M/s. Biotech International Ltd, New Delhi v. DCIT, New Delhi

ITA 3113/DEL/2009 | 2004-2005
Pronouncement Date: 08-01-2010 | Result: Partly Allowed

Appeal Details

RSA Number 311320114 RSA 2009
Bench Delhi
Appeal Number ITA 3113/DEL/2009
Duration Of Justice 6 month(s) 2 day(s)
Appellant M/s. Biotech International Ltd, New Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 08-01-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 08-01-2010
Date Of Final Hearing 21-12-2009
Next Hearing Date 21-12-2009
Assessment Year 2004-2005
Appeal Filed On 06-07-2009
Judgment Text
I.T.A. NO.3113 /DEL/09 1/12 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE SHRI R.P. TOLANI JUDICIAL MEMBER AND SHRI A.K. GARODIA ACCOUNTANT MEMBER I.T.A. NO.3113 /DEL/2009 ASSESSMENT YEAR : 2004-05 M/S BIOTECH INTERNATIONAL DCIT LTD. 2-LOCAL SHOPPING CENTRE CIRCLE-3 (1) BLOCK EFFH MASJID MOTH GK-II NEW DELHI. NEW DELHI. V. (APPELLANT) (RESPONDENT) PAN /GIR/NO.AAACB-2830-N APPELLANT BY : SHRI SALIL AGGARWAL ADVOCATE. RESPONDENT BY : SHRI MS. ANUSHA KHURANA SR. DR. ORDER PER A.K. GARODIA AM: THIS IS AN ASSESSEE'S APPEAL DIRECTED AGAINST THE O RDER OF LD CIT(A)-VI NEW DELHI DATED 16.4.12009 FOR ASSESSMENT YEAR 2004 -05. 2. GROUND NO.1 OF THE APPEAL READS AS UNDER:- THAT LD CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS IN DISALLOWING AMORTIZATION OF DEVELOPMENT & LICENSE EXPENSES AMOU NTING TO RS.2 68 857/- DURING THE YEAR TREATING THESE AS CAP ITAL EXPENDITURE. THESE EXPENSES HAVE BEEN INCURRED IN CONNECTION WITH THE REGISTRATION OF COMPANYS PRODUCTS WITH THE CENTRAL INSECTICIDES BO ARD (CIB). BASED ON THESE REPORTS THE CIB GRANTS THE REGISTRATION OF PR ODUCTS FOR MARKETING AND . I.T.A. NO.3113/DEL/09 2/12 SALE. THE EXPENSES FOR REGISTRATION AND LICENSE AR E THEREFORE PERMISSIBLE BUSINESS EXPENDITURE. 3. BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE ASSESSING OFFICER IN PARA NO.4 THAT AS PER THE AUDIT REPORT FILED BY THE ASSE SSEE IT IS NOTED THAT UNDER CLAUSE 17(A) OF FORM 3 CD IT WAS MENTIONED THAT A SUM OF RS.2 68 857/- HAS BEEN DEBITED AS DEVELOPMENT AND LICENSE EXPENSES WR ITTEN OFF DURING THE YEAR WHICH IS OF CAPITAL NATURE. THE ASSESSING OFFICER A SKED THE ASSESSEE AS TO WHY THE SAME SHOULD NOT BE DISALLOWED BECAUSE IT WAS CE RTIFIED AS CAPITAL EXPENDITURE IN THE TAX AUDIT REPORT. IN REPLY IT W AS SUBMITTED BY THE ASSESSEE THAT THIS EXPENDITURE WAS RELATING TO DEVELOPMENT AND LI CENSE FEES WHICH HAS BEEN INCURRED IN CONNECTION WITH THE REGISTRATION OF COM PANYS PRODUCTS WITH CIB AND THIS EXPENDITURE HAS BEEN WRITTEN OFF ON DEFERMENT BASIS OVER A PERIOD OF THREE YEARS. THE ASSESSING OFFICER WAS NOT SATISFIED AND HE DISALLOWED THE SAME BY HOLDING THAT THE SAME IS DEFINITELY CAPITAL EXPENDI TURE. BEING AGGRIEVED THE ASSESEE CARRIED THE MATTER IN APPEAL BEFORE LD CIT( A) BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. IT IS SUBMITTED BY LD AR OF THE ASSESSEE THAT TH ESE EXPENSES WERE INCURRED IN CONNECTION WITH REGISTRATION OF COMPANY S PRODUCTS WITH CIB. IT IS ALSO SUBMITTED THAT FOR GETTING REGISTRATION WITH CIB T HE ASSESSEE HAS TO SUBMIT REPORTS ON VARIOUS STUDIES AND BASED ON THESE REPOR TS THE CIB GRANTS REGISTRATION OF THE PRODUCT AND HENCE THE EXPENSES INCURRED IS REVENUE IN NATURE ONLY. OUR ATTENTION WAS DRAWN TO THE DETAILS OF EXP ENSES APPEARING ON PAGE NO.75-76 OF THE PAPER BOOK AND IT WAS POINTED OUT T HAT AN AMOUNT OF RS.4 48 200/- WAS INCURRED DURING THIS YEAR AND THE SAME WAS ADDED TO THE OPENING BALANCE OF RS.2 38 914/-. IT IS ALSO SUBMIT TED THAT DURING THIS YEAR THE ASSESSEE HAS DEBITED TO P&L A/C HALF OF THE OPENING BALANCE I.E. RS.1 19 457/- AND 1/3 RD OF THE CURRENT YEAR EXPENSES I.E. RS.1 49 400/- AN D TOTAL COMES TO RS.2 68 857/-. IT IS ALSO SUBMITTED THAT IN EARLIE R YEARS ALSO SIMILAR EXPENSES WERE ACCOUNTED FOR AND DEBITED TO P&L A/C ON SIMILA R BASIS AND IN ASSESSMENT . I.T.A. NO.3113/DEL/09 3/12 YEAR 2001-02 THE SAME WAS ALLOWED AS PER THE ASSE SSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) AND AS PER THE PRINCIPLE OF CONSISTENCY THE SAME SHOULD BE ALLOWED IN THE PRESENT YEAR ALSO. REGARDI NG PRINCIPLE OF CONSISTENCY RELIANCE WAS PLACED ON THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF CIT V. JK CHARITABLE TRUST AS REPORTED IN 308 I TR 161 (SC). RELIANCE WAS ALSO PLACED ON THE TRIBUNAL DECISION RENDERED IN TH E CASE OF MAHANAGAR TELEPHONE NIGAM LTD. V. ADDL. CIT AS REPORTED IN 10 0 TTJ (DEL.) 1 IN SUPPORT OF THIS CONTENTION THAT ANY EXPENSES INCURRED IN CONNE CTION WITH OBTAINING LICENSE IS ALLOWABLE REVENUE EXPENSES. 5. LD DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GON E THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT AS PER THE DETAIL S AVAILABLE ON PAGE NO.75-76 OF THE PAPER BOOK OUT OF TOTAL EXPENSES OF RS.4 48 20 0/- INCURRED DURING THE PRESENT YEAR AN AMOUNT OF RS.1 50 000/- WAS INCURR ED ON ACCOUNT OF PAYMENT TO IIT DELHI FOR PROVIDING KNOW HOW AND TECHNOLOGY TRA NSFER OF TRICHODERMA. THE BALANCE AMOUNT WAS INCURRED ON ACCOUNT OF SUBMISSIO N OF REPORT OF BIOVIRUS II LIQUID ON QUANTITATIVE AND QUALITITATIVE ANALYSIS T OXICOLOGY & CELL CULTURE. IN VIEW OF THESE FACTS WE FEEL THAT BOTH THESE TYPES OF EX PENSES HAVE TO BE DEALT SEPARATELY BECAUSE AS PER THE ASSESSEE THE EXPENSE S INCURRED ON ACCOUNT OF LICENSE FEES AND EXPENSES INCURRED FOR OBTAINING LI CENSE I.E. FOR SUBMISSION OF REPORT ETC. SHOULD BE ALLOWED AS REVENUE EXPENDITUR E AND THERE IS NO ARGUMENT ADVANCED BY LD AR OF THE ASSESSEE REGARDING ALLOWA BILITY OF RS.1 50 000/- INCURRED BY THE ASSESSEE BEING PAYMENT TO IIT DELHI FOR PROVIDING KNOW HOW AND TECHNOLOGY TRANSFER OF TRICHHODERMA. HENCE THIS A MOUNT OF RS.1 50 000/- HAS TO BE CONSIDERED AS CAPITAL EXPENDITURE ONLY BECAUSE I T WAS SPENT ON ACQUIRING TECHNICAL KNOW HOW. REGARDING BALANCE AMOUNT WE F EEL THAT THE SAME SHOULD BE ALLOWED AS REVENUE EXPENDITURE WHICH WILL AMOUNT TO RS.1 19 457/- BEING 50% OF THE OPENING BALANCE OF RS. 2 38 914/- AND RS .99 400/- BEING 1/3 RD OF THE BALANCE AMOUNT OF RS.2 98 200/- INCURRED DURING TH E PRESENT YEAR AND HENCE . I.T.A. NO.3113/DEL/09 4/12 THE TOTAL AMOUNT TO BE ALLOWED IN THE PRESENT YEAR SHOULD BE RS.2 18 857/- AGAINST RS.2 68 857/- CLAIMED BY THE ASSESSEE. THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. WE HOLD SO BECAUSE WE FEEL THAT CLA IM OF THE ASSESSEE ON ACCOUNT OF EXPENSES FOR REGISTRATION OF THE PRODUCT CANNOT BE HELD TO BE CAPITAL EXPENDITURE BUT THE EXPENSES ON ACQUISITION OF TECH NICAL KNOW HOW OF A NEW PRODUCT HAS TO BE TREATED AS CAPITAL EXPENDITURE. 7. GROUND NO.2 OF THE APPEAL READS AS UNDER:- THAT THE LD CIT(A) HAS ERRED BOTH IN LAW AND ON FA CTS IN DISALLOWING EXPENSES AMOUNTING TO RTS.1 99 939/- INCURRED ON PR ODUCT BIO EFFICACY STUDY CONDUCTED FOR MARKETING OF THE PRODUCTS AND B OOKED BY THE ASSESSEE COMPANY UNDER THE HEAD R&D EXPENSES UNDER THE ACCOUNTS GROUP MISC. EXPENSES. THESE EXPENSES ARE OF THE NAT URE OF CONDUCTING TRIAL FOR ASCERTAINING FIELD EFFICACY OF THE PRODUC T AND ARE NORMAL BUSINESS EXPENDITURE FOR QUALITY CONTROL AND TESTING IN CONN ECTION WITH MARKETING OF PRODUCTS AND ARE THEREFORE PERMISSIBLE BUSINESS EXP ENDITURE. 8. BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE ASSESSING OFFICER IN PARA NO.5 OF THE ASSESSMENT ORDER THAT DURING THIS YEAR THE ASSESSEE HAS CLAIMED RESEARCH AND DEVELOPMENT EXPENSES OF RS.1 99 939/- UNDER THE HEAD MISC. EXPENSES IN P&L A/C. THE ASSESSING OFFICER ASKED TH E ASSESSEE AS TO WHY THE SAME SHOULD NOT BE TREATED AS CAPITAL EXPENDITURE. IN REPLY IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT THES E EXPENSES PERTAIN TO RESEARCH AND DEVELOPMENT WORK ON UPGRADATION OF COM PANYS PRODUCTS AND CONDUCTING TRIAL FOR FIELD EFFICACY AND SUCH EXPENS ES ARE ALLOWABLE UNDER SECTION 37 OF THE ACT. THE ASSESSING OFFICER WAS NOT SATISF IED AND HE DISALLOWED THE SAME. BEING AGGRIEVED THE ASSESEE CARRIED THE MAT TER IN APPEAL BEFORE LD CIT(A) BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. . I.T.A. NO.3113/DEL/09 5/12 9. IT IS SUBMITTED BY LD AR OF THE ASSESSEE THAT TH ESE EXPENSES ARE MERELY PERTAINING TO MAINTENANCE OF QUALITY OF PRODUCTS AN D CONDUCTING TRIAL FOR FIELD EFFICACY OF PRODUCT AS A MATTER OF BUSINESS AND COM MERCIAL EXPEDIENCY. IT IS SUBMITTED THAT THIS EXPENDITURE HAS NOT RESULTED IN ANY NEW PRODUCT AND HENCE THE SAME CANNOT BE TREATED AS CAPITAL EXPENDITURE. IT IS ALSO POINTED OUT THAT THESE EXPENSES ARE BASICALLY FOR MARKETING AND DEMO NSTRATION OF PRODUCT FOR CUSTOMERS. 10. LD DR OF THE REVENUE SUPPORTED THE ORDERS OF TH E AUTHORITIES BELOW. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GO NE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO FINDI NG GIVEN BY THE AUTHORITIES BELOW THAT THESE EXPENSES WERE INCURRED FOR DEVELOPING AN Y NEW PRODUCT. IT WAS THE SUBMISSION OF THE ASSESSEE BEFORE THE ASSESSING OFF ICER THAT THESE EXPENSES WERE INCURRED ON UPGRADATION OF COMPANYS PRODUCT A ND CONDUCTING TRIAL FOR FIELD EFFICACY. WE FIND THAT SIMILAR EXPENSES WERE INCURR ED IN THE EARLIER YEARS ALSO AS PER THE DETAILS APPEARING ON PAGE NO.127 OF THE PAP ER BOOK. REGARDING DETAILS OF EXPENSES OF THE PRESENT YEAR WHICH IS AVAILABLE ON PAGE NO.126 OF THE PAPER BOOK WE FIND THAT THESE EXPENSES ARE REGARDING PRO DUCT FESS INCLUDING PAYMENT TO RESEARCH FELLOW COST OF ACCESSORIES CHEMICALS BRASS-WARES AND OTHER MISC. EXPENSES. IN THE ABSENCE OF ANY FINDING THAT ANY NE W PRODUCT WAS DEVELOPED BY INCURRING THESE EXPENSES WE FEEL THAT THE AUTHORIT IES BELOW WERE NOT JUSTIFIED IN TREATING THESE EXPENSES AS CAPITAL IN NATURE. WE T HEREFORE DELETE THIS ADDITION. THIS GROUND OF THE ASSESSEE IS ALLOWED. 12. GROUND NO.3 OF THE APPEAL READS AS UNDER:- THAT THE LD CIT(A) HAS ERRED BOTH IN LAW AND ON FA CTS IN DISALLOWING FOREIGN TRAVELING EXPENSES AMOUNTING RS. 6 32 628/- INCURRED ON HOTEL CHARGES AND CONVEYANCE ETC. DURING THE DIFFERENT FO REIGN TOURS. SUCH . I.T.A. NO.3113/DEL/09 6/12 EXPENSES ARE GENUINE BUSINESS EXPENDITURE INCURRED BY DIRECTORS OF THE COMPANY WHICH ARE FULLY SUPPORTED BY TRAVELING BILL VOUCHER AND BILLS. 13. BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE ASSESSING OFFICER ON PAGE NO.2 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS.23 85 037/- TOWARDS DIRECTORS TRAVELING EXPENSES . THE ASSESSING OFFICER ASKED THE ASSESSEE TO GIVE DETAILS OF THESE EXPENSE S ALONG WITH RELEVANT PRIMARY DOCUMENTS. THE ASSESSEE HAS FILED THE DETAILS BEFOR E THE ASSESSING OFFICER. FROM THE DETAILS IT IS NOTED BY THE ASSESSING OFFI CER THAT AN AMOUNT OF RS.5 82 391/- WAS INCURRED TOWARDS THE TICKET FARE OF THE DIRECTORS AND RS.18 02 692/- TOWARDS BOARDING LODGING AND OTHER EXPENSES. IT IS FURTHER NOTED BY THE ASSESSING OFFICER THAT BILLS AND VOUCHERS FO R EXPENSES AMOUNTING TO RS.12 65 256/- WERE NOT FURNISHED BY THE ASSESSEE. IT IS FURTHER NOTED BY THE ASSESSING OFFICER THAT MERE PURCHASE OF FOREIGN EXC HANGE DOES NOT ENTITLE THE ASSESSEE TO CLAIM THAT THE ENTIRE FOREIGN EXCHANGE WAS SPENT FOR BUSINESS PURPOSES. THE ASSESSING OFFICER WAS OF THE VIEW THA T 50% OF THE AMOUNT FOR WHICH THE BILLS AND VOUCHERS WERE NOT FURNISHED SHO ULD BE DISALLOWED AND ON THIS BASIS HE DISALLOWED AN AMOUNT OF RS.6 32 628/-. BEI NG AGGRIEVED THE ASSESEE CARRIED THE MATTER IN APPEAL BEFORE LD CIT(A) AND A PART FROM OTHER ARGUMENTS IT WAS SUBMITTED BEFORE LD CIT(A) THAT ONLY RS.11 66 329/- HAS BEEN SPENT TOWARDS BOARDING LODGING AND OTHER EXPENSES AND 50 % OF THE EXPENSES FOR WHICH THE BILLS AND VOUCHERS WERE NOT FURNISHED COM ES TO ONLY RS.583105/- AND NOT RS.613281/-. LD CIT(A) HAS DIRECTED THE ITO TO TAKE THE CORRECT AMOUNT FROM THE RECORDS FOR WORKING OUT THE DISALLOWANCE. NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 14. IT WAS SUBMITTED BY THE LD AR OF THE ASSESSEE T HAT IN RESPECT OF EXPENSES RELATING TO BOARDING LODGING CONVEYANCE AND OTHER EXPENSES IT WAS NOT PRACTICAL TO MAINTAIN BILLS AND VOUCHERS AS THESE E XPENSES WERE OF ROUTINE NATURE AND WERE CONNECTED WITH VARIOUS MEETINGS AND CONFER ENCES. IT IS ALSO POINTED OUT THAT THE ASSESSEE HAS REFUNDED THE FOREIGN CURR ENCY TO THE EXTENT OF . I.T.A. NO.3113/DEL/09 7/12 RS.1 47 200/- TO RBI WHICH REMAINED UN-USED AND HEN CE THERE IS NO JUSTIFICASTION FOR ANY DISALLOWANCE OUT OF FOREIGN TRAVELING EXPEN SES. RELIANCE WAS PLACED ON THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT RENDERED IN THE CASE OF SAYAJI IRON & ENGG. CO. V. CIT AS REPORTED IN 253 ITR 749 IN SUPP ORT OF THIS CONTENTION THAT EVEN IF SOME PART OF THE EXPENSES WERE INCURRED ON ACCOUNT OF PERSONAL EXPENSES OF DIRECTORS THE SAME CANNOT BE DISALLOWE D IN THE HANDS OF THE COMPANY ALTHOUGH THE SAME CAN BE TREATED AS PERQUI SITE IN THE HANDS OF THE DIRECTORS. RELIANCE WAS ALSO PLACED ON THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF STATE OF ORISSA V. MAHARAJA BP SINGH DEV AS REPORTED IN 76 ITR 690. IT IS ALSO SUBMITTED THAT RELEVANT DETA ILS ARE AVAILABLE ON PAGES 129- 130 OF THE PAPER BOOK. 15. LD DR OF THE REVENUE SUPPORTED THE ORDERS OF TH E AUTHORITIES BELOW. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GO NE THROUGH THE MATERIAL AVAILABLE ON RECORD AND THE JUDGMENTS CITED BY LD A R OF THE ASSESSEE WE FIND THAT AS PER THE ASSESSEE AN AMOUNT OF RS.11 66 329 /- WAS INCURRED TOWARDS BOARDING LODGING CONVEYANCE AND OTHER EXPENSES FO R WHICH THE ASSESSEE COULD NOT FURNISH RELEVANT BILLS AND VOUCHERS BEFORE THE ASSESSING OFFICER WHEREAS AS PER THE ASSESSING OFFICER THE SAME WAS OF RS.12 65 256/- . REGARDING THIS DIFFERENCE LD CIT(A) HAS ALREADY DIRECTED THE ASSE SSING OFFICER TO FIND OUT THE CORRECT FIGURES AND MAKES A DISALLOWANCE ON THE BAS IS OF CORRECT AMOUNT. REGARDING THE DETAILS OF EXPENSES WE FIND THAT AS PER THE DETAILS SUBMITTED BY THE ASSESSEE ON PAGE NO.129-130 OF THE PAPER BOOK AN AMOUNT OF RS.8 41 989/- WAS INCURRED BY THE ASSESSEE ON ACCOU NT OF FOREIGN EXCHANGE PURCHASE AND UTILIZED AND NO DETAILS WHATSOEVER HAV E BEEN FURNISHED REGARDING MANNER AND PURPOSE FOR WHICH THIS AMOUNT OF FOREIGN EXCHANGE WAS SPENT BY THE DIRECTORS ON FOREIGN TOUR. THIS AMOUNT IS IN ADDIT ION TO THE AMOUNT SPENT ON ACCOUNT OF ACCOMMODATION CHARGES AT VARIOUS HOTELS TO THE EXTENT OF RS.324 340.39. THE TOTAL AMOUNT OF SUCH EXPENSES ON FOREIGN CURRENCY AND HOTEL ACCOMMODATION COMES TO RS.11 66 329.39. WE FAIL TO UNDERSTAND AS TO HOW THE . I.T.A. NO.3113/DEL/09 8/12 ASSESSEE WAS NOT IN A POSITION TO FURNISH THE BILLS AND VOUCHERS REGARDING ACCOMMODATION CHARGES OF VARIOUS HOTELS. REGARDING THE FOREIGN CURRENCY USED OF RS.8.41 LAKHS ALSO IT MAY BE THAT FOR SOME PART OF THE EXPENSES RELEVANT DETAILS AND BILLS/VOUCHERS MAY NOT BE AVAILABLE BUT IT CANNOT BE ACCEPTED THAT FOR ENTIRE AMOUNT OF SUCH EXPENSES NO DETAILS/VOUCHERS AND BILLS ETC. WILL BE AVAILABLE. UNDER THESE FACTS WE ARE OF THE CONSIDE RED OPINION THAT IN THE ABSENCE OF PROPER DETAILS AND VOUCHERS SOME PART O F SUCH EXPENSES HAS TO BE DISALLOWED BECAUSE IN THE ABSENCE OF PROPER DETAILS IT IS NOT POSSIBLE TO POINT OUT THE EXACT AMOUNT OF PERSONAL AND NON BUSINESS EXPEN SES. 17. NOW WE CONSIDER AND DISCUSS THE JUDGMENTS CITE D BY LD AR OF THE ASSESSEE. FIRST JUDGMENT IS OF HON'BLE GUJARAT HIGH COURT RENDERED IN THE CASE OF SAYAJI IRON & ENGG. CO. LTD. (SUPRA). IN THIS CASE IT IS NOTED BY HON'BLE GUJARAT HIGH COURT THAT ONCE IT IS ACCEPTED THAT THE EXPEND ITURE IN QUESTION ARE IN TERMS AS PROVIDED IN SECTION 309 AND 198 OF THE COMPANIES ACT 1956 THERE CANNOT BE ANY NON BUSINESS PURPOSE IN SO FAR AS THE ASSESSEE COMPANY IS CONCERNED. IT IS NOTED BY HON'BLE GUJARAT HIGH COURT IN THAT CASE TH AT THE EXPENDITURE INCURRED BY THE ASSESSEE COMPANY ON MAINTENANCE OF VEHICLES WHI CH WERE AVAILABLE TO THE DIRECTORS FOR THEIR PERSONAL USE WOULD FALL WITHIN THE MEANING OF REMUNERATION AS DEFINED IN THE EXPLANATION TO SECTION 198 OF THE CO MPANIES ACT. IN THE PRESENT CASE NOTHING HAS BEEN SHOWN TO US THAT THE PERSONA L EXPENSES OF THE DIRECTORS INCURRED WHILE THEY WERE ON FOREIGN TOURS ARE TO BE CONSIDERED AS PART OF REMUNERATION OF THE DIRECTORS AS PER SECTION 198 & 309 OF THE COMPANIES ACT. SUCH EXPENSES ARE NOT UNIFORM IN ALL CASES. WE FIND THAT FOR THE VISIT OF SHRI VIVEK SINGHAL TO VARIOUS PLACES OF EUROPE DURING 25.4.200 3 TO 9.5.2003 I.E. FOR 15 DAYS AN AMOUNT OF 3 86 339/- WAS INCURRED ON ACCOUNT OF FOREIGN CURRENCY AND FOR THE VISIT OF MR.SAURABH SINGHAL TO USA-BANGKOK DURING `12.6.2003 TO 3.7.2003 I.E. FOR 22 DAYS AN AMOUNT OF RS.94 800/- WAS INCURRED O N ACCOUNT OF FOREIGN EXCHANGE. AGAIN ON VISIT OF SHRI VIVEK SINGHAL DURI NG 28.10.2003 TO 18.11.2003 I.E. FOR 22 DAYS AN AMOUNT OF RS.3 60 850/- WAS I NCURRED ON ACCOUNT OF FOREIGN EXCHANGE. THESE DETAILS SHOW THAT PER DAY EXPENSES IN THESE THREE VISIT IS NOT . I.T.A. NO.3113/DEL/09 9/12 COMPARABLE. SIMILARLY FOR ACCOMMODATION CHARGES A LSO I.E. HOTEL EXPENSES THE EXPENSES ARE NOT COMPARABLE. AN AMOUNT OF RS.1.49 L AKHS WAS INCURRED DURING THE VISIT OF SHRI VIVEK SINGHAL TO EUROPE FOR 15 DA YS AN AMOUNT OF RS.1.31 LAKHS WAS INCURRED ON VISIT OF SHRI SAURABH SINGHAL TO US A-BANGKOK FOR 21 DAYS AND FOR THE VISIT OF SHRI VIVEK SINGHAL IN OCTOBER & NO VEMBER 2003 FOR 22 DAYS THE HOTEL EXPENSES INCURRED WAS ONLY RS.0.43 LAKHS. FOR ACCOMMODATION EXPENSES ALSO NO DETAILS/BILLS WERE PRODUCED BY THE ASSESSE E AND HENCE IT CANNOT BE SAID THAT EXPENSES INCURRED BY THE DIRECTORS OF THE ASSE SSEE COMPANY ARE TOTALLY FOR BUSINESS PURPOSE AND NO PERSONAL EXPENSES IS INCLUD ED IN THESE EXPENSES. IN THE PRESENT CASE THIS JUDGMENT OF HON'BLE GUJARAT HIGH COURT RENDERED IN THE CASE OF SAYAJI IRON & ENGG. CO. (SUPRA) IS OF NO HE LP TO THE ASSESSEE BECAUSE SUCH PERSONAL EXPENSES INCURRED BY THE ASSESSEE WHI LE ON FOREIGN TOUR CANNOT BE SAID TO BE PART OF THEIR PERQUISITES AS PER THEI R TERMS OF EMPLOYMENT OR AS PER THE PROVISIONS OF COMPANIES ACT AND HENCE THIS JUD GMENT OF HON'BLE GUJARAT HIGH COURT IS OF NO HELP TO THE ASSESSEE. 18. REGARDING JUDGMENT OF HON'BLE APEX COURT RENDER ED IN THE CASE OF MAHARAJA BP SINGH DEV (SUPRA) RELIED UPON BY THE LD AR OF THE ASSESSEE WE FIND THAT IN THIS CASE THE ITO WAS UNABLE TO RELY O N THE BOOKS OF ACCOUNTS PRODUCED BY THE ASSESSEE AND INCOME WAS ASSESSED BY HIM ON THE BASIS OF BEST OF JUDGMENT. IT IS NOTED BY THE HON'BLE APEX COURT THAT APART FROM COMING TO THE CONCLUSION THAT THE MATERIAL PLACED BEFORE HIM BY T HE ASSESSEE WERE NOT REALIABLE THE ASSTT. COLLECTOR HAS GIVEN NO REASON FOR ENHANCING THE ASSESSMENT . IT IS ALSO NOTED THAT HIS ORDER DOES NOT DISCLOSE THE BASIS ON WHICH HE HAS ENHANCED THE ASSESSMENT . WE ARE OF THE CONSIDERED OPINION THAT THIS JUDGMENT IS ALSO OF NO HELP TO THE ASSESSEE IN THE PRESENT C ASE BECAUSE THE FACTS ARE DIFFERENT. IN THE PRESENT CASE NO DETAILS/SUPPORT ING BILLS AND VOUCHERS WERE PRODUCED BY THE ASSESSEE REGARDING THE AMOUNT INCU RRED BY THE ASSESSEE BY WAY OF PURCHASE OF FOREIGN CURRENCY AND ON HOTEL AC COMMODATION ETC. AND HENCE THE ASSESSING OFFICER HAD NO OPTION BUT TO MAKE EST IMATED DISALLOWANCE. IT IS NOT A CASE OF ARBITRARY ASSESSMENT. IT WAS HELD BY HON' BLE APEX COURT IN THIS CASE . I.T.A. NO.3113/DEL/09 10/12 THAT THE ASSESSMENT MUST BE BASED ON SOME RELEVANT MATERIAL. IN THE PRESENT CASE THE RELEVANT MATERIAL IS THAT THE ASSESSEE HA S CLAIMED DEDUCTION ON ACCOUNT OF EXPENSES ON FOREIGN TRAVELING OF DIRECTO RS FOR WHICH NO DETAILS/SUPPORTING VOUCHERS WERE PRODUCED BY THE AS SESSEE BEFORE THE AUTHORITIES BELOW AND BEFORE US AND HENCE IT IS NOT POSSIBLE TO VERIFY AND EXAMINE THE CLAIM OF THE ASSESSEE AND HENCE IT HAS TO BE ESTIMATED AS TO HOW MUCH EXPENSES CAN BE OF PERSONAL NATURE. IN THE ABS ENCE OF PROPER DETAILS AND VOUCHERS THERE IS NO OPTION LEFT EXCEPT TO ESTIMAT E SUCH PERSONAL AND NON BUSINESS EXPENSES AND UNDER THESE FACTS WE FEEL TH AT THIS JUDGMENT IS OF NO HELP TO THE ASSESSEE. AFTER HOLDING THAT PART OF THE EXP ENSES INCURRED BY THE ASSESSEE FOR WHICH PROPER DETAILS AND SUPPORTING VOUCHERS AR E NOT FURNISHED HAS TO BE CONSIDERED FOR MAKING AN ESTIMATED DISALLOWANCE ON ACCOUNT OF PERSONAL EXPENSES AND NON BUSINESS EXPENSES WE FEEL THAT S UCH ESTIMATE OF PERSONAL AND NON BUSINESS EXPENSES AT 50% OF EXPENSES IS EXC ESSIVE AND WE ARE OF THE CONSIDERED OPINION THAT TO MEET THE ENDS OF JUSTICE THE DISALLOWANCE SHOULD BE OF 25% OF SUCH EXPENSES FOR WHICH SUPPORTING VOUCHERS AND DETAILS COULD NOT BE PRODUCED BY THE ASSESSEE. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF 25% OF EXPENSES F OR WHICH THE DETAILS AND VOUCHERS COULD NOT BE PRODUCED BY THE ASSESSEE. THI S GROUND OF THE ASSESSEE STANDS PARTLY ALLOWED. 20. GROUND NO.4 OF THE APPEALS READS AS UNDER:- THAT THE LD CIT(A) HAS ERRED BOTH IN LAW AND ON FA CTS IN DISALLOWING PRIOR PERIOD ELECTRICITY EXPENSES AMOUNTING TO RS.4 000/- PAID TO SHARMA FRIENDS COOPERATIVE GROUP HOUSING SOCIETY LTD. PERT AINING TO THE PERIOD 1.5.2002 TO 30.6.2003 DESPITE THE FACT THAT THE DEM AND FOR THESE EXPENSES WAS MADE BY THE SOCIETY DURING THE YEAR. 21. BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED B Y THE ASSESSING OFFICER IN PARA NO.8 OF THE ASSESSMENT ORDER THAT OUT OF TOTAL EXPENSES OF RS.1 44 709/- ON . I.T.A. NO.3113/DEL/09 11/12 ACCOUNT OF PRIOR PERIOD EXPENSES AN AMOUNT OF RS.6 2 562/- WERE PERTAINING TO ELECTRICITY CHARGES AND DISCOUNT EXPENSES PERTAININ G TO ASSESSMENT YEAR 2002- 03 AND 2003-04. BEING AGGRIEVED THE ASSESEE CARRI ED THE MATTER IN APPEAL BEFORE LD CIT(A). LD CIT(A) HAS CONFIRMED THE DISAL LOWANCE OF RS.4 000/- AND DELETED THE BALANCE OF RS.58 562/-. NOW THE ASSESS EE IS IN FURTHER APPEAL BEFORE US REGARDING THE DISALLOWANCE OF RS.4 000/- CONFIRM ED BY LD CIT(A). 22. LD AR OF THE ASSESSEE SUBMITTED THAT THIS DEMAN D WAS ASCERTAINED DURING THE PRESENT YEAR AND HENCE THE SAME SHOULD BE ALLOW ED. 23. LD DR OF THE REVENUE SUPPORTED THE ORDERS OF TH E AUTHORITIES BELOW. 24. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GO NE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IT IS NOTED BY LD CIT(A) IN PARA NO.1.3 OF HIS ORDER THAT IN A LETTER DATED 13.8.2003 WRITTEN BY S HARMA COOPERATIVE GROUP HOUSING SOCIETY IT IS MENTIONED THAT THE PAYMENT I S DUE FROM 1.5.2002 TO 30.6.2003. IT IS ALSO NOTED BY LD CIT(A) THAT NO WH ERE IT IS MENTIONED THAT THE DEMAND IS ASCERTAINED DURING THE PRESENT YEAR. IT IS ALSO NOTED BY LD CIT(A) THAT THE ASSESSEE HAS NOT FILED ANY REPLY TO SHOW THAT T HE DEMAND HAS CRYSTALLIZED DURING THIS YEAR. BEFORE US ALSO NO EVIDENCE WAS F ILED TO SHOW THAT THE DEMAND HAS CRYSTALLIZED DURING THIS YEAR. WE THEREFORE FIND NO REASON TO INTERFERE IN THE ORDER OF LD CIT(A) ON THIS ISSUE. THIS GROUND OF T HE ASSESSEE IS REJECTED. 25. IN THE RESULT THE APPEAL OF THE ASSESSEE STAND S PARTLY ALLOWED. 26. ORDER PRONOUNCED IN THE OPEN COURT ON 8TH JANU ARY 2010. SD/- SD/- (R.P. TOLANI) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 8 .1.2010. HMS . I.T.A. NO.3113/DEL/09 12/12 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)- NEW DELHI. 5. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DELHI. TRUE COPY. (ITAT NEW DELHI).