THE COMMISSIONER OF INCOME TAX, vs. M/S M.M.PUBLICATIONS LTD,

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ITA/200/2014HC KeralaKLHC01026766201416 October 2018Author: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN,HONOURABLE MR. JUSTICE ASHOK MENON10 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the appeals filed by both the assessee and the revenue were to be rejected. Regarding the assessee's appeals for assessment years 2008-09 and 2009-10, the Tribunal had confined the disallowance to 1/5th of the total expenses claimed. The Court found no reason to interfere with this order, especially since the Tribunal had noted that previous orders for the assessee for assessment years 2005-06 and 2006-07 were set aside by the High Court. For the revenue's appeal concerning assessment year 2008-09, the Court noted that the AO had himself allowed 50% disallowance in some instances, and the Tribunal had applied the same 20% disallowance as in the subsequent year (2009-10). The Court concluded that no question of law arose from the Tribunal's order, as it was based on factual appreciation, and therefore, no interference was called for in the revenue's appeal either. The appeals were rejected without costs.

What were the facts?

The appeals concern the disallowance of expenses incurred for foreign travel of staff of M.M. Publications Ltd. for assessment years 2008-09 and 2009-10. The Assessing Officer (AO) disallowed 100% of expenses in some cases for 2008-09, and 50% in others, deeming foreign travel partly business and partly personal. For 2009-10, the AO disallowed 20% of all foreign travel expenses, citing a personal element. The First Appellate Authority (FAA) allowed full expenses, following a prior Tribunal decision for the assessee for assessment years 2005-06 and 2006-07. The Revenue appealed to the Tribunal. The Tribunal, for the assessment years in question, disallowed 1/5th (20%) of the expenses, noting that previous Tribunal orders for the assessee for 2005-06 and 2006-07 were set aside by the High Court.

What were the issues?

1. Whether the Tribunal erred in disallowing 1/5th of the expenses incurred for foreign travel of staff for assessment years 2008-09 and 2009-10, when the First Appellate Authority had allowed the full claim. (Question of law and fact, concerning Section 37 of the Income Tax Act, 1961). Assessee's Contentions: The assessee argued that the FAA's order, which allowed full expenses, was based on detailed factual analysis of each trip and should be upheld. They also pointed to prior Tribunal orders for earlier years that allowed full expenses. Revenue's Contentions: The Revenue contended that the AO's disallowance of 100% or 50% in some cases for 2008-09 was justified due to the personal element in foreign travel. They argued that the Tribunal's decision to confine the disallowance to 20% for 2008-09 was not sustainable, and a higher disallowance (100%) should have been made.

Which sections of the Income-tax Act were involved?

Section 37

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON TUESDAY ,THE 16TH DAY OF OCTOBER 2018 / 24TH ASWINA, 1940 ITA.No. 185 of 2014 AGAINST THE ORDER/JUDGMENT IN ITA 26/2014 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 04-04-2014 APPELLANT/S: M.M.PUBLICATIONS LTD, P.B NO 226, ERAYILKADAVU, KOTTAYAM 686001, REPRESENTED BY ITS CHIEF GENERAL MANAGER, MR. V. SAJEEV GEORGE BY ADVS. SRI.M.GOPIKRISHNAN NAMBIAR SRI.JOSON MANAVALAN SRI.K.JOHN MATHAI SRI.KURYAN THOMAS SRI.P.BENNY THOMAS SRI.P.GOPINATH RESPONDENT/S: COMMISSIONER OF INCOME TAX, PUBLIC LIBRARY BUILDINGS, SASTRI ROAD, KOTTAYAM 686001 BY ADVS. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH SC FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 16.10.2018, ALONG WITH ITA.187/2014, ITA.200/2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: I.T.A Nos.185/2014, 187/2014 & 200/2014 2 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON TUESDAY ,THE 16TH DAY OF OCTOBER 2018 / 24TH ASWINA, 1940 ITA.No. 187 of 2014 AGAINST THE ORDER/JUDGMENT IN ITA 27/2014 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 04-04-2014 APPELLANT/S: M.M.PUBLICATIONS LTD, P.B.NO.226, ERAYILKADAVU, KOTTAYAM - 686 001,REPRESENTED BY ITS CHIEF GENERAL MANAGER,MR.V.SAJEEV GEORGE. BY ADVS. SRI.M.GOPIKRISHNAN NAMBIAR SRI.JOSON MANAVALAN SRI.K.JOHN MATHAI SRI.KURYAN THOMAS SRI.P.BENNY THOMAS SRI.P.GOPINATH RESPONDENT/S: COMMISSIONER OF INCOME TAX PUBLIC LIBRARY BUILDINGS, SASTRI ROAD,KOTTAYAM - 686 001. BY ADVS. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH SC FOR INCOME TAX SRI.P.K.R.MENONSR.COUNSEL GOITAXES THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 16.10.2018, ALONG WITH ITA.185/2014, ITA.200/2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: I.T.A Nos.185/2014, 187/2014 & 200/2014 3 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON TUESDAY ,THE 16TH DAY OF OCTOBER 2018 / 24TH ASWINA, 1940 ITA.No. 200 of 2014 AGAINST THE ORDER/JUDGMENT IN ITA 26/2014 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 04-04-2014 APPELLANT/S: THE COMMISSIONER OF INCOME TAX, KOTTAYAM. BY ADVS. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH SC FOR INCOME TAX RESPONDENT/S: M/S M.M.PUBLICATIONS LTD, ERAYILKADAVU,KOTTAYAM.PIN 686001. BY ADVS. SRI.P.BENNY THOMAS SRI.JOSON MANAVALAN SRI.K.JOHN MATHAI SRI.KURYAN THOMAS SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.GOPINATH OTHER PRESENT: SRI PKR MENON SR COUNSEL FOR GOI TAXES THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 16.10.2018, ALONG WITH ITA.187/2014, ITA.185/2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: I.T.A Nos.185/2014, 187/2014 & 200/2014 4 I.T.A Nos.185/2014, 187/2014 & 200/2014

J U D G M E N T Vinod Chandran, J The appeals are by the assessee and the revenue. The assessee has filed appeals from the common order of the Tribunal for the assessment years 2008-09 and 2009- 2010. The Revenue has filed an appeal from the very same common order, but however, only for the assessment year 2008-09. The issue agitated is with respect to the dis- allowance of expenses incurred for foreign travel of the staff of the assessee company claimed under Section 37 of the Income Tax Act, 1956 (for brevity "the IT Act" only).

2.

The Assessing Officer, for the year 2008-09, disallowed 100% of the expenses and in certain cases found the foreign travel to be partly business and partly personal and allowed 50% of the allowances claimed. In the year 2009-10, the Assessing officer resorted to the method of 20% dis-allowance for all the expenses incurred on that count, finding that there is a personal element in all these foreign travels. The Assessing Officer found that though foreign trips cannot be termed to be pleasure trips or family trips it can also not be found that they were solely for the purpose of the business. It is in such circumstance that 1/5th of the expenses claimed on foreign travels were dis-allowed. The First Appellate Authority followed the decision of the Tribunal in the case of the assessee itself on the very same aspect for the year 2005-06 and 2006-07 and permitted full allowance of expenses incurred as expenditure under Section 37 of the IT Act. Appeals was filed by the Revenue before the Tribunal.

3.

We find that the Tribunal refused to follow the judgment of the earlier Bench of equal strength on the ground that the facts differ from year to year. It was also noticed that the Assessing Officer has given reasons insofar as the dis-allowance for the present years. In any event, orders of the Tribunal for the years 2005-06 and 2006-07 were set aside by us in ITA Nos.285/2010, 335/2010 & 164/2012. We in the said decision, confined it to the allowance as granted by the First Appellate Authority whose orders were found to be elaborate and contained detailed discussion on the individual facts with respect to each of the foreign trips. We do not find any reason to interfere with the orders of the Tribunal in the appeals filed by the assessee for the year 2008-09 and 2009-10 in both of which the Tribunal confined the dis-allowance to 1/5th of the total expenses claimed.

4.

In this context, we have to notice the appeal of the revenue. As was noticed herein above, for the years 2009-10, the Assessing Officer himself had granted 1/5th of the expenses as dis-allowances which was restored by the Tribunal after setting aside the order of the First appellate Authority. In the year 2008-09, the Assessing Officer had made dis-allowance of 50% and 100% in various instances of the expenses claimed. The First Appellate Authority had allowed the claim in toto. The Tribunal while considering the appeal of the revenue confined the dis-allowance to 20% as has been done in the year 2009-10. The Revenue has filed the appeal contending that 100% dis-allowance has to be made in all instances. We do not think that the appeal can be m sustained especially since the Assessing Officer himself had in certain instances granted 50% dis-allowance. The Tribunal also noticed the fact that, for the next year, the Assessing Officer had disallowed only 20% of the expenses claimed. The very same procedure was adopted for the year 2008-09 also. We do not think any question of law arises from the order of the Tribunal since the same is on an appreciation of facts as has been set out in the order of assessment. We hence do not think any interference is called for to the Tribunal's order in the appeal of the Revenue also. The appeals would stand rejected. No costs. K.VINOD CHANDRAN JUDGE ASHOK MENON jma JUDGE

Appendix — schedule of exhibits
APPENDIX OF ITA 185/2014 PETITIONER'S/S EXHIBITS: ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2008-09 DATED 29.12.2010 ISSUED TO THE APPELLANT BY THE DEPUTY COMMISSIONER OF INCOME TAX,CIRCLE 1, KOTTAYAM ANNEXURE B TRUE COPY OF THE ORDER DATED 15.11.2013 ISSUED TO THE APPELLANT BY THE COMMISSIONER OF INCOME TAX (APPEALS)-V KOCHI. ANNEXURE C TRUE COPY OF THE APPEAL MEMORANDUM DATED 23.1.2014 FILED BY THE DEPARTMENT BEFORE THE INCOME TAX APPELLATE TRIBUNAL. ANNEXURE D TRUE COPY OF THE ARGUMENT NOTE UN-DATED FILED BY THE APPELLANT BEFORE THE INCOME TAX APPELLATE. ANNEXURE E TRUE COPY OF THE ORDER DATED 4.4.2014 ISSUED TO THE APPELLANT BY THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH ALONG WITH CERTIFIED COPY. I.T.A Nos.185/2014, 187/2014 & 200/2014 9 APPENDIX OF ITA 187/2014 PETITIONER'S/S EXHIBITS: ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2009-10 DATED 28.12.2011 ISSUED TO THE APPELLANT BY THE DEPUTY COMMISSIONER OF INCOME TAX,CIRCLE 1, KOTTAYAM. ANNEXURE B TRUE COPY OF THE ORDER DATED 15.11.2013 ISSUED TO THE APPELLANT BY THE COMMISSIONER OF INCOME TAX (APPEALS)- V,KOCHI. ANNEXURE C TRUE COPY OF THE APPEAL MEMORANDUM DATED 23.1.2014 FILED BY THE DEPARTMENT BEFORE THE INCOME TAX APPELLATE TRIBUNAL. ANNEXURE D TRUE COPY OF THE ARGUMENT NOTE UN-DATED FILED BY THE APPELLANT BEFORE THE INCOME TAX APPELLATE. ANNEXURE E TRUE COPY OF THE ORDER DATED 4.4.2014 ISSUED TO THE APPELLANT BY THE INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH. I.T.A Nos.185/2014, 187/2014 & 200/2014 10 APPENDIX OF ITA 200/2014 PETITIONER'S/S EXHIBITS: ANNEXURE A: ASSESSMENT ORDER U/S 143(3) INCOME TAX ACT 1961 DATED 29.12.2010 ANNEXURE B: CIT(A)S ORDER IN ITA NO. 71/KTM/CIT(A)-IV DT 15.11.2013 ANNEXURE C: ITAT'S ORDER IN ITA NO.26/COCH/2014 DT 04.04.2014

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