ASHOK H THAKKAR,MUMBAI vs. ASSTT. COMMISSIONER OF INCOME TAX, NADIAD
Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld.
CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 19.03.2024 passed for A.Y. 2017-18. 2. The assessee has taken the following grounds of appeal:-
“1. Ground No.1: Addition of Rs. 40,03,034/- being reimbursement of expenses incurred during the official tour for business purpose:
1 On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in upholding the addition of Rs. 40,03,034/- being the reimbursement of expenses incurred by the Appellant during the official tour for business purposes.
2 Asst.Year –2017-18 - 2–
the business of the company and the expenses which were reimbursed to him were first incurred by him for the company’s business purpose.
3 The Ld. CIT(A) further erred in upholding the reimbursed expenses as alleged ‘perquisites’ in the hands of the Appellant.
4 The Appellant prays that the addition of Rs. 40,03,034/- towards reimbursement of travelling expenses be deleted.”
The brief facts of the case are that the assessee was the founder promoter of M/s. ADF Foods Ltd., a public limited company engaged in the business of manufacture of variety of food products including pickles, ready to eat and frozen foods. During the course of assessment, the Assessing Officer observed that the assessee was holding various credit cards of HSBC, American Express Bank, Citi Bank etc. and the assessee incurred various expenses on these credit cards during the year under consideration. On going through the statement of expenses incurred by the assessee, the Assessing Officer observed that certain payment made by the assessee for foreign travel by the assessee was stated to have been made for official business purposes. These official business expenses incurred by the assessee were reimbursed to the assessee by M/s. ADF Foods Ltd. and total reimbursement for the year under consideration amounted to Rs. 40,03,034/-. During the course of assessment, the assessee was asked to justify as to how these expenses, which were reimbursed by ADF Foods Asst.Year –2017-18 - 3–
assessee, and the assessee has failed to reveal any business endeavor during such visits to Bangkok, Dubai or London. Therefore, the Assessing
Officer held that such reimbursements by M/s. ADF Foods Ltd. to the assessee are in the nature of incentives given by the assessee and not reimbursement of expenses and therefore, such incentives should have been offered to tax by the assessee as his taxable income. Accordingly, the Assessing Officer added a sum of Rs. 40,03,034/- in the hands of the assessee.
In appeal, Ld. CIT(A) confirmed the order passed by the Assessing Officer by holding that the assessee has failed to furnish any corroborative evidence to controvert the findings of the Assessing Officer and that the assessee has not been able to justify that the expenses were made in official business capacity by providing details of business assignments, purpose and business client meet during the foreign travel.
The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(A) confirming the addition made by the Assessing Officer. Before us, the Counsel for the assessee submitted that both the Assessing Officer and the Ld. CIT(A) have failed to understand the nature of reimbursement. It was submitted that the assessee was the Chairman and Managing Director of M/s. ADF Foods Ltd., which was a listed company since 1993-94. The company is in the business of exporting food products like spices, pickles and ready to eat packages. The companies exports constitutes almost 96% of it’s turnover and for this purpose, the assessee as it’s Managing Director had to travel to various countries for the purpose Asst.Year –2017-18 - 4–
of business and as per policy of the company, the assessee was required to incurr expenditure on it’s credit card and to the extent the expenses were for official purposes, the company would verify the claim of the assessee and thereafter reimburse the same, either to the assessee or directly to the credit card companies. During the year, the company had directly paid the aforesaid sum of Rs. 40.03 lakhs directly to the credit card companies. The Counsel for the assessee drew our attention to confirmationof M/s. ADF
Foods Ltd. to the effect that these expenses have been reimbursed by the company towards official foreign visits of the assessee. Further, the Counsel for the assessee submitted that during the year under consideration, export turnover constituted 98.51% of the total turnover of the assessee it was submitted that during the year under consideration the total turnover of M/s. ADF Foods Ltd. was to the tune of Rs. 159 crores.
Further, the Counsel for the assessee drew our attention to Page 8 of the Paper Book and submitted that during the impugned year under consideration, the assessee had also incurred certain personal expenditures on these credit cards to the tune of Rs. 11,15,596/- which were not reimbursed by M/s. ADF Foods Ltd., as per the company policy. The Counsel for the assessee submitted that no reimbursement was made by the company towards the Bangkok trip of the assessee, since it was for personal / leisure purposes, which was not reimbursed as per company policy. The Counsel for the assesse submitted that the total travelling expenses incurred by the company during this year were Rs. 4.6 crores, out of total turnover of 159 crores and out of the same, the disputed amount is only a sum of Rs. 40.03 lakhs. Accordingly, the Counsel for the assessee
Asst.Year –2017-18
- 5–
submitted that looking into the instant facts, wherein as per company policy only official expenses were reimbursed and any personal expenses incurred by the assessee on his credit card were not reimbursed to the assessee, the aforesaid addition is not liable to be sustained in the hands of the assessee, being purely in the nature of reimbursement of expenses incurred for official purposes.
In response, Ld. D.R. placed reliance on the observations made by the Assessing Officer and Ld. CIT(A) in their respective orders.
We have heard the rival contention and perused the material available on record.
We observe that the assessee was the founder and Managing Director of M/s. ADF Foods Ltd., a company is engaged in the business of export of spices, pickles etc. During the year under consideration approximately 98% of the Revenue of the company came from export of it’s products. For this purpose, the assessee, being the Managing Director was required to travel to various countries and as per company policy expenses incurred for official purposes were reimbursed by the company directly to the credit card companies. Taking into consideration the fact that the company had a substantial turnover of Rs. 159 cores largely from export of it’s products, keeping into consideration the confirmation given by M/s. ADF Foods that these reimbursements made to the assessee were for his official visits, keeping into consideration the fact that certain expenses which were found to be of a personal nature were not been Ashok H Thakkar vs. ACIT Asst.Year –2017-18 - 6–
reimbursed to the assessee by M/s. ADF Foods Ltd. and also in light of the fact that out of a turnover of Rs. 159 crores, only Rs. 4 crores were incurred towards travelling expenses, we are of the considered view that in light of these facts the addition made by the Assessing Officer is liable to be deleted.
In the result, the appeal of the assessee is allowed. This Order is pronounced in the Open Court on 15/01/2025 (DR. BRR KUMAR) JUDICIAL MEMBER Ahmedabad; Dated 15/01/2025
TANMAY, Sr. PSआदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to :
1. अपीलाथŎ / The Appellant
2. ŮȑथŎ / The Respondent.
3. संबंिधत आयकर आयुƅ / Concerned CIT
4. आयकर आयुƅ(अपील) / The CIT(A)-
5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाडŊ फाईल / Guard file.
आदेशानुसार/ BY ORDER,
उप/सहायक पंजीकार (Dy./Asstt.