ARCHI EXIM PVT. LTD.,AHMEDABAD vs. THE ITO, WARD-1(1)(3), AHMEDABAD

This appeal is filed by the Assessee against order dated 21.05.2024, passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2013-14.

The assessee has raised the following grounds of appeal :-

The assessee Company is engaged in the trading business of different types of chemicals alongwith seals, stationery items, coils, ceiling and other accessories and import of the products as well as purchase of the products from the local markets and selling the same in local market and in foreign market on small scale basis. The assessee filed return of income for the Assessment Year (A.Y.) 2013-14 on 29.09.2013 claiming refund of Rs.46,540/-. The case of the assessee was selected for scrutiny under Section 143(1) of the Income Tax Act, 1961. The statutory notices were issued and the assessee filed details as well as the submissions. After taking cognisance of the same, the Assessing Officer observed that the assessee has investment in shares of M/s. Rushi Mechatronics Pvt. Ltd. of Rs.31,00,000/-. However, managing and administrative cost or any other expenses with regard to making interest cost has not been disallowed in respect of the expenditure in terms of administrative cost or any other expenses with regard to making and managing such investment. After taking cognisance of the assessee’s contention, the Assessing Officer made disallowance of Rs.23,528/- under Section 14A of the Act read with Rule 8D of the Income Tax Rules. The Assessing Officer further made disallowance of Rs.7,13,322/- towards travelling expenses including Foreign Trips. The Assessing Officer made disallowance of Rs.64,41,834/- in respect of reimbursement of expenses under Section 40(a)(ia) of the Act

Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

The Ld. AR submitted that the CIT(A) was not right in disallowing the Travelling Expenses of Rs.3,56,661/- and reimbursement of expenses under Section 40(a)(ia) of the Act of Rs.64,41,834/-. The Ld. AR submitted that the CIT(A) in respect of disallowance relating to Travelling Expenses restricted the disallowance to 25% but the same should have been allowed as the expense was Assessment Year: 2013-14 Archi Exim Pvt. Ltd. Vs. ITO Page 3 of 4 solely for the purpose of business exigencies and the assessee has demonstrated various details that the assessee’s business has increased. The Ld. AR submitted that the majority of travelling expenses was incurred for visit to China and that is for visit to one party M/s. International Chem Limited from whom the assessee had imported goods worth Rs.36.53 Crores as against the total purchase by the assessee of Rs.38.47 Crores during the year under consideration. The assessee has already submitted statement showing details of foreign traveling undertaken by various persons of Company as well as invoices/bills in respect of foreign travel expenditure.

The Ld. DR submitted that the CIT(A) after verifying the details only has restricted the expenditure to 25% which is a reasonable disallowance and thus relied heavily on the order of the CIT(A).

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that from the perusal of the records it can be seen that the CIT(A) has disallowed 25% of the confirmed total expenses after taking into account past history of the expenses and in consonance with the business acquired by the assessee from the foreign parties. Therefore, the disallowance out of travelling expenses made by the Assessing Officer and the 25% confirmed by the CIT(A) is accordingly sustained.