AVIPRO INDIA PRIVATE LIMITED,MUMBAI vs. DY.CIT-9(1)(2), MUMBAI

Grounds no.1 and 2, raised by the assessee are with regard to disallowance of travel expenditure @ 50% of the total expenditure and

We have considered rival submissions and perused the material available on record. We find that the assessee is a Private Limited Company rendering consultancy services. The assessee company receives fee for services rendered by it to various Airline companies. The services rendered by the assessee comprised of promoting and marketing various components manufactured by various parties which are used in Commercial Aviation Sector. The Assessing Officer observed that the assessee receives fee from abroad and does not require major expenditure to be incurred in India. The Assessing Officer made a general observation that Shri Sairam Patro, who is a 50% shareholder and director in assessee company is the main force behind the assessee company and his personal expenditure has been debited in the company’s books. We find that the assessee had debited an amount of ` 7,82,743, on account of business promotion expenditure. The assessee replied before the Assessing Officer that majority of these expenditures were incurred by the assessee’s Director using his credit card and the same were later reimbursed by the assessee company to its Director. The entire list of expenditure incurred through various credit cards belonging to Shri Sairam Petro, at various places including in Bombay Presidential Golf Club were

In respect of travel expenditure, the Assessing Officer found that the assessee had claimed total travelling expenditure of `10,01,584. The assessee furnished the entire details of the travel made by the Director with his family members to various places and gave complete details of the same before the Assessing Officer together with the purpose of visit. The Assessing Officer observed that since the entire consultancy fee is received by the assessee fully from abroad, there is no need for the assessee to make any domestic travel in India. We find that the Assessing Officer on a perusal of the details filed by the assessee towards travelling expenditure disallowed the sum of ` 8,55,547, out of total travel expenditure of ` 10,01,584, as personal expenditure debited to the company’s account.

We find that the learned Commissioner (Appeals) upheld the action of the Assessing Officer in disallowing the entire business promotion expenses of ` 7,82,743. With regard to travel expenditure, the learned Commissioner (Appeals) observed that the assessee could produce details only for ` 3,01,197, out of the total expenditure of `

We find that for the assessment yearS 2009–10 to 2012–13 and for the assessment year 2014–15, the Assessing Officer had disallowed only 8% of the business promotion expenditure and travel expenditure as not meant for the purpose of business of the assessee. In view of this consistent stand taken by the Revenue in earlier assessment years as well as in subsequent assessment year, we hold that the disallowance @ 8% of the total travel expenditure and business promotion expenditure would meet the ends of justice and the Assessing Officer is directed accordingly. Grounds no.1 and 2, raised by the assessee are partly allowed.

Ground no.3, is with regard to disallowance made under section 14A r/w rule 8D(2) in the sum of ` 2,71,266.

We have considered rival submissions and perused the material available on record. We find that the assessee had received dividend on mutual fund and shares totaling to ` 25,81,967, and claimed the same as exempt under section 10(33) / 10(34) of the Act and an amount of ` 9,14,629, as long term capital gain on securities claimed

We find that the learned Authorised Representative fairly conceded for the disallowance made in the sum of ` 71,094, and under first limb of rule 8D(2). With regard to the disallowance made under rule 8D(2)(iii), towards administrative expenses, the law is now well settled by the Special Bench decision of the Tribunal, Delhi Bench, in CIT v/s Vireet Investments Pvt. Ltd., [2017] 165 ITD 027 (Del.) (SB) that only those investments which had actually yielded exempt income to the assessee should be considered for the purpose of working out the disallowance under rule 8D. Accordingly, we direct the Assessing Officer to re–compute the disallowance under third limb of rule 8D(2) by considering only those investments which had yielded exempt income. Accordingly, ground no.3, raised by the assessee is partly allowed for statistical purposes.

In the result, assessee’s appeal is partly allowed for statistical purposes. Order pronounced in the open Court on 13.12.2019