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Income Tax Appellate Tribunal, MUMBAI BENCH “G” MUMBAI
Before: SHRI ABY T VARKEY & SHRI OM PRAKASH KANT
Being identical ground Being identical grounds raised in both these appeals raised in both these appeals, same were heard together and disposed off by way this consolidated order for er and disposed off by way this consolidated order for er and disposed off by way this consolidated order for convenience and avoid repetition of convenience and avoid repetition of facts. The ground acts. The grounds of appeal for assessment year 2017 assessment year 2017-18 are reproduced as under:
1. The Id CIT(A) erred in upholding the disallowance of The Id CIT(A) erred in upholding the disallowance of The Id CIT(A) erred in upholding the disallowance of foreign travelling expenses of Rs.5,41,634/- made by the foreign travelling expenses of made by the AO without appreciating the fact that: AO without appreciating the fact that: • The ledger and invoices were submitted. • The ledger and invoices were submitted. • The expenditure on Foreign Travel was genuinely done • The expenditure on Foreign Travel was genuinely done • The expenditure on Foreign Travel was genuinely done towards business / marketing activities of the Director of the towards business / marketing activities of the Director of the towards business / marketing activities of the Director of the assessee company. assessee company. • The foreign travel expenditure pertained to Director Mr foreign travel expenditure pertained to Director Mr foreign travel expenditure pertained to Director Mr Nihal Garware who was an NRI Nihal Garware who was an NRI • Such travel expenditure is reasonable and commensurate • Such travel expenditure is reasonable and commensurate • Such travel expenditure is reasonable and commensurate with the sales of the company. with the sales of the company. • The profitability of the company is extremely high from any • The profitability of the company is extremely high from any • The profitability of the company is extremely high from any given parameter. given parameter.
2. The Id C The Id CIT(A) erred in upholding the disallowance of IT(A) erred in upholding the disallowance of business promotion expenses of Rs. 1,81,075/ business promotion expenses of Rs. 1,81,075/- made by business promotion expenses of Rs. 1,81,075/ the AO without appreciating the fact that: the AO without appreciating the fact that: • The ledger and invoices were submitted. • The ledger and invoices were submitted. • The expenditure on Business Promotion was genuinely • The expenditure on Business Promotion was genuinely • The expenditure on Business Promotion was genuinely done towards busin done towards business / marketing activities of the Director ess / marketing activities of the Director of the assessee company. of the assessee company. • The nature of the expenditure is cost of Taj Mahal Hotel • The nature of the expenditure is cost of Taj Mahal Hotel • The nature of the expenditure is cost of Taj Mahal Hotel ChambersMembership. ChambersMembership. • Such business promotion expenditure is reasonable and • Such business promotion expenditure is reasonable and • Such business promotion expenditure is reasonable and commensurate with the sales of the company. commensurate with the sales of the company.
M/s Garware Finance Corporation Ltd. M/s Garware Finance Corporation Ltd. 3 & 68/M/2023 • The profitability of the company is extremely high from any fitability of the company is extremely high from any fitability of the company is extremely high from any given parameter. given parameter.
3. The appellant prays that aforesaid disallowance of The appellant prays that aforesaid disallowance of The appellant prays that aforesaid disallowance of travel and business promotion expenses made may be travel and business promotion expenses made may be travel and business promotion expenses made may be deleted.
In the case of the assessee a defect memo In the case of the assessee a defect memo In the case of the assessee a defect memo was issued specifying the defect that ct that the appeal was filed by the Director only the appeal was filed by the Director only. In response, the assessee submitted that a certificate to the effect In response, the assessee submitted that a certificate In response, the assessee submitted that a certificate that there was no Managing Director and therefore defect stands that there was no Managing Director and therefore defect that there was no Managing Director and therefore defect removed and appeal is admitted removed and appeal is admitted for adjudication.
Briefly stated, facts of the case are that the assessee company facts of the case are that the assessee company facts of the case are that the assessee company was engaged in the business of providing consultancy and financial was engaged in the business of providing consultancy and financial was engaged in the business of providing consultancy and financial services, trading in shares etc. For the year under consideration, shares etc. For the year under consideration, shares etc. For the year under consideration, the assessee filed return of income u/s 139(1) of the Income-tax the assessee filed return of income u/s 139(1) of the Income the assessee filed return of income u/s 139(1) of the Income Act, 1961 (in (in (in short short short ‘the ‘the ‘the Act’) Act’) Act’) declaring declaring declaring total total total income income income at Rs.1,00,18,070/-. A search action u/s . A search action u/s 132 of the Act was carried 132 of the Act was carried out in the case of the assessee on 09.03.2021 along with other n the case of the assessee on 09.03.2021 along with other n the case of the assessee on 09.03.2021 along with other cases on “Nihal Garware Nihal Garware” and consequently notice u/s 153A of the and consequently notice u/s 153A of the Act was issued. In the assessment completed u/s 153A of the Act In the assessment completed u/s 153A of the Act In the assessment completed u/s 153A of the Act dated 28.03.2022, the Assessing Officer made disallowance of dated 28.03.2022, the Assessing Officer made disallowance of dated 28.03.2022, the Assessing Officer made disallowance of travelling expense amounting to Rs.5,41,634/ travelling expense amounting to Rs.5,41,634/- and business promotion expenses of amounting to Rs.1,81,075/ promotion expenses of amounting to Rs.1,81,075/-. .
On further appeal, the Ld. CIT( On further appeal, the Ld. CIT(A) upheld the disallowance. upheld the disallowance. Aggrieved, the assessee is in appeal before the Tribunal by way of the assessee is in appeal before the Tribunal by way of the assessee is in appeal before the Tribunal by way of raising grounds as reproduced above. raising grounds as reproduced above.
M/s Garware Finance Corporation Ltd. M/s Garware Finance Corporation Ltd. 4 & 68/M/2023
We have heard rival submission of the parties on the issue We have heard rival submission of the parties on the issue We have heard rival submission of the parties on the issue-in- dispute and perused the relevant material on record. As far as dispute and perused the relevant material on record. As far dispute and perused the relevant material on record. As far Ground No. 1 relating to disallowance of foreign travelling expense Ground No. 1 relating to disallowance of foreign travelling expense Ground No. 1 relating to disallowance of foreign travelling expense is concerned, we find that assessee claimed total travelling expenses is concerned, we find that assessee claimed total travelling expenses is concerned, we find that assessee claimed total travelling expenses of Rs.10,17,746/- out of which amount of Rs.7,55,783/ out of which amount of Rs.7,55,783/- was out of which amount of Rs.7,55,783/ related to foreign travel. In the return of income filed, the assessee related to foreign travel. In the return of income filed related to foreign travel. In the return of income filed suo motu made disallowance of Rs.2,14,149/ made disallowance of Rs.2,14,149/- related to related to travel expenses. However, the Assessing Officer observed that assessee expenses. However, the Assessing Officer observed that assessee expenses. However, the Assessing Officer observed that assessee failed to explain business expediency on foreign travels and failed to explain business expediency on foreign travels and failed to explain business expediency on foreign travels and therefore, he disallowed for balance foreign travelling expenses of therefore, he disallowed for balance foreign travellin therefore, he disallowed for balance foreign travellin Rs.5,46,334/-. The Ld. CIT(A) noted the submission of the assessee . The Ld. CIT(A) noted the submission of the assessee . The Ld. CIT(A) noted the submission of the assessee that foreign travel expenses that foreign travel expenses relate to director Shri Nihal Garware Shri Nihal Garware who is a non-resident Indian and who resides outside India resident Indian and who resides outside India resident Indian and who resides outside India. According to assessee, he was According to assessee, he was required to freque required to frequently attend business affairs of the assessee company and therefore expenditure business affairs of the assessee company and therefore expenditure business affairs of the assessee company and therefore expenditure of foreign travel was justified. of foreign travel was justified.
5.1 Before us, the assessee has submitted ledger and invoices of Before us, the assessee has submitted ledger and invoices of Before us, the assessee has submitted ledger and invoices of the expenses claimed the expenses claimed. On perusal of the financial sta n perusal of the financial statements of the assessee company, ompany, we w e find find that that during during the the year year under under consideration the assessee consideration the assessee has shown revenue from operations of shown revenue from operations of Rs.1,34,50,653/-. The main expenses claimed pertain to prior . The main expenses claimed pertain to prior . The main expenses claimed pertain to prior period expenses of Rs.11,00,340/ period expenses of Rs.11,00,340/- and travel expenses of travel expenses of Rs.10,70,746/-. In our opinion . In our opinion looking to the business operations looking to the business operations of the assessee company and of the assessee company and suo motu disallowance made by the disallowance made by the M/s Garware Finance Corporation Ltd. M/s Garware Finance Corporation Ltd. 5 & 68/M/2023 assessee, additional disallowance on foreign travel expenses by the disallowance on foreign travel expenses by the Assessing Officer is not justified being a non Assessing Officer is not justified being a non-resident director resident director ,it was necessary for him necessary for him to travel to India for looking after affairs of to travel to India for looking after affairs of the assessee company the assessee company. The Assessing Officer cannot dictate to the The Assessing Officer cannot dictate to the assesseeas how to manage affairs of the assessee how to manage affairs of the assessee. The case laws . The case laws relied upon the Ld. CIT(A) by the distinguishable of facts. In the relied upon the Ld. CIT(A) by the distinguishable of facts. In the relied upon the Ld. CIT(A) by the distinguishable of facts. In the case of Kanu Kitchen Kuulture (P.) Ltd. v. DCIT [2014] 49 nu Kitchen Kuulture (P.) Ltd. v. DCIT [2014] 49 nu Kitchen Kuulture (P.) Ltd. v. DCIT [2014] 49 taxmann.com 64 (Delhi taxmann.com 64 (Delhi-Trib.) full details were not filed before the full details were not filed before the Assessing Officer and the case of Spica Finstock Ltd. v. ACIT Spica Finstock Ltd. v. ACIT Assessing Officer and the case of [2010] 1 ITR (Trib.) 437 (Ahmedabad) [2010] 1 ITR (Trib.) 437 (Ahmedabad) expenses were incurred for expenses were incurred for enefit of the assessee company. In the case of SPI the personal benefit of the assessee company. In the case of enefit of the assessee company. In the case of Technologies India (P.) Ltd. v. ACIT [2013] 33 taxmann.com Technologies India (P.) Ltd. v. ACIT [2013] 33 taxmann.com Technologies India (P.) Ltd. v. ACIT [2013] 33 taxmann.com 594 (Chennai-Trib.) there was no evidence to show to that foreign show to that foreign travel expenses incurred for the purpose of business. Therefore, the travel expenses incurred for the purpose of business. travel expenses incurred for the purpose of business. ratio of these decisions cannot be applied over the facts of the ese decisions cannot be applied over the facts of the ese decisions cannot be applied over the facts of the instant case.
5.2 Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that appeal for assessment year 2013 appeal for assessment year 2013-14 involving identical issue has 14 involving identical issue has been restored to the been restored to the file of the Ld file of the Ld CIT(A) in in 2635/Mum/2018 and m/2018 and therefore he submitted that this issue may therefore he submitted that this issue may also to be set aside to the file of the also to be set aside to the file of the Ld. CIT(A) for deciding afresh for deciding afresh after verification of the vouchers and evidence in support thereof. after verification of the vouchers and evidence in support thereof. after verification of the vouchers and evidence in support thereof.
M/s Garware Finance Corporation Ltd. M/s Garware Finance Corporation Ltd. 6 & 68/M/2023 5.3 We find that in AY 2013 We find that in AY 2013-14 appeal has been restored to the 14 appeal has been restored to the file of Ld CIT(A) as same was dismissed in file of Ld CIT(A) as same was dismissed in limine by the LD CIT(A) by the LD CIT(A) for non-filing of appeal in electronic format. of appeal in electronic format. In the present case we the present case we have already held that disallowance of travel expenses is not have already held that disallowance of travel expenses is not have already held that disallowance of travel expenses is not justified in view of suo justified in view of suo-moto disallowance, quantum of moto disallowance, quantum of travel expenses amount in proportion of business turnover and business expenses amount in proportion of business turnover and business expenses amount in proportion of business turnover and business expediency etc . In view of the facts and circumstances of the case, view of the facts and circumstances of the case, view of the facts and circumstances of the case, we set aside the finding of ld CIT(A) and delete the addition made by set aside the finding of ld CIT(A) and delete the addition made by set aside the finding of ld CIT(A) and delete the addition made by the Assessing Officer. the Assessing Officer. The Ground No. 1 of appeal of the assessee is of appeal of the assessee is accordingly allowed.
The ground No. 2 of the appeal relates to disallowance of The ground No. 2 of the appeal relates to disallowance of The ground No. 2 of the appeal relates to disallowance of business promotion expenses of Rs.1,81,075/ business promotion expenses of Rs.1,81,075/-. We have heard rival We have heard rival submission of the parties. submission of the parties. The assessee has mainly claimed that The assessee has mainly claimed that red for business promotion included expenses for expenses incurred for business promotion included expenses red for business promotion included expenses meetings organized in hotels by the Director of the company organized in hotels by the Director of the company. In our organized in hotels by the Director of the company opinion, the assessee has justified the business expediency of the opinion, the assessee has justified the business expediency of the opinion, the assessee has justified the business expediency of the expenses. The Ld DR submitted that the assessee should produce expenses. The Ld DR submitted that the assessee should produce expenses. The Ld DR submitted that the assessee should produce the persons with whom he held meeting to support his contention ns with whom he held meeting to support his contention ns with whom he held meeting to support his contention of business expediency. We are of the view that of business expediency. We are of the view that it may not be possible for the assessee to produce all those persons with whom possible for the assessee to produce all those persons with whom possible for the assessee to produce all those persons with whom the director of the company h the director of the company had meeting in hotels. Looking to the . Looking to the quantum of expenses of expenses, as compared to the business turnover, we do , as compared to the business turnover, we do not find the expense as excessive and hence, we set-aside the not find the expense as excessive and hence, we set not find the expense as excessive and hence, we set finding of Ld CIT(A) and delete the addition made by the AO. finding of Ld CIT(A) and delete the addition made by the AO. finding of Ld CIT(A) and delete the addition made by the AO.
M/s Garware Finance Corporation Ltd. M/s Garware Finance Corporation Ltd. 7 & 68/M/2023 6.1 The grounds raised in assessment year 2018 raised in assessment year 2018-19 being identical to the ground rounds raised in assessment year 2017 raised in assessment year 2017-18, same are decided mutatis mutandis mutatis mutandis. are allowed. 7. In the result, appeals of the In the result, appeals of the assessee are allowed.