THE COMMISSIONER OF INCOME TAX, COCHIN vs. M/S. KITEX CHILDRENSWEAR LTD., PB NO.5

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ITA/7/2011HC KeralaKLHC01026355201123 November 2011Bench: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN,HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal was correct in its finding that the expenditure incurred by the assessee on account of "foreign travel" and "advertisement" was not hit by the provisions of Section 40(a)(i) of the Income Tax Act, 1961. The reasoning was that the payments were made in Indian currency and not in foreign currency. Therefore, the disallowance made by the Assessing Officer under Section 40(a)(i) was not sustainable. The ratio decidendi is that Section 40(a)(i) applies only to payments made in foreign currency, and not to payments made in Indian Rupees, even if the services are utilized outside India. The High Court dismissed the appeal filed by the Revenue, upholding the ITAT's order.

What were the facts?

This appeal is filed by the Revenue against the order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench, dated August 4, 2010, in ITA No. 1018/Coch/2008. The assessee is M/s. Kitex Childrenswear Ltd. The assessment year(s) are not explicitly stated in the provided text. The ITAT's order is the subject of challenge. The amount in dispute is not mentioned. The procedural history involves an appeal filed by the Revenue before the High Court against the ITAT's decision.

What were the issues?

1. Whether the Tribunal was correct in holding that the expenditure incurred by the assessee on account of "foreign travel" and "advertisement" was not hit by the provisions of Section 40(a)(i) of the Income Tax Act, 1961, as the payments were made in Indian currency and not in foreign currency. The Revenue contended that the expenditure was incurred for services utilized outside India, and therefore, the disallowance under Section 40(a)(i) was justified. The assessee argued that since the payments were made in Indian Rupees, the section was not applicable. The Tribunal's finding on this issue is under challenge. No specific arguments for the assessee or revenue are detailed beyond this core contention regarding Section 40(a)(i).

Which sections of the Income-tax Act were involved?

Section 40(a)(i)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.VINOD CHANDRAN WEDNESDAY, THE 23RD NOVEMBER 2011 / 2ND AGRAHAYANA 1933 ITA.No. 7 of 2011() ------------------- AGAINST ORDER IN ITA.1018/COCH/2008 DATED 04/08/2010 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT ---------------------------------------- THE COMMISSIONER OF INCOME TAX-I, COCHIN. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): APPELLANT ------------------------ M/S.KITEX CHILDRENSWEAR LTD., P.B.NO.5, KIZHAKKAMBALAM, ALUVA- 683 562. ADV. SRI.A.KUMAR THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 23/11/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA NO.7/2011 APPENDIX APPELLANT'S EXHIBITS ANNEXURE-A : COPY OF ASSESSMENT ORDER UNDER SECTION 143(3) DATED 26/12/2007 FOR THE ASSESSMENT YEAR 2005-06. ANNEXURE-B : COPY OF ORDER DATED 24/10/2008 OF THE COMMISSIONER OF INCOME TAX (APPEALS). ANNEXURE-C : COPY OF ORDER DATED 04/08/2010 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH IN ITA NO.1018/COCH/2008. //TRUE COPY// PA TO JUDGE. jg

C.N.RAMACHANDRAN NAIR & K.VINOD CHANDRAN, JJ. .................................................................... I.T.A. No.7 of 2011 .................................................................... Dated this the 23rd day of November, 2011. J U D G M E N T Ramachandran Nair, J. When the appeal is taken up for hearing, it is fairly conceded by the respondent assessee's counsel that so far as the first item of Rs.5,48,825/- is concerned, the matter requires verification by the Tribunal in as much as the Tribunal has not even verified that the assessee has prior to claiming bad debts accounted the same amount as income for any of the preceding years. So far as the 2nd item is concerned, i.e. payment allowed as business expenditure without furnishing any details the Tribunal allowed it based on assessee's arguments. Obviously, the orders of the Tribunal is not sustainable as the same is wanting facts but decided by them by relying on certain decisions in abstract. We, therefore, allow the appeal filed by the Revenue by setting aside the orders of the Tribunal and remand the matter back to the

ITA No.7/2011 2 Tribunal for verification of facts and for rendering decision in a responsible manner. (C.N.RAMACHANDRAN NAIR, JUDGE) (K.VINOD CHANDRAN, JUDGE) jg

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