What did the Tribunal hold?

The Tribunal held that the disallowance of travel expenditure was based on surmises and conjectures. While some expenditure was for partners, the disallowance of the entire 20% was not justified, and only 50% of a specific voucher amount should be disallowed.

The assessee, a partnership firm engaged in exporting silk fabrics, had its assessment completed with additions for overseas commission and a disallowance of 20% of travel expenditure. The CIT(A) granted relief on commission but confirmed the travel expenditure disallowance.

What were the issues?

Whether the disallowance of travel expenditure as personal was justified, and the extent to which such disallowance should be made.

Universal Textile Mills vs DCIT | ITAT Bangalore 2017

Income Tax Appellate Tribunal, ‘C’ BENCH, BENGALURU

Before: SHRI INTURI RAMA RAO & SHRI LALIET KUMAR

For Appellant: Shri Rajkamal Ganeriwala, CA

For Respondent: Shri M.K.Biju, JCIT (DR)

Hearing: 06/11/2017Pronounced: 17/11/2017

Date of hearing : 06/11/2017 Date of pronouncement : 17/11/2017 O R D E R

Per INTURI RAMA RAO, AM :

This is an appeal filed by the assessee directed against the order of the Commissioner of Income-tax (Appeals), Bengaluru-2, Bengaluru, [CIT(A)] dated 07/01/2017 for the assessment year 2012- 13.

The assessee raised the following grounds of appeal:

2. To delete the consequential levy of interest on tax amount.

Briefly facts of the case are that the assessee is a partnership firm. It is engaged in the business of export of silk fabrics. Return of income for the assessment year 2012-13 was filed on 28/09/2012 declaring income of Rs.4,97,66,800/-. Against said return of income,

Page 3 of 4 the assessment was completed at total income of Rs.5,50,79,235/- vide order dated 26/03/2015 passed u/s 143(3) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short]. While doing so, the Assessing Officer (AO) made addition on account of overseas commission paid of Rs.43,83,206/- and made disallowance of 20% of travelling expenditure of Rs.9,31,232/-. The AO disallowed overseas commission paid on the ground that no TDS was made. In respect of foreign travel expenditure, AO held that the partners of the assessee undertook foreign travel, therefore, he presumed that 20% of the expenditure should be in the nature of personal expenditure.

On appeal before the CIT(A), the CIT(A) granted relief in respect of disallowance of commission paid to foreign parties. However, confirmed addition made on account of foreign travel. The CIT(A), after referring to description given in the vouchers dated 14th June 2011 concluded that the expenditure was also incurred towards family members of the firm. Therefore, he confirmed the entire disallowance. Being aggrieved, the assessee is in appeal before us.

We heard rival submissions and perused the material on record. In the present case, the AO has disallowed 20% of travel expenditure holding to be in the nature of personal expenditure of the partners of the assessee. This is done merely based on surmises and conjectures. The AO had not referred to any evidence. However, the CIT(A) had referred to one of the vouchers wherein expenditure of Rs.3,18,176/- was incurred and it was stated in the narration of the expenditure that the amount was also incurred towards partners Shri Aditya Jaipura and Page 4 of 4 one Ms.PJ. It is not known who that person Ms.PJ is. Even assuming that she is not the partner of the firm, only 50% of Rs.3,18,176/- can be confirmed and the balance disallowed in absence of any evidence on record suggesting personal nature cannot be upheld. Therefore, we direct the AO to disallow 50% of Rs.3,18,176/- and delete the balance addition.

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

UNIVERSAL TEXTILE MILLS,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-4(3)(1), BANGALORE

What did the Tribunal hold?

What were the facts?

What were the issues?

Which sections of the Income-tax Act were involved?

Recent GST High Court judgments