI BENCHES MUMBAI.