SOHAM TRADING AND INVESTMENT P. LTD, MUMBAI v. DCIT 7(2), MUMBAI

ITA 6040/MUM/2009 | 2005-2006
Pronouncement Date: 04-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 604019914 RSA 2009
Assessee PAN AABCS4422J
Bench Mumbai
Appeal Number ITA 6040/MUM/2009
Duration Of Justice 1 year(s) 11 month(s) 18 day(s)
Appellant SOHAM TRADING AND INVESTMENT P. LTD, MUMBAI
Respondent DCIT 7(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 04-11-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 04-11-2011
Date Of Final Hearing 31-10-2011
Next Hearing Date 31-10-2011
Assessment Year 2005-2006
Appeal Filed On 16-11-2009
Judgment Text
1 SOHAM TRADING & INVESTMENT P LTD IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI E BENCH MUMBAI BENCHES MUMBAI BEFORE SHRI B RAMAKOTAIAH AM & SHRI VIJAY PAL RA O JM ITA NO. 6040/MUM/2009 (ASST YEAR 2005-06) SOHAM TRADING & INVESTMENT P LTD MAHALAXMI ENGG ESTATE LADY JAMSHEDJI CROSS ROAD NO.1 MAHIM (W) VS THE DY COMMR OF INCOME TAX 7(2) MUMBAI (APPELLANT) (RESPONDENT) PAN NO. AABCS4422J ASSESSEE BY SH S C TGIWARI/MS NATASHA MANGAT REVENUE BY SH G P TRIVEDI DT.OF HEARING 31 ST OCT 2011 DT OF PRONOUNCEMENT 4TH NOV 2011 PER VIJAY PAL RAO JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 25.8.2009 OF THE CIT(A) FOR THE AY 2005-06. 2 THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE G ROUNDS IN THIS APPEAL: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE T HE LEARNED COMMISSIONER OF INCOME TAX (A) VII MUMBAL (HEREINAFTER REFERRED TO AS CIT (A)) HAS ERRED IN TREATING THE FOREIGN TRAVELLING EXPENSES AS NON-G ENUINE VIS--VIS THE BUSINESS OF APPELLANT WITHOUT BRINGING ANY MATERIAL ON RECORD. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LEARNED CIT (A) HAS ERRED IN BRUSHING ASIDE THE EVIDENCE PRODUCED BEFORE HIM IN RESPECT OF FOREIGN TRAVELLING AND HAS ERRED IN CONCLUDING THAT T HE APPELLANT HAS FAILED IN DISCHARGING THE ONUS IN THAT RESPECT. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LEARNED CIT (A) HAS ERRED IN LAW IN DIRECTING THE A.O. TO WORK OUT DISA LLOWANCE AS PER RULE 8D READ WITH SECTION 14A WITHOUT CONSIDERING THE FACTS OF HE CASE IN ITS ENTIRETY. 2 SOHAM TRADING & INVESTMENT P LTD 3 GROUND 1 & 2 IS REGARD DISALLOWANCE OF FOREIGN TR AVELLING EXPENSES. 3.1 THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PREM ISES SERVICE PROVIDER. THE ASSESSEE HAS DEBITED TO THE P&L ACCOUNT AN AMOUNT O F RS. 2 12 990/- UNDER THE HEAD FOREIGN TRAVELLING EXPENSES. THE ASSESSING OFFICER HAS MADE AN ENQUIRY AS TO THE BUSINESS NEXUS OF THE FOREIGN TRAVELLING EXPENS ES AND ASKED THE ASSESSEE TO FILE THE NECESSARY RECORDS IN SUPPORT OF THE CLAIM OF TH E EXPENSES. THE ASSESSING OFFICER HELD THAT THE ASSESSEE COULD NOT PRODUCE ANY SATISF ACTORY EXPLANATION OR EVIDENCE REGARDING THE CLAIM OF FOREIGN TRAVELLING EXPENSES. ACCORDINGLY THE CLAIM OF FOREIGN TRAVELLING EXPENSES AMOUNTING TO RS. 2 12 990/- WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3.2 ON APPEAL THE CIT(A) AFTER ANALYZING THE FACT HELD THAT THE TRAVELLING EXPENSES ARE NOT BEING WHOLLY AND EXCLUSIVELY FOR T HE PURPOSE OF THE BUSINESS; THEREFORE DISALLOWED. 4 BEFORE US THE LD AR OF THE ASSESSEE HAS SUBMITTE D THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE WITHOUT CONFRO NTING THE ASSESSEE TO PRODUCE ANY SPECIFIC EVIDENCE IN SUPPORT OF THE CLAIM OF TH E ASSESSEE. EVEN THE CIT(A) HAS NOT DISPUTED THE FOREIGN TRAVEL UNDERTAKEN BY THE A SSESSEE; THEREFORE TAXING AUTHORITY CANNOT QUESTION THE BUSINESS DECISION OF THE ASSESSES WHEN THE EXPENDITURE WAS ACTUALLY INCURRED. HE HAS FURTHER SUBMITTED THAT THE DIRECTOR OF THE ASSESSEE COMPANY HAS VISITED LONDON AS A GOODWILL V ISIT TO ITS CLIENT M/S G.E COUNTRYWIDE CONSUMER FINANCIAL SERVICES LTD. HE HAS MET ONE MR RAO AT LONDON AND THEREFORE THE ASSESSEE HAS EXPLAINED THE PURPO SE OF THE VISIT. ALL THE EXPENSES WERE BY ACCOUNT PAYEE CHEQUE; THEREFORE THE GENUIN ENESS OF THE EXPENDITURE HAS NOT BEEN DISPUTED. THE LD AR HAS EMPHASIZED THAT IN SUCH A CLAIM EXCEPT EXPLAINING THE PURPOSE OF THE VISIT THE ASSESSEE C OULD NOT FILE DOCUMENTARY 3 SOHAM TRADING & INVESTMENT P LTD EVIDENCE. THE REVENUE CANNOT ENTER INTO THE SHOE OF A BUSINESSMAN TO QUESTION THE BUSINESS DECISIONS. HE HAS RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SASSOON J. DAVID AND CO. (P.) LTD. V. COMMISSIONER OF INCOME-TAX REPORTED IN 118 ITR 261 AS WELL AS THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF BRALCO METAL INDUSTRIES PVT. LTD. V. COMMISSIONER OF INCOME-TAX 206 ITR 477. 4.1 ON THE OTHER HAND THE LD DR HAS SUBMITTED THAT WHEN THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS TO PROVE THAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE; THEN THE ASSESSING O FFICER HAS RIGHTLY DISALLOWED THE SAID EXPENDITURE. HE HAS FURTHER SUBMITTED THAT TH E CIT(A) HAS POINTED OUT THAT THE ASSESSEE FAILED TO EXPLAIN THE PURPOSE OF THE FOREI GN TOUR UNDERTAKEN BY THE ASSESSEE AND THE SUBJECT MATTER FOR THE MEETING AN D DISCUSSIONS. THE LD DR HAS SUBMITTED THAT THE UNDISPUTED FACT IS THAT THE OFFI CE OF THE M/S G.E COUNTRYWIDE CONSUMER FINANCIAL SERVICES LTD. IS AT DELHI; THERE FORE FOREIGN TOUR UNDERTAKEN TO LONDON CANNOT BE CONSIDERED AS FOR THE BUSINESS PUR POSES WHEN THE ASSESSEE HAS FAILED TO PRODUCE THE RELEVANT MATERIAL IN SUPPORT OF THE CLAIM. 5 WE HAVE CONSIDERED THE RIVAL CONTENTION AND PERUS ED THE RELEVANT MATERIAL ON RECORD. AT THE THRESHOLD WE NOTE THAT M/S G.E C OUNTRYWIDE CONSUMER FINANCIAL SERVICES LTD. IS HAVING HEAD OFFICE AT DELHI TO WHOM THE PREMISES WAS LET OUT ONLY ON LEAVE AND LICENSE BASIS BY THE ASSESSEE AND THE FOREIGN TOUR BY THE DIRECTOR OF THE ASSESSEE COMPANY STATED TO HAVE BEEN UNDERTAKEN ONLY IN RESPECT OF THE LEAVE AND LICENSE TO M/S G.E COUNTRYWIDE CONSUMER FINANCI AL SERVICES LTD. FURTHER THE LEASE AND LICENSE WAS ENTERED INTO BY THE ASSESSEE AND M/S G.E COUNTRYWIDE CONSUMER FINANCIAL SERVICES LTD. ON22.3.2004; THERE FORE WHEN THE ALLEGED LEAVE AND LICENSE AGREEMENT WAS ALREADY EXECUTED AND STIL L CONTINUING THEN THE FOREIGN 4 SOHAM TRADING & INVESTMENT P LTD TOUR UNDERTAKEN DURING THE YEAR UNDERTAKEN BY THE D IRECTOR WAS CERTAINLY NOT FOR NEGOTIATION OF LEAVE AND LICENSE. IN VIEW OF THIS P ECULIAR FACT AND IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE REGARDING THE HOTEL BILL ALLEGED BOARDING EXPENSES AS WELL AS THE PURPOSE OF THE ALLEGED MEETING WITH MR RAO IT CANNOT BE ACCEPTED THAT THE EXPENDITURE CLAIMED TO HAVE BEEN INCURRED IS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. 5.1 IT IS SETTLED PROPOSITION OF LAW THAT IN ORDER TO ALLOW THE CLAIM OF EXPENDITURE U/S 37(1) APART FROM OTHER CONDITIONS THE EXPENSE S SHOULD BE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. TH E ONUS IS ON THE ASSESSEE TO PROVE AND SATISFY THE REVENUE AUTHORITIES THAT THE EXPEND ITURE HAS BEEN INCURRED ENTIRELY AND ONLY FOR THE PURPOSE OF THE BUSINESS OF THE ASS ESSEE. THE ASSESSEE HAS EVEN NOT FILED ANY DETAILS REGARDING THE PURPOSE OF FOREIGN VISIT. EVEN OTHER WISE WHEN THE LEAVE AND LICENSE WITH M/S G.E COUNTRYWIDE CONSUMER FINANCIAL SERVICES LTD. HAS ALREADY BEEN ENTERED INTO; THEN IN THE ABSENCE OF ANY SPECIFIC PURPOSE OF THE SAID FOREIGN VISIT IT CANNOT BE SAID THAT THE FOREIGN V ISIT UNDERTAKEN BY THE DIRECTOR OF THE ASSESSEE COMPANY IS IN RESPECT OF LEAVE AND LICENSE AGREEMENT WITH M/S G.E COUNTRYWIDE CONSUMER FINANCIAL SERVICES LTD. THE AS SESSEE HAS NOT BROUGHT OUT EVEN THE ATTENDING CIRCUMSTANCE AND EVIDENCE TO CON NECT THE SAID FOREIGN VISIT WITH THE BUSINESS OF THE ASSESSEE BEING LEAVE AND L ICENSE WITH M/S G.E COUNTRYWIDE CONSUMER FINANCIAL SERVICES LTD. ACCORDINGLY WE D O NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE CIT(A) QUA THIS ISSUE. 6 GROUND NO.3 IS REGARDING DISALLOWANCE U/S 14A. 6.1 THE ASSESSEE CLAIMED EXEMPTED DIVIDEND INCOME O F RS. 2 97 236/-. THE ASSESSING OFFICER DISALLOWED 10% OF THE DIVIDEND IN COME AS EXPENDITURE ATTRIBUTABLE FOR EARNING EXEMPTED DIVIDEND INCOME U/S 14A. 5 SOHAM TRADING & INVESTMENT P LTD 6.2 THE CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO REWORK THE EXPENDITURE ATTRIBUTABLE TO EARNING OF DIVIDEND INCOME BY APPLY ING RULE 8D R.W.S 14A. 7 THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT RULE 8D IS NOT APPLICABLE FOR THE AY UNDER CONSIDERATION; THEREFORE THE DIRECTIONS G IVEN BY THE CIT(A) ARE NOT SUSTAINABLE . HE HAS FURTHER STATED THAT THE ASSE SSEE WOULD ACCEPT WITH THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND TH EREFORE THE ASSESSEE WOULD NOT SEEK ANY RELIEF AGAINST THE DISALLOWANCE MADE BY TH E ASSESSING OFFICER EXCEPT THE DIRECTIONS OF THE CIT(A) FOR WORKING OUT THE EXPEND ITURE UNDER RULE 8D. 7.1 ON THE OTHER HAND THE LD DR HAS FAIRLY AGREED TO THE DISALLOWANCE ACCEPTED BY THE ASSESSEE AND MADE BY THE ASSESSING OFFICER U /S 14A AT 10% DIVIDEND INCOME. 8 SINCE RULE 8D IS NOT APPLICABLE FOR THE ASSESSME NT YEAR UNDER CONSIDERATION IN VIEW OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. V. DEPUTY COMMISSIONER OF I NCOME-TAX REPORTED IN 328 ITR 81; THEREFORE THE DIRECTIONS GIVEN BY THE CIT(A) FOR APPLYING RULE 8D ARE SET ASIDE. SINCE THE ASSESSEE HAS ACCEPTED THE DISALLOW ANCE MADE BY THE ASSESSING OFFICER; ACCORDINGLY WE SUSTAIN THE DISALLOWANCE M ADE BY THE ASSESSING OFFICER AT 10% DIVIDEND INCOME U/S 14A. 9 IN THE RESULT THE APPEAL FILED BY THE ASSESSEE I S PARTLY ALLOWED. ORDER PRONOUNCED ON THE 4TH DAY OF NOV 2011 . SD/ SD/ ( B RAMAKOTAIAH ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: NOV 2011 RAJ* 6 SOHAM TRADING & INVESTMENT P LTD COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR ITAT MUMBAI