M/S GEOMIN INDUSTRIES PRIVATE LIMITED,JABALPUR vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1(1), JABALPUR

This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-1, Jabalpur (‘CIT(A)’ for short) dated 07/03/2019, partly allowing the assessee’s appeal contesting its’ assessment under section 143(3) of the Income Tax Act, 1961 (‘the Act’ hereinafter) dated 28/09/2017 for assessment year (AY) 2015-16. The appeal raises two issues, which we shall take up in seriatim.

The first issue concerns the disallowance in the sum of Rs.1,59,100, being ten percent of the claim in respect of travel expenditure (i.e., Rs.15.91 lacs) u/s. 37(1) of the Act. Both the disallowance as well as its confirmation in first 2 Geomin Industries (P.) Ltd. v. Asst. CIT (AY 2015-16) appeal has been on the basis that the expenditure is not fully supported by proper bills and vouchers and, besides, travel for personal purposes (of the Directors, etc.) could not be ruled out, so that a disallowance, accordingly, at 10% of the claimed sum stands made. 3. We have heard the parties, and perused the material on record. The assessee’s case is that the Revenue’s charge of the expenditure incurred and claimed being not duly supported by bills and vouchers is factually incorrect, and toward which its’ learned counsel, Shri Ghai, would take us through the ledger account of the said expense (PB pgs.21-43) to show that full travel particulars of each and every expense item is entered therein (books of account). How could, he averred, these details be specified in the absence of supporting bills and vouchers, which were also produced in the assessment proceedings and test checked. Not a single instance of either absence of voucher, or of it being for personal (non-business) purpose has been stated. Ad hoc disallowance on presumptive basis could not hold in law. We could not agree more. No doubt, the primary burden to prove its’ return of income and the claims preferred thereby is on the assessee (CIT v. Calcutta Agency Ltd. [1951] 19 ITR 191 (SC); CIT v. R. Venkataswamy Naidu [1956] 29 ITR 529 (SC)). However, neither the assessment nor the appellate order reflects any inquiry into facts and, resultantly, a substantiation of the charge – which could only be based on a finding/s of facts – on the basis of which the disallowance stands made and confirmed. Again, a claim qua personal purpose (of the person travelling) of travel, has to have its basis in fact/s, and cannot be a matter of presumption, with we observing, as afore- stated, no inquiry into facts. The presumption, rather, would be to the contrary, particularly considering that the accounts are audited, as why would a company bear the personal expenditure of any person? The primary burden on the assessee afore-stated is for the reason that only it is in the knowledge of the facts 3 Geomin Industries (P.) Ltd. v. Asst. CIT (AY 2015-16) of its’ case, and could therefore substantiate/explain the same. But that does not empower the Revenue to impute, without any factual basis, either absence of supporting bills/vouchers or a non-business purpose. It is only when called upon to demonstrate the business purpose of a travel that it could be said that the assessee has, or has not, been able to prove the same, which would, in that case, be a matter of the evidence/s led and explanation/s furnished. Needless to say, no such exercise has been carried out in the instant case, and the Revenue’s charge is, we are afraid, no more than a bald claim. Why, there is in fact even no claim of the expenditure incurred being at a disproportionate or substantial increase over that incurred under the same head in the past. No wonder the ld. Departmental Representative (DR) was unable to answer any of the queries raised by the Bench in this regard during hearing. We, therefore, have no hesitation in directing the deletion of the impugned disallowance, and the assessee succeeds. We decide accordingly.

The next issue is, similarly, qua a disallowance for Rs.50,000 out of expenditure claimed toward vehicle repair & running, i.e., Rs.12.98 lacs (Ledger account at PB pgs. 44–133). The submissions by the learned counsel, Shri Ghai, were essentially the same, i.e., as for the disallowance of travel expenditure. The ld. DR would, however, submit that there is nothing on record to rebut the charge of some expenditure on vehicle repair and maintenance being necessarily incurred for the personal purposes of the Directors, etc., to which Shri Ghai would respond by stating that the directors had their personal cars, expenditure on which stands incurred by them personally. He would though admit, on query, that no such claim stands made at any stage, much less substantiated.

We have heard the parties, and perused the material on record. Commutation is a fact of everyday life, particularly urban, necessitating incurring expenditure thereon. Why, even expenditure on travel from home to 4 Geomin Industries (P.) Ltd. v. Asst. CIT (AY 2015-16) office and back, unless covered by the terms of the employment, would be a personal expense of the person concerned. The Revenue is therefore justified to say that some expenditure on the personal use of the vehicles by the Directors or other employees of the assessee-company cannot be ruled out. No case to the contrary has been stated, much less made out. It is only where the Directors or other staff to whom the company vehicles have been provided are shown to have, as stated, personal vehicles for their own use, and of having incurred expenditure on their running and maintenance, that it could be said, with some degree of objectivity, that no personal purpose could be imputed. Sure, as Sh. Ghai would also point out, there could be no ‘personal expense’ in the case of a company, a corporate entity. However, what is meant thereby is for the personal purposes of the person concerned, so that it becomes an other than business, or non-business expense in the hands of the company claiming the same, disallowable u/s. 37(1) of the Act. It is only where the same is contractually provided by the company, and taken into account in computing salary income, i.e., at the perquisite value thereof, of the person/s concerned, that no disallowance on this count, i.e., euphemistically called personal expenditure, could be made in the hands of the employer-company. The Revenue is, thus, justified in making a disallowance toward estimated expenditure for such non-business purpose, which, at less than 4% of the total expenditure, seems fairly reasonable, being even otherwise around Rs.4,000 per month only. No claim of an excess disallowance has in any case been made. The disallowance is, accordingly, upheld, and the assessee fails. We decide accordingly.