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ORDER PER BENCH The captioned appeals filed by the assessee are directed against the order of the Commissioner of Income Tax (Appeals)-31, Mumbai [in short ‘CIT(A)’] and arise out of the assessment completed u/s 143(3) r.w.s. 147 of the Income Tax Act 1961 (the ‘Act’). As common issues are involved, we are proceeding to dispose them off through a consolidated order for the sake of convenience. 2. Facts being identical, we begin with the assessment year (AY) 2007-08. The grounds of appeal filed by the appellant read as under:
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding addition made by the AO at 25% in respect of perquisites taxed in the hands of the appellant u/s 17(2)(iv) of Rs.3,89,477/- pertaining to credit card expenses. The appellant prays that the action of Ld. CIT(A) in sustaining 25% this addition may kindly be deleted.
2. Without prejudice to Ground No. 1, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in sustaining 25% the addition on an ad-hoc basis and arbitrary/presumptive manner which is bad in law and needs to be deleted.
3. Briefly stated, the facts of the case are that the appellant/assessee is a Director in M/s Technocraft Industries (India) Ltd. (in short ‘TIIL’). During the course of assessment proceedings, the Assessing Officer (AO) found that the credit card bills of the assessee are paid by the employer. Therefore, he asked the assessee vide order sheet noting Sharad Kumar Sharf 3 4953,4954,4955, 4956 and 2719/Mum/2016 dated 21.04.2014 to furnish the details of credit card expenses/statement for the impugned assessment year and to explain why the credit card bills/expenses paid by the employer should not be taxed u/s 17(2)(iv) of the Act. In response to a query raised by the AO, the assessee filed a reply dated 05.05.2014 stating: “Regarding credit card expenses a statement showing head wise details along with copy of account statement and copies of available bills are enclosed. You may please note that all these expenses are on account of official engagements and trips undertaken by me on behalf of Technocraft Industries (India) Ltd. and the expenses are borne by the company.” The AO having gone through the credit card statement/bills/invoices furnished by the assessee found that the total expenses incurred through credit card during the year was Rs.15,57,910/-. Further, he found that many expenses are personal in nature and the assessee could not furnish all the bills/invoices in respect of expenses incurred through credit card. Moreover, the assessee failed to furnish any evidence establishing that the expenses had been incurred wholly and exclusively for the purpose of business. In absence of complete documentary evidence, the AO disallowed expenses @ 25% stating that personal use may not be ruled out. Thus he made an addition of Rs.3,89,477/- to the total income of the assessee as perquisite u/s 17(2)(iv) of the Act.
4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) held :
Sharad Kumar Sharf 4 4953,4954,4955, 4956 and 2719/Mum/2016 “6.1 On consideration of the facts as they emerge from the impugned order and the submissions made in these proceedings, I find that the appellant vide submissions dated 05.05.2014 filed during scrutiny proceedings had furnished detailed break up of expenses incurred on the credit card. Perusal of the chart enclosed shows that these pertained to sales promotion expenses and travel expenses. The appellant had also filed names and addresses of customers located outside India in Hungary, Germany, Greece and Italy in the capacity of MD (Commercial) for business meetings of the company. The appellant had also travelled to China for business visit on behalf of the company. However, the appellant failed to furnish any documentary evidence establishing that these expenses have been incurred wholly and exclusively for the business purpose. In the absence of complete documentary evidence, the personal use of expenses cannot be ruled out. Therefore, addition of 25% of these expenses are reasonable and the appellant’s ground raised in the appeal is dismissed.”
5. Before us, the Ld. counsels of the appellant file an application for admission of additional evidence under Rule 29 of the ITAT Rules, 1963. It is submitted that during the financial year (FY) 2006-07, the appellant had incurred certain credit card expenses for foreign travel for business purposes which were paid by the employer company-TIIL. The fringe benefit tax on the same was paid by the employer under the head ‘Sales Promotion’ and ‘Tours and Travels’. To substantiate the appellant’s claim, the Ld. counsels submit some additional evidence as under:
Sharad Kumar Sharf 5 4953,4954,4955, 4956 and 2719/Mum/2016 Sr. Particulars Submitted Submitted No. to CIT(A) 1. Computation of value of fringe benefits and tax thereon of the appellant’s employer X X company, Technocraft Industries (India) Ltd. for AY 2007-08 2. Acknowledgement of return filed of the appellant’s employer company, Technocraft X X Industries (India) Ltd. for AY 2007-08 3. Order dated 26.11.2009 passed u/s 115WE(3) of the Act in case of the appellant’s X X employer company, Technocraft Industries (India) Ltd. for AY 2007-08 Then the Ld. counsels refer to Rule 30 of the ITAT Rules, 1963 which prescribe circumstances under which, additional evidence could be admitted before the Tribunal. Also reliance is placed by them on the decision in CIT v. Kum. Satya Setia 143 ITR 486 (MP), UOP LLC v. Addl. DIT 108 ITD 186 (Delhi-ITAT) and ITO & Others reported in 112 ITR 423 (Cal). Thus it is submitted that the additional evidence submitted before the Tribunal are in form of supporting documents for the primary claim of the appellant that the credit card expenses were incurred for business purpose of the employer and fringe benefit tax on the same has already been paid by the employer. Therefore, the Ld. counsels submit that the said document be admitted as additional evidence under Rule 29 of the ITAT Rules, 1963 as the same serves as supplementary evidence to prove that the credit card expenses had been incurred for business purposes of the employer company and fringe benefit tax on the same was paid by the employer.
Sharad Kumar Sharf 6 4953,4954,4955, 4956 and 2719/Mum/2016 The Ld. counsels also submit that TIIL is a public limited company engaged in the business of manufacture and export of drum closures, pipes, cotton yarn, knitted cotton and textile products. The appellant being the MD of TIIL is fully responsible for the exports of the company. TIIL is predominantly an export-oriented company getting more than 85% of the business from its foreign customers across the globe. Therefore, for expanding the business of TIIL, it is imperative for the MD to hold meetings with existing as well as prospective clients/customers. Accordingly, there were expenditures such as sales promotion, marketing, foreign travel which need to be incurred and are absolutely necessary for the growth of the business of TIIL. As a part of business ethics, the appellant needs to be accompanied by his wife for his business meetings. Further, the expenses incurred by the appellant were for hotel stay, car rental, telephone expenses while abroad, air ticket expenses and petrol cost. In this case, the appellant did not, of his own accord, ask his wife to accompany him when he was sent by the company on a business tour abroad. It is the company that desired that the appellant’s wife would also join him in the tour, as a part of business ethics. Hence, the expenditure incurred for the wife were also met by the company and not by the appellant. A decision of the Hon’ble Andhra Pradesh High Court has been mentioned without citation. So we are not in a position to comment on it. The Ld. Counsels further submit that as a matter of abundant precaution, the employer-company TIIL has already paid fringe benefit Sharad Kumar Sharf 7 4953,4954,4955, 4956 and 2719/Mum/2016 tax on the expenses under consideration under the head ‘Sales Promotion’ and ‘Tours and Travels’ (including foreign travel) for the AYs 2007-08 to 2009-10. The computation of value of fringe benefits and tax thereon and acknowledgement of return filed by TIIL for the said years have been filed as additional evidence vide letter dated 07.03.2018. In view of the same, it is submitted that taxing the said expenses as perquisites u/s 17(2)(iv) in the hands of the appellant would tantamount to double taxation. Thus it is submitted that in the interest of natural justice, the addition made by the Ld. CIT(A) may be deleted. It is stated that by the Finance (No. 2) Act, 2009 a new section 115WM was inserted to abolish the fringe benefit tax w.e.f. AY 2010-11 Also reliance is placed by them on the decision in CIT v. M.N. Nadkarni (1996) 161 ITR 544 (Bom), CIT v. L.W. Russel (1964) 53 ITR 91 (SC), CIT v. Lala Shri Dhar (1972) 84 ITR 192 (Delhi). The Ld. counsel filed a copy of the above decisions.
Per contra, the Ld. DR supports the order passed by the Ld. CIT(A). Also relying on the order dated 30.06.2017 of the ITAT ‘J’ Bench Mumbai in assessee’s own case for the AY 2006-07 (ITA No. 7652/Mum/2014), it is submitted by him that facts being identical the same may be followed.
We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. We begin with the case laws filed by the Ld. counsels of the appellant. In M.N. Nadkarni (supra), scholarship was given by the company to children of members of managing staff. Scholarship was Sharad Kumar Sharf 8 4953,4954,4955, 4956 and 2719/Mum/2016 paid directly to the children. There was no reference in terms of employment to scholarship scheme. Scholarship was given to meet cost of education. The Hon’ble High Court held that (i) amounts paid as scholarship is not assessable as perquisites in the hands of member of managing staff within the meaning of section 17(2)(iii) and (ii) even if the amounts were taken as having been paid to the assessee, they were amounts of scholarship and hence not liable to be included in the computation of the total income of the assessee under the provisions of section 10(16). In L.W. Russel (supra), it is held that where employer contributed sum towards premium payable by assessee-employee to which employee would be entitled on his attaining age of superannuation, said sum was not a perquisite within the meaning of section 7(1) of the 1922 Act. In Lala Shri Dhar (supra), it is held that the amount of insurance premium paid by the employer-company to purchase personal accident insurance under comprehensive policy of the assessee, who is a director of employer company, is not a perquisite within the meaning of section 7(1) of the Act. In the instant case, both the AO and the Ld. CIT(A) have held that the assessee failed to furnish any documentary evidence establishing that these expenses have been incurred wholly and exclusively for the business purpose. There is a specific finding of the AO that the assessee failed to furnish before him all the bills/invoices in respect of expenses incurred through credit card. We find from the written submission filed Sharad Kumar Sharf 9 4953,4954,4955, 4956 and 2719/Mum/2016 by the Ld. counsels of the assessee before the Tribunal that no attempt has been made to refute the above finding of the AO as well as that of Ld. CIT(A). The Ld. counsels could have filed documentary evidence before us, establishing that these expenses were incurred wholly and exclusively for the business purpose. They have failed to do so. In the instant case, the burden of prove was on the appellant. He failed to discharge the same. Thus on pure facts, the case of the appellant is distinguishable from the case laws relied on by the Ld. counsels. 7.1 Similar issue arose before the ITAT ‘J’ Bench Mumbai in assessee’s own case (ITA No. 7652/Mum/2014) for the immediate preceding assessment year 2006-07. The 1st ground of appeal before the Tribunal in that case was as under: “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding addition made by Ld. AO at 50% in respect of perquisites taxed in the hands of the appellant u/s 17(2)(iv) pertaining to credit card expenses. The appellant prays that the action of Ld. CIT(A) in sustaining 50% of the addition may kindly to be deleted.” Also additional evidence was filed by the assessee in the above assessment year before the Tribunal submitting that on the impugned amounts, the employer-company has paid fringe benefit tax and hence no disallowance is required. In the above assessment year, the assessee sought to submit additional evidence being order passed u/s 115WE in the case of employer-company for the assessment year 2006-07. Also the Ld. counsel referred to the decision dated 29.07.2011 of the ITAT, Mumbai Bench in the case of Bipin Kotak v. ACIT (ITA No.
Sharad Kumar Sharf 10 4953,4954,4955, 4956 and 2719/Mum/2016 4866/Mum/2009) and submitted that these amounts cannot be added as perquisites in the hands of the assessee as fringe benefit tax thereon has been paid by the employer-company. Having examined the above ground of appeal and application for additional evidence filed by the assessee, the Tribunal held as under: “7. Upon careful consideration we find ourselves in agreement with the learned departmental representative that assessee is trying to make out an altogether new case. The assessee has also not followed the tribunal rules for seeking admission of additional evidence. Further assessee’s Counsel has tried to pass on additional evidence without any mention in this regard in a paper book. In our considered opinion, since these additional evidences were not before the authorities below, nor any case was made out in this regard before the authorities below these additional evidences cannot be admitted. Hence we reject the request for admission of additional evidence. In this regard we place reliance upon the following case laws, for declining to admit the additional evidence. (i) Velji Deoraj& Co. v. CIT (1968) 68 ITR 0708 (Bombay) (ii) CIT v. Smt. Kamal C. Mehboobbani (1995) 214 ITR 0015 (Bombay) (iii) CIT v. Rao Raja Hanut Singh (2001) 252 ITR 0528 (Rajasthan) (iv) Ian Peter Morris v. ACIT [Civil appeal No.11385-11386 of 2016 (SC)] (v) Maruti Udyog Ltd. v. ITAT (2000) 244 ITR 303 (Delhi) (vi) UOP LLC v. Addl. Director of IT [(2007) 108 ITD 186 (Delhi)
8. Now coming to the merits of the case we find that no details whatsoever regarding the credit card expense was submitted before the Assessing Officer. Hence addition of the impugned amount in the hands of the assessee was fully justified. Upon assessee's appeal learned CIT(A) has admitted additional evidences and thereafter despite not being fully