R.N. SAHNI,NEW DELHI vs. JCIT, NEW DELHI

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ITA 210/DEL/2017Status: DisposedITAT Delhi21 February 2020AY 2011-123 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The tribunal held that the disallowance under Section 14A cannot exceed the dividend income. It also held that foreign travel expenses incurred for business development should be allowed.

What were the facts?

The assessee appealed against the disallowance of expenses under Section 14A and foreign travel expenses. The disallowance under Section 14A exceeded the dividend income, and the foreign travel expenses were disallowed for lack of documentary evidence.

What were the issues?

Whether disallowance under Section 14A can exceed dividend income and whether foreign travel expenses for business development are allowable.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI

Before: MS. SUSHMA CHOWLA & SHRI O.P.KANT

For Appellant: CA यथ क ओर से /
Hearing: 20.02.2020Pronounced: 21.02.2020

आदेश / ORDER PER SUSHMA CHOWLA, VP The present appeal filed by assessee is against order of CIT(A)-11, New Delhi dated 20.12.2016 relating to assessment year 2011-12 against the order passed under section 143(3) of the Income-tax Act, 1961 (in short ‘the Act’).

2.

The Ld.AR for the assessee moved an application for adjournment however, because of the nature of the issues involved, the adjournment application was refused.

1.

Assessment Year 2011-12 3. The first issue which is raised by way of Ground of appeal Nos. 1 & 2 is against the disallowance made u/s 14A r.w.Rule 8D of the Income Tax Rules (in short “Rules”). The Assessing Officer had made the aforesaid disallowance in line with the provision of Rule 8D of IT Rules. However, we find from the perusal of the CIT(A)’s order itself that the CIT(A) had noted the fact the dividend income received by the assessee of Rs.10,581/- in para 4.3.1 of the appellate order. The disallowance made u/s 14A of the Act amounts to Rs.15,10,519/-.

4. The Hon’ble Delhi High Court in Cheminvest Ltd. vs CIT, 378 ITR 33 (Delhi) has held that the disallowance u/s 14A of the Act r.w. Rule 8D of the Rules cannot exceed the dividend income received by the assessee.

5.

Applying the said ratio to the issue involved, we direct the Assessing Officer to restrict the disallowance made u/s 14A r.w. Rule 8D to Rs.10,581/-. Thus, Ground of appeal Nos. 1 & 2 raised by the assessee are allowed.

6. Now Coming to the 2nd issue vide Ground No.3, the assessee is aggrieved by the disallowance made out a foreign travel expenses amounting to Rs.2,45,628/-. The assessee was running a resort and had claimed travelling expenses of Rs.2,45,628/- on his trip to London. The assessee explained that the said foreign trip was made for business purposes to have a meeting with the foreign travel agent, from whom the assessee was receiving the business. The Assessing Officer disallowed the said expenditure on the ground that no documentary evidence was filed in Assessment Year 2011-12 respect of foreign travel expenses incurred in London. The CIT(A) upheld the disallowance made. The assessee is in appeal against the same.

7. On the perusal of record, we are of the view that it is for the assessee to decide the course of its business and in the scenario of business development, the expenditure on foreign travelling merits to be allowed in the hands of the assessee. Thus, Ground No.3 raised by the assessee is allowed.

8.

In the result, appeal filed by the assessee is allowed.

Order pronounced in the open court on 21st February, 2020.

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