TRIBHOVANDAS BHIMJI ZAVERI, MUMBAI v. DY.C.I.T. CEN. CIR.2, MUMBAI

ITA 5550/MUM/2007 | 2005-2006
Pronouncement Date: 21-04-2010 | Result: Partly Allowed

Appeal Details

RSA Number 555019914 RSA 2007
Assessee PAN AAAFT0950A
Bench Mumbai
Appeal Number ITA 5550/MUM/2007
Duration Of Justice 2 year(s) 7 month(s) 30 day(s)
Appellant TRIBHOVANDAS BHIMJI ZAVERI, MUMBAI
Respondent DY.C.I.T. CEN. CIR.2, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-04-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted J
Tribunal Order Date 21-04-2010
Date Of Final Hearing 08-04-2010
Next Hearing Date 08-04-2010
Assessment Year 2005-2006
Appeal Filed On 22-08-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI PRAMOD KUMAR ( AM ) ITA NO. 5550/MUM/2007 ASSESSMENT YEAR : 2005 - 06 TRIBHOVANDAS BHIMJI ZAVERI 241 - 243 ZAVERI BAZAR MUMBAI - 400 0 02 . ..( APPELLANT ) P.A. NO. ( AAAFT 0950 A) VS. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 2 M.K. ROAD AAYAKAR BHAVAN MUMBAI - 400 0 20 . ..( RESPONDENT ) ITA NO. 6 7 45/MUM/ 2007 ASSESSMENT YEAR : 2005 - 06 DY. COMMISSIONER OF INCOME TAX - 14(1) 202 2 ND FLOOR EARNEST HOUSE NARIMAN POINT MUMBAI - 400 021. ..( APPELLANT ) VS. TRIBHOVANDAS BHIMJI ZAVERI 241 - 243 ZAVERI BAZAR MUMBAI - 400 002 . ..( RESPONDENT ) A SSESSEE BY : DR. K. SHIV A RAM WITH SHRI RAHUL K. HAKANI DEPARTMENT BY : SHRI L.K. AGRAWAL ITA NO. 5550 & 6745/M/07 A.Y: 05 - 06 2 O R D E R PER D. K. AGARWAL (JM). THESE CROSS APPEAL S BY ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE ORDER DATED 24.7.2007 PASSED BY T H E LD. CIT(A) FOR THE ASSESSMENT YEAR 2005 - 06. BOTH THESE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2 . BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM IS ENGAGED IN MANUFACTURING AND SALE OF GOLD SILVER AND DIAMOND ORNAMENTS. IT FILED RETURN DECLARING TOTAL INCOME OF RS.2 62 15 771/ - . HOWEVER THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS .3 35 57 067/ - VIDE ORDER DATED 27.2.2007 PASSED U/S.143(3) OF THE IT ACT 1961(THE ACT). ON APPEAL THE LD. CIT(A) PARTLY ALLOWED THE APPEAL. 3. BEING AGGR IE V E D BY THE ORDER OF THE LD. CIT(A) THE ASSESSEE AND THE REVENUE BOTH ARE IN APPEAL BEFORE US. ITA NO.5550/M/07 (ASSESSEE'S APPEAL) (A.Y.2005 - 06): 4. THE SOLE GROUND TAKEN BY THE ASSESSEE READS AS UNDER : - ITA NO. 5550 & 6745/M/07 A.Y: 05 - 06 3 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LOWER AUTHORITIES ERRED IN DISALLOWING ENTIRE FOREIGN TRAVEL EXPENSES OF RS .22 89 807/ - . 5. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDING IT WAS OBSERVED BY THE AO THAT THE ASSESSEE HAS CLAIMED FOREIGN TRAVELLING EXPENSES RS.22 89 807/ - . THE ASSESSEE WAS ASKED TO FILE PARTICULARS AS TO NAME OF PERSONS TRAVELLED PLACE S VISITED DATES OF JOURNEY AIR TICKET EXPENSES OTHER EXPENSES AND PURPOSE OF JOURNEY. THE ASSESSEE WAS ALSO ASKED TO EXPLAIN AS TO WHY THE SAID EXPENSES SHOULD NOT BE DISALLOWED AS THE FIRM WAS NOT ENGAGED IN EXPORT BUS INESS. IN RESPONSE IT WAS INTERALIA SUBMITTED BY T H E ASSESSEE THAT THE WHOLE TRAVEL EXPENSES ARE ATTRIBUTABLE TO THE ASSESSEE S FIRM. A LL FOREIGN VISITS HAVE BEEN UNDERTAKEN TO ACQUIRE THE KNOWLEDGE OF NEW DESIGN IN THE JEWELLERY IN THE WORLD BEING A F AST CHANGING FASHION WORLD THE VISITS SHOULD BE TREATED AS BUSINESS EXPENSES. THE ASSESSEE HAS ALSO FILED THE CHART SHOWING THE DETAILS AS REQUIRED. THE AO AFTER CONSIDERING THE A SSESSEE'S EXPLANATION OBSERVED THAT (A) THE ASSESSEE FIRM IS IN THE LINE OF JEWELLERY FROM THE LAST 100 YRS. IT IS ONE OF THE PIONEER FIRMS OF THE JEWELLERY INDUSTRY IN THE CITY AND AS SUCH ASSESSEE IS NOT REQ UIRED TO HAVE KNOWLEDGE OF JEWELLERY OF LATEST TREND OF JEWELLERY LINE ; (B) ASSESSEE FIRM IS NOT ENGAGED IN EXPORT OF JEW ELLERY . THERE IS NO EXPORT OF JEWELLERY FOR THE ITA NO. 5550 & 6745/M/07 A.Y: 05 - 06 4 Y EA R UNDER CONSIDER ATION AND SUBSEQUENT Y EA RS ; (C) THE ASSESS E E DID NOT PRODUCE ANY EVIDENCE REG ARDING THE BUSINESS PURPOSE OF THE FOREIGN TRAVEL ; AND (D) THE DISALLOWANCE OF FOREIGN TRAVEL EXPENSES HAS BEEN UPHELD BY THE CIT(A) AND ITAT FOR THE EARLIER YEARS. ACCORDINGLY THE AO WAS OF THE VIEW THAT THE FOREIGN TRAVEL EXPENSES INCURRED BY THE ASSESSEE HAVE NOT BEEN INCURRED WHOLLY AND SUBSTANTIALLY FOR THE BUSINESS PURPOSES AND HENCE HE DISALLOWED THE FOREI GN TRAVEL EXPENSES RS.22 89 807/ - . ON APPEAL THE LD. CIT(A) WHILE HOLDING THAT THE APPELLANT HAS NOT BEEN ABL E TO BRING OUT ANY POSITIVE EVIDENCE WHICH COULD SHOW THAT THE FOREIGN TRAVEL UNDERTAKEN BY S HRI SHRIKANT ZAVERI AND SMT. BINDU ZAVERI AND OTHE R MEMBER OF THE FAMILY WAS FOR THE PURPOSE OF BUSINESS AND THE VISITS UNDER TAKEN BY THEM ARE FOR NON - BUSINESS PURPOSES HOWEVER ALLOWED FOREIGN TRAVEL EXPENSES IN THE CASE OF FOREIGN TRAVEL UNDERTAKEN BY SHRI RAJEEV SAGAR AMOUNTING TO RS.40 128/ - AND CON FIRMED THE DISALLOWANCE TO THE EXTENT OF RS.22 49 679/ - . 6. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE AO AND THE LD. CIT(A) FURTHER SUBMITS THAT THE MAIN PURPOSE OF THE TRIPS WERE T O ACQUIRE KNOWLEDGE OF NEW DESIGNS IN JEWELLERY IN THE WORLD SO AS TO KEEP TRACK OF NEW DEVELOPMENT WHICH TAKES PLACE ABOARD IN THE LINE OF BUSINESS. FIRST TRIP BY TWO WORKING PARTNERS NAMELY SHRIKANT ZAVERI ITA NO. 5550 & 6745/M/07 A.Y: 05 - 06 5 AND BINAISHA ZAVERI ON 15/04/2004 WAS FOR THE BA SEL & ZURICH SWITZERLAND BASEL 2004 WORLD WATCH & JEWELLERY SHOW. THIS WAS FOR ATTENDING AN EXHIBITION HELD BETWEEN 15 TH APRIL TO 22 ND APRIL AND IN SUPPORT THE REFERENCE WAS MADE AT P AGE 5 - 28 OF THE ASSESSEE S PAPER BOOK. HE FURTHER SUBMITS THAT THE SECOND TRIP BY SHRIKANT ZAVERI ON 09.05.2004 AND BY SMT. BINDU S. ZAVERI ON 06.05.2004 WERE TO NEW YORK. THIS WAS FOR GAINING INFORMATION ABOUT THE TRENDS PREVAILING IN USA IN THE LINE OF ASSESSEE S BUSINESS. DURING THE TRIP BOTH PERSONS VISITED PARTI ES WHOSE LETTERS ARE ENCLOSED AND ALSO THE PORFORMA INVOICE AT PAGE 20 TO 21 OF THE ASSESSEE S PAPER BOOK. HE FURTHER SUBMITS THAT THE THIRD TRIP BY SMT. BINDU ZAVERI ON 14.08.2004 WAS FOR BOM/JFK/LON - AI - BOM AND PURPOSE OF THIS WAS TO GAIN INFORMATION AN D KNOWLEDGE REGARDING THE TRENDS IN THE INTERNATIONAL MARKET. DURING THE TRIP SHE VISITED PARTIES WHOSE LETTERS ARE ENCLOSED ALONG WITH PROFORMA INVOICE AT PAGE 22 - 23 OF ASSESSEE S PAPER BOOK. HE FURTHER SUBMITS THAT THE FOURTH TRIP BY SHRIKANT G. ZAVER I WAS BOMBAY FRANKFURT BOMBAY BETWEEN 12.06.2004 AND 19.06.2004. THIS TRIP HELPED THE ASSESSEE IN IMPORTING THE JEWELLERY FROM ABROAD IN JULY 2007 AS PER THE DOCUMENTS LISTED IN PARA - 1 APPEARING AT PAGE 11 TO 18 OF ASSESSEE S PAPER BOOK. HE FURTHER SUB MITS THAT THE FIFTH TRIP BY SHRIKANT G. ZAVERI AND BINDU S. ZAVERI BETWEEN 28.02.2005 AND 06.03.2005 BOM/DXB/BOM. THIS WAS THE USUAL SHORT TRIP TO DUBAI FOR ITA NO. 5550 & 6745/M/07 A.Y: 05 - 06 6 GAINING KNOWLEDGE IN THE INTERNATIONAL MARKET ABOUT THE TRENDS PREVAILING ABROAD SINCE DUBAI HAS A VERY BIG GOLD MARKET DISPLAYING THOUSANDS OF DESIGNS OF JEWELLERY. AT THIS STAGE THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO PLACED ON RECORD A CHART SHOWING THE FOLLOWING DETAILS OF FOREIGN TRAVEL EXPENSES: CHART SHOWING DETAILS OF FOREIGN TRAVELLING EX PENSES. TRIP PARTICULARS SHRIKANT ZAVERI BINDU ZAVERI BENAISHA ZAVERI I VISIT WAS FOR ATTENDING BASEL 2004 WORLD WATCH & JEWELLERY SHOW BETWEEN 15 TH APRIL TO 22 ND APRIL AND FURTHER BUSINESS VISITS. SUBSEQUENTLY IMPORTS WERE MADE FROM THESE COUNTRI ES. DURATION: 9 DAYS FROM 15 TH APRIL TO 25 TH APRIL EXPENSES: RS.6 71 531/ - N.A. DURATION: 48 DAYS FROM 15 TH APRIL TO 4 TH JUNE EXPENSES: RS.4 58 979/ - II VISIT TO NEW YORK FOR KNOWING ABOUT RECENT TRENDS IN THE LINE OF BUSINESS. VISITED SEVERAL PARTIES. DURATION: ONLY 6 DAYS FROM 9 TH MAY TO 15 TH MAY EXPENSES: RS.2 01 534/ - DURATION: ONLY 22 DAYS FROM 13 TH MAY TO 7 TH JUNE EXPENSES: RS.1 31 500/ - N.A. III VISIT TO U.S.A. & U.K. FOR KNOWING RECENT TRENDS UNDERTAKEN ALONE. N.A. DURATION: ONLY 32 DAYS FROM 14 TH AUGUST TO 16 TH SEPTEMBER EXPENSES: RS.5 25 797/ - N.A. IV VISIT TO FRANCE ALONE & SUBSEQUENTLY ORDER RECEIVED IN JUNE 2007 DURATION: ONLY 6 DAYS FROM 12 TH JUNE TO 19 TH JUNE EXPENSES: RS.1 43 533/ - / - N.A. N.A. V SHOR T TRIP TO DUBAI FOR GAINING KNOWLEDGE ABOUT TRENDS IN DUBAI DURATION: ONLY 6 DAYS FROM 28 TH FEB TO 6 TH MARCH EXPENSES: RS.38 177/ - DURATION: ONLY 6 DAYS FROM 28 TH FEB TO 6 TH MARCH EXPENSES: RS.17 484/ - N.A. HE FURTHER SUBMITS THAT THE FOREIGN TRAVE LING EXPENSES WERE ALLOWED IN EARLIER YEARS BY THE TRIBUNAL IN ASSESSEE S OWN CASE BY ITS ORDER FOR ITA NO. 5550 & 6745/M/07 A.Y: 05 - 06 7 ASSESSMENT YEAR S 2002 - 03 AND 2003 - 04 APPEARING AT PAGE 35 TO 45 O F THE ASSESSEE S PAPER BOOK. HE FURTHER SUBMITS THAT FOR THE ASSESSMENT YEAR 2004 - 05 THE LD . CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE DEPARTMENT HAS NOT FIELD ANY 2 ND APPEAL. HE FURTHER SUBMITS THAT FOREIGN TRAVEL EXPENSES ARE VERY NORMAL CONSIDERING THE TURNOVER OF RS.184 CRORES. IN T HE LIGHT OF THE ABOVE THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING THAT ALL THE EXPENSES WERE INCURRED FOR BUSINESS PURPOSES FAIRLY ADMITS THAT THE POSSIBILITY OF PERSONAL ELEMENT OF THE EXPENSES CANNOT BE RULED OUT THEREFORE HE HAS NO OBJECTION IF SOME OF THE EXPENSES ARE DISALLOWED B EING PERSONAL IN NATURE. 7 . ON THE OTHER HAND THE LD. DR SUBMITS THAT FOR THE REASONS AS MENTIONED IN THE ASSESSMENT ORDER AND IN THE ORDER OF THE LD. CIT(A) THE DISALLOWANCE SUSTAINED BY THE LD. CIT(A) BE UPHELD. 8 . WE HAVE CAREFULLY CONSIDERED THE SUB MISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE CLAIM OF THE ASSESSEE IS THAT FOREIGN TRAVEL EXPENSES RS.22 4 9 67 9/ - HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS AND IN SUPPORT HE HAS PLACED ON RECORD A CHART SHOWING THE DETAILS OF FOREIGN TRAVEL EXPENSES AND PURPOSE OF VISIT S UNDERTAKEN BY THE PARTNERS OF THE FIRM. IT WAS ITA NO. 5550 & 6745/M/07 A.Y: 05 - 06 8 DISALLOWED BY THE AO ON THE GROUND THAT (A) THE ASSESSEE FIRM IS IN THE LINE OF JEWELLERY BUSINESS FROM THE LAST 100 YRS. IT IS ONE OF THE PIONEER FIRMS OF THE JEWELLERY INDUSTRY IN THE CITY AND AS SUCH ASSESSEE IS REQ UIRED TO HAVE KNOWLEDGE OF LATEST TREND OF JEWELLERY IN ITS LINE OF BUSINESS ; (B) ASSESSEE FIRM IS NOT ENGAGED IN EXPORT OF JEWELLERY . THERE IS NO EXPORT OF JEWELLWEY FOR THE Y EA R UNDER CONSIDER A T IO N AND SUBSEQUENT Y EA RS ; (C) THE ASSESSE E DID NOT PRODUCE ANY EVIDENCE REG ARDING THE BUSINESS PURPOSE OF THE FOREIGN TRAVEL ; AND (D) THE DISALLOWANCE OF FOREIGN TRAVEL EXPENSES HAS BEEN UPHELD BY THE LD. CIT(A) AND ITAT. 9. ON APPEA L THE LD. CIT(A) OBSERVED THAT THE A SSESSEE'S NAME DOES NOT FIGURE IN THE STALL IN THE JEWELLERY EXHIBITION NAMELY BASEL 2004 WORLD WATCH & JEWELLERY SHOW HELD IN BASEL ZURICH . HE FURTHER OBSERVED THAT THE APPELLANT ALSO HAD NOT PRODUCED ANY DIRECT E VIDENCE WHICH COULD SHOW THAT THE APPELLANT AND HIS DAUGHTER MS. BINAISHA ZAVERI PARTICIPATED IN BASEL SHOW FOR JEWELLERY. HE FURTHER OBSERVED THAT THE APPELLANT S SUBMISSION THAT IT HAD SUBMITTED A COPY OF THE AIRWAY BILL WHICH IS OF BASEL DOES NOT SUPPO RT THE CASE OF THE APPELLANT THAT THEY HAD VISITED THE ABOVE JEWELLERY SHOW OR IN ANY WAY THEY HAD PARTICIPATED THEREIN. THE EVIDENCE AS PRODUCED BY THE APPELLANT IS OF GENERAL IN NATURE WHICH IN FACT MAY NOT HAVE NECESSITATED THE PERSONAL ITA NO. 5550 & 6745/M/07 A.Y: 05 - 06 9 PRESENCE OF THE PERSONS WHO HAVE TRAVELLED FOR SECURING THAT MATERIAL. IT IS AN EFFORT ON THE PART OF THE APPELLANT TO PRODUCE SOME OF THE BILLS IN ORDER TO JUSTIFY THE TRAVELLING FROM BOMBAY TO FRANKFURT AND BACK. THE LEARNED CIT(A) FURTHER NOTICED FROM THE TRAVELLI NG DETAILS FILED BY THE APPELLANT THAT SHRI SHRIKANT ZAVERI HAD UNDERTAKEN TRIP FROM BOMBAY TO NEW YORK AND BACK ON 09.05.2004 AND DATE OF RETURN WAS ON 15.05.2004 BUT NO EVIDENCE AS TO FOR WHAT PURPOSE FOR WHICH THE TRAVELLING HAVE BEEN UNDERTAKEN BY TH E APPELLANT EXCEPT FOR A LETTER FROM M/S. EURO STAR BELGUIM INC. WHICH HAD CLAIMED THAT SHRI ZAVERI HAD VISITED THEIR OFFICE AT NEW YORK. THE LETTER SPEAKS OF FURTHER PLACEMENT OF CERTAIN ORDERS ON THE ABOVE CONCERN BY THE APPELLANT BUT NO SUCH ORDER HAS B EEN PLACED. HE FURTHER OBSERVED THAT IN THE CASE OF SMT BINDU ZAVERI WHO HAD UNDERTAKEN A VISIT TO BOMBAY JFK - LONDON - AL - B1 THE JOURNEY HAD COMMENCED ON 14.08.2004 AND SHE HAD RETURNED BACK ON 16.09.2004. THE JOURNEY PERIOD INVOLVED IS FOR ALMOST 35 D AYS AND THE APPELLANT IN ITS SUPPORT HAS AGAIN PRODUCED LETTER OF M/S. EURO STAR BELGIUM INC. AND IT ALSO STATES THAT SMT. BINDU ZAVERI HAD VISITED THEIR OFFICE ON 20.08.2004 AND THEY ARE EXPECTING TO PLACEMENT OF ORDER FROM THE APPELLANT. THE LANGUAGE U SED IN BOTH THE LETTERS AS REFERRED TO ABOVE IN THE CASE OF SHRI SHRIKANT ZAVERI AND SMT. BINDU ZAVERI IS JUST SAME EXCEPT FOR THE CHANGE OF DATES. THUS FROM THE FACE OF EVIDENCES PRODUCED BEFORE THE LEARNED CIT(A) THE ITA NO. 5550 & 6745/M/07 A.Y: 05 - 06 1 0 LEARNED CIT(A) WAS OF THE VIEW THAT THESE LETTERS JUST APPEAR TO HAVE BEEN OBTAINED BY THE APPELLANT FOR THE SAKE OF JUSTIFYING THE NECESSITY OF FOREIGN TRIPS UNDERTAKEN BY THE ABOVE MENTIONED PERSONS. IN FACT SMT. BINDU ZAVERI HAD SPENT ALMOST 35 DAYS AND THE EVIDENCE PRODUCED JUST REFERS T O A MERE VISIT TO M/S EURO STAR BELGIUM INC. AND IT CANNOT IN ANY WAY JUSTIFY THE JOURNEY UNDERTAKEN FOR 35 DAYS. IT IS NOTHING BUT PURELY ON PERSONAL ACCOUNT WHICH THE APPELLANT IS TRYING TO MAKE OUT FOR THE BUSINESS PURPOSES. HE FURTHER NOTICED FROM F OREIGN TRAVEL DETAILS OF THE PERSONS WHO HAVE UNDERTAKEN FOREIGN VISITS ARE THE FAMILY MEMBERS THOUGH THEY MAY BE WORKING PARTNERS IN THE APPELLANT S CONCERN. ACCORDINGLY HE HELD THAT THE APPELLANT HAS NOT BEEN ABLE TO BRING OUT ANY POSITIVE EVIDENCE WH ICH COULD SHOW THAT THE FOREIGN TRAVEL UNDERTAKEN BY SHRI SHRIKANT ZAVERI AND SMT. BINDU ZAVERI AND OTHER MEMBER OF THE FAMILY WAS FOR THE PURPOSE OF BUSINESS AND THE APPELLANT HAS MADE EFFORTS TO PRODUCE SOME SORT OF EVIDENCE WHICH HE HELD THAT THEY DO NO T JUSTIFY THE PURPOSES AND THE VISITS UNDERTAKEN BY THE AFORESAID PERSONS WHO HAD GONE ABROAD ARE FOR NON BUSINESS PURPOSES. HE FURTHER OBSERVED THAT I N THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. 2004 - 05 ALSO THE DISALLOWANCE ON ACCOUNT OF FOREIGN TRA VEL EXPENSES HAVE BEEN CONFIRMED IN APPEAL BY CIT(A) AS THE APPELLANT HAD FAILED TO PROVE THAT SUCH EXPENSES WERE INCURRED FOR BUSINESS PURPOSES. HOWEVER HE ALLOWED FOREIGN TRAVEL ITA NO. 5550 & 6745/M/07 A.Y: 05 - 06 11 EXPENSES OF RAJEEV SAGAR AMOUNTING TO RS.40 128/ - AND HE SUSTAINED THE BALA NCE AMOUNT OF RS.22 49 679/ - (RS.22 89 807 RS.40 128) WHICH IS PURELY FOR PERSONAL PURPOSE AND IT CANNOT BE SAID TO BE INCURRED BY THE APPELLANT WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSE. 10. WE FURTHER FIND THAT THE TRIBUNAL IN A SSESSEE'S OWN CA SE IN DCIT VS. M/S. TRIBHOVANDAS BHIMJI ZAVERI IN ITA NO. 8316/M/2003 FOR ASSESSMENT YEAR 20 02 - 03 ORDER DATED 13 TH JUNE 2007 HAS ALLOWED THE FOREIGN TRAVEL EXPENSES INCURRED ON THE EMPLOYEES OF THE ASSESSEE FIRM IN RESPECT OF FOREIGN TRAVEL UNDERTAKEN BY T HEM IN CONNECTION WITH THE BUSINESS OF THE ASSESSEE FIRM. THE ABOVE ORDER OF THE TRIBUNAL HAS BEEN FOLLOWED BY THE TRIBUNAL IN THE APPEALS FOR THE ASSESSMENT YEARS 2003 - 04 AND 2004 - 05 VIDE ORDERS DATED 14.8.2008 AND 30.4.2008 RESPECTIVELY. FURTHER THE HO N BLE JURISDICTIONAL HIGH COURT HAS ALSO UPHELD THE VIEW TAKEN BY THE TRIBUNAL VIDE JUDGMENT IN CIT VS. M/S. TRIBHOVANDAS BHIMJI LTD. DATED 17.11.2009 IN INCOME TAX APPEAL NO.910 1957 AND 2220 OF 2009. 11. IN RAM BAHADUR THAKUR LTD. VS. CIT (2003) 261 IT R 390 (KER.)(FB) THEIR LORDSHIPS HAVE LAID DOWN THE BROAD PRINCIPLES ON THE SCOPE OF SECTION 37(1) OF THE ACT VIS - A - VIS ON THE ISSUE OF FOREIGN TRAVEL EXPENSES WHICH WERE SUMMARISED AS FOLLOWS ( PAGE 404): ITA NO. 5550 & 6745/M/07 A.Y: 05 - 06 12 THE BROAD PRINCIPLES THAT CAN BE DEDUCED FROM THE AFORESAID DISCUSSION ON THE SCOPE OF SECTION 37(1) OF THE ACT VIS - A - VIS THE QUESTION OF LAW INVOLVED IN THE CASE CAN BE SUMMARISED AS FOLLOWS : (1) IN ORDER TO CONSTITUTE AN EXPENDITURE FALLING UNDER SECTION 37(1) OF THE ACT THE SIX CONDITIONS VIZ. (I) THE EXPENDITURE SHOULD NOT BE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36 (II)IT SHOULD HAVE BEEN INCURRED IN THE ACCOUNTING YEAR (III) IT SHOULD BE IN RESPECT OF A BUSINESS WHICH WAS CARRIED ON BY THE ASSESSEE AND THE PROFITS OF WHICH ARE TO BE C OMPUTED AND ASSESSED (IV) IT SHOULD NOT BE IN THE NATURE OF PER - SONAL EXPENSES OF THE ASSESSEE (V) IT SHOULD HAVE BEEN LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF SUCH BUSINESS AND (VI) IT SHOULD NOT BE IN THE NATURE OF CAPITAL EXPEN DITURE SHOULD CONCUR. (2) THOUGH THE EXPRESSIONS FOR THE PURPOSES OF THE BUSINESS IS WIDER IN SCOPE THAN THE EXPRESSION FOR THE PURPOSE OF EARNING PROFITS AND MAY COMPREHEND MANY ACTS INCIDENTAL TO THE CARRYING ON OF A BUSINESS ITS LIMITS ARE IMPLICIT IN IT AND THE PURPOSE SHALL BE FOR THE PURPOSE OF THE BUSINESS THAT IS TO SAY THE EXPENDITURE INCURRED SHALL BE FOR THE CARRYING ON OF THE BUSINESS AND THE ASSESSEE SHALL INCUR IT IN HIS CAPACITY AS A PERSON CARRYING ON THE BUSINESS. (3) THE EXPENDITURE INCURRED IS ON THE GROUND OF COMMERCIAL EXPEDIENCY AND IN ORDER INDIRECTLY TO FACILITATE THE CARRYING ON OF THE BUSINESS. (4) THE FACT THAT THERE WAS NO COMPELLING NECESSITY TO INCUR THE EXPENDITURE ON WHICH DEDUCTION IS CLAIMED IS IRRELEVANT TO CONSTITU TE EXPENDITURE UNDER SECTION 37(1) OF THE ACT. (5) EVEN AN EXPENDITURE INCURRED BY AN ASSESSEE IN THE COURSE OF HIS OR ITS BUSINESS VOLUNTARILY AND WITHOUT NECESSITY CAN BE ALLOWED AS A DEDUCTION UNDER SECTION 37(1) OF THE ACT IF IT IS INCURRED FOR PROMOTI NG THE BUSINESS AND TO EARN PROFITS EVEN THOUGH THERE WAS NO COMPELLING NECESSITY TO INCUR SUCH EXPENDITURE. (6) IF THE PAYMENT OF EXPENDITURE IS INCURRED FOR THE PURPOSE OF THE TRADE OF THE ASSESSEE IT DOES NOT MATTER THAT THE PAYMENT MAY ENURE TO THE BEN EFIT OF A THIRD PARTY ALSO. (7) IN EVERY CASE IT IS A QUESTION OF FACT WHETHER THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF TRADE OR BUSINESS OF THE ASSESSEE. (8) WHERE AN ASSESSEE SEEKS TO DEDUCT FROM HIS OR ITS BUSINESS PROFITS CERTAIN ITEMS OF EXPENDITURE THE ONUS OF PROVING THAT SUCH DEDUCTIONS ARE PERMISSIBLE IS ON THE ASSESSEE. THIS IS PARTICULARLY SO WHEN THE CLAIMS ARE BASED ON FACTS WHICH ARE ITA NO. 5550 & 6745/M/07 A.Y: 05 - 06 13 EXCLUSIVELY WITHIN THE KNOWLEDGE OF THE ASSESSEE. THUS IT IS FOR THE ASSESSEE TO PLEAD AND PROVE BEFORE THE AUTHORITIES THAT THE EXPENSES ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. (9) WHEN A CLAIM FOR DEDUCTION OF AN EXPENDITURE UNDER SECTION 37(1) OF THE ACT IS MADE BY AN ASSESSEE THE ASSESS ING OFFICER IS BOUND TO CONDUCT AN ENQUIRY AS TO WHETHER THE ASSESSEE SATISFIES ALL THE REQUIREMENTS OF THE SECTION BEFORE EITHER ALLOWING OR REJECTING THE CLAIM. THE OFFICER CANNOT MECHANICALLY EITHER ALLOW THE DEDUCTION OR DENY THE SAME. WE MAKE IT CLE AR THAT THESE ARE NOT EXHAUSTIVE AND THE APPLICATION OF THESE PRINCIPLES MAY VARY FROM CASE TO CASE AND WILL DEPEND ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. IT HAS BEEN HELD (PAGE 405) : WE ARE OF THE VIEW THAT IN ALL CASES WHERE AN ASSESSEE MAKE S A CLAIM FOR DEDUCTION OF AN EXPENDITURE UNDER SECTION 37(1)OF THE ACT THE ASSESSING OFFICER IS BOUND TO CONSIDER THE SAID CLAIM BE IT IN RESPECT OF THE EXPENSES FOR THE FOREIGN TOUR OF THE DIRECTOR OF A COMPANY OR IN RESPECT OF THE EXPENSES FOR THE FORE IGN TOUR OF THE WIFE OF THE DIRECTOR ACCOMPANYING HIM METICULOUSLY KEEPING IN MIND THE LEGAL PRINCIPLES GOVERNING THE QUESTION AND TO ARRIVE AT A DECISION EITHER WAY AFTER AFFORDING A REASONABLE OPPORTUNITY TO THE ASSESSEE. THE APPELLATE AUTHORITIES ARE A LSO BOUND TO CONSIDER THE MATTER IN ACCORDANCE WITH LAW AND IN THE LIGHT OF THE BROAD LEGAL PRINCIPLES SUMMARISED ABOVE. OF COURSE THE BURDEN IS ON THE ASSESSEE TO FURNISH ALL RELEVANT MATERIALS TO ESTABLISH ITS CLAIM THAT THE EXPENDITURE ON WHICH DEDUCTIO N IS CLAIMED FALLS UNDER SECTION 37(1). 12. IN DELHI CLOTH AND GENERAL MILLS CO.LTD. VS. CIT (1994) 208 ITR 785 IT HAS BEEN HELD (PAGE 795): AS REGARDS QUESTION NO. 4 LEARNED COUNSEL FOR THE REVENUE FAIRLY CONCEDES THAT IN VIEW OF THE DECISION OF THI S COURT IN THE CASE OF THE ASSESSEE ITSELF REPORTED AS DELHI CLOTH AND GENERAL MILLS CO. LTD. V. CIT [1986] 158 ITR 64 W HEREIN IT HAS BEEN HELD THAT EXPENSES INCURRED BY AN ASSESSEE FOR ATTENDING A BUSINESS CONFERENCE BY ITS ITA NO. 5550 & 6745/M/07 A.Y: 05 - 06 14 EMPLOYEE WOULD BE DEDUCTIBLE AS BUSINESS EXPENDITURE THE QUESTION REQUIRES TO BE ANSWERED IN THE AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE. WE MAY NOTE THAT THE REVENUE'S SPECIAL LEAVE PETITION TO APPEAL AGAINST THE SAID JUDGMENT HAS ALSO BEEN DISMISSED (SEE [1992] 193 ITR (ST.) 5) . THE QUESTION IS ACCORDINGLY ANSWERED. 13. ON E XAMINING THE A SSESSEE'S CASE IN THE LIGHT OF THE ABOVE PRINCIPLES LAID DOWN BY THEIR LORDSHIPS AND KEEPING IN VIEW THE EVIDENCE FILED BY THE ASSESSEE WE FIND THAT IT IS NOT THE CASE OF THE AO THAT THE PA RTNERS HAVE NOT UNDERTAKEN FOREIGN TRIPS. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THERE WAS NO SUCH EXHIBITION IN BASEL ZURICH AT THE RELEVANT TIME. SINCE THE PARTNERS OF THE FIRM HA VE ATTENDED THAT EXHIBITION HELD DURING 15 TH APRIL 2004 TO 22 ND APRI L 2004 TO KEEP TRACK OF NEW DEVELOPMENTS IN THE LINE OF THE BUSINESS AND IN THE ABSENCE OF ANY OTHER CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE WE ARE OF THE VIEW THAT THE FOREIGN TRAVEL EXPENSES INCURRED BY THE ASSESSEE FOR ATTENDING THE SAID EXHIB ITION CANNOT BE SAID FOR NON - BUSINESS PURPOSES . SIMILARLY THE OTHER VISITS TO NEW YORK USA UK FRANCE AND DUBAI FOR KNOWING RECENT TRENDS IN THE LINE OF THE BUSINESS CANNOT BE TOTALLY VIEWED FOR NON BUSINESS PURPOSES. HOWEVER KEEPING IN VIEW THAT TH E ASSESSEE HAS FAILED TO PROVE THE NEXUS OF DURATION / STAY OF THE FOREIGN VISITS WHICH IN THIS CASE VARIES FROM 6 DAYS 9 DAYS 22 DAYS 32 DAYS AND 48 DAYS WE ARE OF THE VIEW THAT THE ENTIRE FOREIGN TRAVEL EXPENSES HAVE NOT BEEN INCURRED WHOLLY AND EX CLUSIVELY FOR THE PURPOSE OF BUSINESS AND ITA NO. 5550 & 6745/M/07 A.Y: 05 - 06 15 ACCORDINGLY IN THE INTEREST OF JUSTICE IT WOULD BE FAIR AND REASONABLE IF A DISALLOWANCE OF 25% OF RS.22 49 679/ - IS CONSIDERED ON ACCOUNT OF PERSONAL VISITS AND STAY BY THE PARTNERS . A CCORDINGLY WE SUSTAIN THE D ISALLOWANCE OF RS.5 62 420/ - BEING 25% OF RS.22 49 679/ - FOR PERSONAL PURPOSES AND DELETE THE BALANCE DISALLOWANCE OF RS.16 87 259/ - . T HE GROUND TAKEN BY THE ASSESSEE IS THEREFORE PARTLY ALLOWED. ITA NO.6745/M/07 (ASSESSMENT YEAR 05 - 06) (REV ENUE S APPEA L) : 14. ALL THE GROUNDS ARE AGAINST THE DELETION OF DISALLOWANCE OF DEDUCTION U/S.80 IB OF THE ACT. 15. AT THE TIME OF HEARING IT HAS BEEN AGREED BY BOTH PARTIES THAT THE ISSUE IS COVERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL CONFIRMED BY THE HON BLE JURISDICTIONAL H IG H COURT IN CIT VS. TRIBHOVANDAS BHIMJI LTD. IN INCOME T AX APPEAL S NO. 910 1957 AND 2220 OF 2009 DATED 17.11.2009 WHEREIN IT HAS BEEN OBSERVED AND HELD AS UNDER : H EARD LEARNED C OUNSEL FOR THE R EVENUE AND THE LEARNED COUNSEL APPEARING ON BEHALF OF THE RESPONDENT. THE QUESTION SOUGHT TO BE RAISED IN THIS APPEAL IS WHETHER THE TRIBUNAL WAS RIGHT IN CONFIRMING THE DECISION OF CIT(A) ON FOREIGN TRAVEL EXPENSES AND ALLOWING THE ASSESSEE S CLAIM FOR DE DUCTION U/S.80IB OF INCOME TAX ACT. WE WERE TAKEN THROUGH THE ORDER OF THE TRIBUNAL WHEREIN IN PARAGRAPHS 6 & 7 OF THE IMPUGNED ORDER THE TRIBUNAL HAS DEALT WITH THE DEDUCTION UNDER SECTION 80IB OF THE ACT. HAVING GONE THROUGH THE SAME WE FIND NO FAULT WITH THE VIEW TAKEN BY THE TRIBUNAL. T HE VIEW TAKEN BY THE ITA NO. 5550 & 6745/M/07 A.Y: 05 - 06 16 TRIBUNAL IS REASONABLE AND POSSIBLE VIEW. NO SUBSTANTIAL QUESTION OF LAW ARISE IN THE APPEALS. THE APPEALS ARE THEREFORE DISMISSED IN LIMINI WITH NO ORDER AS TO COSTS. RESPECTFULLY FOLLOWING THE ABOVE DECISION AND IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT ON RECORD BY THE REVENUE WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S.80 IB OF THE ACT AND ACCORDINGLY WE ARE INCLINED TO UPHOLD THE FINDING OF THE LD. CIT( A) IN DIRECTING THE AO TO ALLOW THE CLAIM OF THE ASSESSEE. T HE GROUNDS TAKEN BY THE REVENUE ARE THEREFORE REJECTED. 16. IN THE RESULT A SSESSEE'S APPEAL IS PARTLY ALLOWED AND REVENUE S APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.4. 2010. SD/ - SD/ - ( PRAMOD KUMAR ) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 21.4. 20 10 . JV. COPY TO : THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR I TAT MUMBAI.