C I T vs. M/S PORRITTS AND SPENCER LTD.

The revenue has preferred this appeal under Section 260-A of the Income Tax Act, 1961 (for short, “the Act”) against order dated 6.7.2007 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘B’, New Delhi in I.T.A. No.5365(DEL)/2004 for the assessment year 2001-02, proposing to raise following substantial questions of law:- “i) Whether the Hon’ble ITAT has erred in law in confirming the order of the CIT(A) vide which the disallowance of Rs.2,91,774/- made by the Assessing Officer on account of personal use of Cars/Telephones was deleted, though the Hon’ble Madras High Court has already confirmed such disallowance of expenses in the case of M/s Chitram & Co. (P) Ltd. Vs. CIT, (191-ITR-96)? ii) Whether the Hon’ble ITAT has erred in law in confirming the order of the CIT(A) in which the disallowance of Rs.77,552/- made by the Assessing Officer on account of Foreign Tour expenses incurred on purchase of gifts was deleted? iii) Whether on the facts and circumstances of the case, the Hon’ble ITAT is right in holding the amount of Rs.15,22,822/- as revenue expenditure, whereas these expenses were held by the Assessing Officer as capital, the benefit of which was of enduring nature?” iv) Whether on the facts and circumstances of the case, the Hon’ble ITAT is erred in deleting the disallowance made u/s 80HHC by reducing the business profits by 90% of duty draw back, interest income, misc. income and provisions made in earlier years written back?”

In the course of assessment for the assessment year in question, the Assessing Officer disallowed claim on account of use of cars/telephones and foreign tour expenses. The Assessing Officer also held that expenditure claimed by the assessee towards repairs should be treated as capital expenditure. The Assessing Officer also applied Explanation (baa) to Section 80 HHC of the Act to the income of the assessee, claimed by the assessee to be miscellaneous income, such as from sale of scrap and some refunds and also writing back of provisions in earlier years, which according to the assessee did not fall in the said clause.

The CIT(A) partly allowed the appeal of the assessee. The Tribunal upheld the claim of the assessee.

As regards question No.(i), it was held that the expenses claimed were not for personal use but were for official use. View of the Tribunal for the earlier assessment year in the case of the assessee was followed. The finding of the Tribunal for the earlier assessment year was upheld by this Court vide order dated 5.3.2009 in I.T.A. No.38 of 2008 C.I.T. v. M/s Porrits & Spencer (Asia) Ltd.

As regards to question No.(ii), the Tribunal held that the claim for expenses on foreign tours was admissible on the principle of business expediency. Learned counsel for the assessee submits that the Tribunal followed its order for the earlier assessment year in the case of the assessee against which I.T.A. No.539 of 2006 was filed by the revenue, but the said finding was not challenged. The finding of the Tribunal is consistent with the view taken by this Court in CIT v. Avery Cycle Industries Ltd. 296 ITR 393 (P&H).

As regards question No.(iii), following its judgment for the earlier assessment year in the case of the assess, which was affirmed by this Court in CIT v. Porritts & Spencer (A) Ltd. 257 ITR 49 (P&H), the Tribunal held that the expenditure was on repairs and was, thus, revenue expenditure.

As regards to question No. (iv), the Tribunal, following its order in the case of the assessee for the earlier assessment year, held that the expenses were not covered by Explanation (baa). Learned counsel for the assessee points out that the revenue preferred I.T.A. No.539 of 2006 but the said finding was not questioned. The tax effect involved on this ground is Rs.16,628/- only.

We have heard learned counsel for the assessee and perused the record.

Since questions (i) and (iii) are covered by the earlier order of this Court mentioned above, question (ii) is covered by judgment of this Court in Avery Cycle (supra) and with respect to question (iv), the Tribunal has followed its decision in the case of the assessee for the earlier assessment year, which has attained finality, we are unable to hold that any substantial question of law arises.

The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE September 15, 2009 ( DAYA CHAUDHARY ) ashwani JUDGE 4