ACIT, New Delhi v. M/s. Selan Exploration Technology Ltd, New Delhi

ITA 3207/DEL/2009 | 2006-2007
Pronouncement Date: 15-01-2010 | Result: Dismissed

Appeal Details

RSA Number 320720114 RSA 2009
Bench Delhi
Appeal Number ITA 3207/DEL/2009
Duration Of Justice 6 month(s) 1 day(s)
Appellant ACIT, New Delhi
Respondent M/s. Selan Exploration Technology Ltd, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 15-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 15-01-2010
Date Of Final Hearing 07-01-2010
Next Hearing Date 07-01-2010
Assessment Year 2006-2007
Appeal Filed On 14-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G NEW DELHI BEFORE SHRI RAJPAL YADAV JUDICIAL MEMEBR AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER I.T.A NO. 3207/DEL./09 ASSESSMENT YEAR - 2006-07 ACIT CIRCLE-8 (1) ROOM NO. 163 C.R. BUILDING NEW DELHI. VS. SELAN EXPLORATION TECHNOLOGY LTD. 3 THE GREEN RAJKORI NEW DELHI. (APPELLANT) (RESPONDENT) AND I.T.A. NO. 2977/DEL/09 ASSESSMENT YEAR 2006-07 SELAN EXPLANATIION TECHNOLOGY LTD. VS. DCI T CIRCLE-8 (1) 3 THE GREEN RAJOKRI NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KISHORE B SR. DR. RESPONDENT BY : KVSR KRISHNA CA ORDER PER RAJPAL YADAV JM: ITA NO. 3207/DEL/09 & I TA NO. 2977/DEL/09 AS STT. YEAR 2006-07 2 THE ASSESSEE AND REVENUE ARE IN CROSS APPEAL AGAIN ST THE ORDER OF LD. CIT (A) DATED 15 TH APRIL 2009 PASSED FOR ASSTT. YEAR 2006-07. THE CO MMON ISSUE INVOLVED IN BOTH THESE APPEALS RELATES TO ALLOWABIL ITY AND DISALLOWABILITY OF EXPENSES INCURRED ON FOREIGN TRAVEL BY THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING PLACED ON RECORD CERTAIN DETAILS IN TABULAR FORM WHEREIN HE HAS POINTED OUT THE TOTAL EXPENSES CLAIMED BY ASSESSEE ALLOWED BY THE AO FURTHER RELIEF GRANTED BY THE LD. CIT(A) AND HOW RELIEF OF RS. 16 52 510/- IS STILL TO BE GRANTED TO THE ASSESSEE AS THE ISSUE IS COVERED PARTLY IN FAVO UR OF THE ASSESSEE BY THE ORDER OF THE ITAT PASSED IN ASTT. YEAR 2003-04 2004-05. THE DETAILS READ AS UNDER :- SELAN EXPLORATION TECHNOLOGY LIMITED ASSESSMENT YEAR 2006-07 DETAILS OF RELIEF SOUGHT FROM THE HON BLE ITAT PARTICULARS AMOUNT (IN RS.) TOTAL EXPENSES 5 662 036 ALLOWED BY AO (A) 1 415 536 _______________ DISALLOWED BY AO 4 246 500 RELIEF BY CIT (A) (B ) 1 378 250 ________________ DISALLOWANCE AS ON DATE 2 868 250 ________________ TOTAL EXPENSES 5 662 036 LESS : TRAVEL FARE EXPENSES DULY SUPPORTED 799 075 ________________ 4 862 961 25% DISALLOWANCE AS PER ITAT ORDER 1 215 740 ________________ EXPENSES TO BE ALLOWED 4 446 296 EXPENSES ALLOWED (A) + (B) 2 793 786 _________________ BALANCE RELIEF SOUGHT BEFORE ITAT 1 652 510 __________________ ITA NO. 3207/DEL/09 & I TA NO. 2977/DEL/09 AS STT. YEAR 2006-07 3 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF OIL EXPLORATION . IT HAS FILED ITS RETURN OF INCOME ON 28.11.2006 DECLARING TOTAL LOSS OF RS. 1 07 53 983/-. THE AO ISSUED NOTICE U/S 143(2) OF T HE ACT. ON SCRUTINY OF THE ACCOUNTS HE FOUND THAT ASSESSEE HAS CLAIMED A SUM O F RS. 56 62 036/- ON ACCOUNT OF FOREIGN TRAVEL OF ITS DIRECTORS SHRI ROHIT KAPOO R SHRI S.K. SINGH AND SHRI V.B. MAHAJAN TO UK USA AND SINGAPORE. OUT OF THIS TOTAL AMOUNT A SUM OF RS. 7 99 075/- PERTAINS TO AIR FARE AND RS. 48 35 407/- FOR PURCHA SE OF FOREIGN CURRENCY FOR MEETING OUT VARIOUS EXPENSES REGARDING LODGING AND BOARDING ETC. THE AO NOTICED THAT SHRI ROHIT KAPOOR IS A NON EXECUTIVE DIRECTOR BASED IN N EW YORK USA. HE HAS UNDERTAKEN FOUR FOREIGN VISITS OUT OF THESE FOUR TW O HAVE BEEN PERFORMED VIA NEW YORK. IN THE OPINION OF THE AO THESE VISITS DO NOT AT ALL APPEAR TO BE UNDERTAKEN FOR THE PURPOSE OF THE ASSESSEE COMPANYS BUSINESS RATH ER THEY ARE MORE LIKELY THE PERSONAL VISITS TO HIS HOME TOWN. HE THEREFORE MA DE A DISALLOWANCE OF RS. 29 80 000/- BY TREATING IT AS NON BUSINESS EXPENSES . FOLLOWING HIS FINDING IN ASSTT. YEAR 2003-04 AND 2004-05 DISALLOWED 50% OF THE BALA NCE EXPENSES ON THE GROUND THAT ASSESSEE FAILED TO PRODUCE RELEVANT BILLS AND VOUCHERS IN SUPPORT OF ITS CLAIM. IN THIS WAY TOTAL DISALLOWANCE OF RS. 42 46 500/- WAS MADE BY THE AO. 3. ON APPEAL IT WAS CONTENDED BY THE ASSESSEE IN AS STT. YEAR 2003-04 AND 2004- 05 SIMILAR ISSUE TRAVELED UP TO THE TRIBUNAL AND TH E TRIBUNAL HAS RESTRICTED THE DISALLOWANCE TO 25% OF THE TOTAL FOREIGN TRAVEL EXP ENSES IN ITA NOS. 1450 AND 1451/DEL/07 LD. CIT(A) ACCEPTED THE CONTENTION OF ASSESSEE TO THIS EXTENT BUT HOWEVER HE CONCURRED WITH THE FINDING OF THE AO THA T SHRI ROHIT KAPOOR IS BASED AT NEW YORK WHICH PROVES THAT THE PURPOSE OF HIS TRAVE L IS ATLEAST MIX IF NOT FULLY NON BUSINESS. HE ALSO FOUND THAT EXPENSES OF HIS WIFE F OR FOREIGN TRAVEL HAVE BEEN ITA NO. 3207/DEL/09 & I TA NO. 2977/DEL/09 AS STT. YEAR 2006-07 4 TREATED AS COMPANIES EXPENSES. HE DIRECTED THE AO T O FULLY DISALLOW THE EXPENSES PERTAINING TO THE WIFE OF SHRI ROHIT KAPOOR. WITH REGARD TO SHRI ROHIT KAPOOR LD. CIT(A) HAS OBSERVED THAT 75% OF THE EXPENSES OTHER THAN TICKETS ARE TO BE DISALLOWED IN RESPECT OF SHRI ROHIT KAPOOR S TWO J OURNEY TO NEW YORK/ LONDON. WITH REGARD TO REST OF THE EXPENSES LD. CIT (A) DIRECTED THE AO TO DISALLOW 25% AS PER ITATS ORDER IN EARLIER YEARS. 4. LD. COUNSEL FOR THE ASSESSEE ON THE STRENGTH OF THE DETAILS TABULATED ABOVE POINTED OUT THAT ASSESSEE IS ENTITLED TO RELIEF OF RS. 16 52 510/- ON THE BASIS OF THE ITATS ORDER IN EARLIER YEAR. HE POINTED OUT THAT N O DOUBT COMPLETE DETAILS SUPPORTED WITH THE VOUCHERS ARE NOT AVAILABLE WITH THE ASSES SEE AND NOT PRODUCED BEFORE THE AO. BUT IF WE LOOK THE TOTAL TURN OVER OF THE ASSES SEE AND THE EXPENSES IN TERMS OF %AGE OF THE TOTAL TURN OVER THEN IT IS 3.03 WHICH I S FAR LESS THAN ASSTT. YEAR 2003-04 2004-05 AND 2005-06. IN THOSE ASSTT. YEARS IT WAS 3 .99% 8.04% .5.05% RESPECTIVELY. HE FURTHER POINTED OUT THAT IN ASSTT. YEAR 2003-04 2004-05 THE AO HAS MADE A DISALLOWANCE AT 50% WHICH HAVE BEEN RESTRICT ED BY THE ITAT TO 25%. IF A STRICT LINE CANNOT BE DRAWN QUANTIFYING EXACT AMOUN T OF EXPENSES ALLEGED TO HAVE BEEN INCURRED FOR BUSINESS PURPOSE AND NON BUSINESS PURPOSE THEN THE ESTIMATED DISALLOWANCE OUGHT TO BE WORKED OUT BY FOLLOWING A COMMON YARDSTICKS. LD. REVENUE AUTHORITIES HAVE MADE DIFFERENT CLASSIFICATION WITH IN A CLASS WITHOUT THEIR BEING ANY BASIS. LD. DR ON THE OTHER HAND RELIED UPON THE ORD ER OF AO. 5. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION. AS FAR AS THE ISSUE AGITATED IN THE APPEAL OF REVENUE IS CONCERNED IT IS AGITATING THE FINDING OF LD. CIT(A) FOR RESTRICTING THE DISALLOWANCE TO 25% OF THE BALANCED AMOUNT WORKED OUT BY HIM ON THE BASIS OF ITATS ORDER. IN ASSTT. YEAR 2003-04 WE HA VE EXAMINED THIS ISSUE AND ITA NO. 3207/DEL/09 & I TA NO. 2977/DEL/09 AS STT. YEAR 2006-07 5 ARRIVED AT A CONCLUSION THAT ASSESSEE WAS UNABLE TO PROVE ITS EXPENSES FOR THE PURPOSE OF THE BUSINESS AND WE RESTRICTED THE DISAL LOWANCE TO 25%. THE AO HAD MADE DISALLOWANCE AT 50% ON THE BASIS OF HIS FINDIN G ASSTT YEAR 2003-04 AND 2004- 05 ONLY. TO THAT EXTENT WE DO NOT FIND ANY ERROR IN THE ORDER OF LD. CIT(A). HENCE APPEAL OF THE REVENUE IS DISMISSED. 6. AS FAR AS APPEAL OF ASSESSEE IS CONCERNED THE NE W FACT DISCUSSED BY THE LD. CIT(A) AS WELL AS AO ARE NOT SUPPORTED WITH ANY EVI DENCE. THE FINDING OF THE AO IS THAT FOUR VISITS UNDERTAKEN BY SHRI ROHIT KAPOOR VI A NEW YORK APPEARS TO BE PERSONAL VISIT TO HIS HOME TOWN. HE HAS NOT RECORDE D THE STATEMENT OF SHRI ROHIT KAPOOR OR ANY OTHER REPRESENTATIVE OF THE COMPANY. ELEMENT OF PERSONAL NATURE OF EXPENSES INVOLVED IN THESE VISITS MAY NOT BE RULED OUT BUT THERE IS NO SPECIFIC EVIDENCE EITHER IN FAVOUR OF THESE EXPENSES OR AGAI NST THE VISITS VIA NEW YORK. SIMILAR WAS THE REASON IN EARLIER YEARS WHERE WE FI ND THAT ASSESSEE CANNOT PROVE ITS BUSINESS EXPENSES AND WE RESTRICTED THE DISALLOWANC E TO 25% OF THE TOTAL EXPENSES. THAT CAN TAKE CARE OF ALL NON BUSINESS USER OF THE EXPENSES. THE TOTAL EXPENSES IN TERMS OF %AGE WITH RESPECT TO THE TOTAL TURN OVER I N THIS ASST. YEAR IS ON LOWER SIDE THAN THE ALL OTHER FOUR YEARS. WHEN ANY AUTHORITY W ANTS TO ESTIMATE THE EXPENSES FOR THE PURPOSE OF NON BUSINESS USER THEN ALL THESE FA CTORS ARE REQUIRED TO BE KEPT IN MIND I.E TOTAL TURN OVER HOW MUCH WAS ALLOWED IN EARLIER YEARS ETC. TAKING INTO CONSIDERATION THESE ASPECTS WE ARE OF THE OPINION T HAT LD. CIT(A) INSTEAD OF BIFURCATED THE EXPENSES IN DIFFERENT HEAD WITH IN O NE CLASS ON THE ALLEGATION OF NEW FACTS OUGHT TO HAVE MADE A DISALLOWANCE AT 25% OF T HE TOTAL EXPENSES AS PER THE ORDER OF THE ITAT IN EARLIER YEARS. THAT ORDER WAS PASSED UNDER THE SIMILAR CIRCUMSTANCES I.E. ABSENCE OF EXACT EVIDENCE INDICA TING THE INCURRENCE OF EXPENSES ITA NO. 3207/DEL/09 & I TA NO. 2977/DEL/09 AS STT. YEAR 2006-07 6 SOLELY FOR THE PURPOSE OF BUSINESS. WE ALLOW THE AP PEAL OF ASSESSEE PARTLY AND DIRECT THE AO TO MAKE A DISALLOWANCE AT 25% OF THE TOTAL E XPENSES. 7. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED AND APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.1.10. [SHAMIM YAHYA] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER VEENA DATED: COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT