GREWAL EXPORT P.LTD,NAVI MUMBAI vs. DCIT 10(3), MUMBAI

order dated 29/1/2016 of CIT(A)-24, Mumbai the assessee has filed the present appeal.Assessee-company-engaged in the business of exporting of engineering, electronic and industrial products-filed its return of income on 28/09/2011,declaring income of Rs.95.36 lakhs.The Assessing Officer(AO)completed assessment u/s. 143(3) of the Act,on 21/11/2013,determining its income at Rs.98.26 lakhs. 2.First ground of appeal is about treating the interest income under the head income from other sources instead of income from Business.Before us,the Authorised Representative (AR) fairly conceded that the Tribunal had decided the identical issue against the assessee,while adjudicating the appeal for the AY.s. 2009-10 and 2010-11(ITA/2987/ Mum/2913, dtd. 12. 09.2014 and ITA/7087/Mum/2013,dtd.08. 07.2015). Respectfully, following the above orders the Tribunal,we dismiss Ground no.1. 3.Second ground deals with disallowance made by the AO,u/s.14A of the Act.During the assessment proceedings,the AO found that the assessee had earned exempt income of Rs.1.54 crores,that it had made a disallowance of Rs.2.88 lakhs on its own,that it had claimed total expenditure of Rs.5.77 lakhs in the P&L account.Invoking the provisions of Rule 8D(2) of the Income tax Rules,1962(Rules) r.w.s.14A of the Act.The AO made total disallowance of Rs.8.01lakhs.After considering the suo-motu disallowance made by the assessee ,he restricted the disallowance to Rs.5.77 crores.

1580/M/16(11-12) Grewal Export P.Ltd.

3.1.In the appellate proceedings,before the First Appellate Authority (FAA),the assessee made detailed submissions and relied upon certain case laws. He referred to the order of the Tribunal for AY.2009-10 (supra), wherein the Tribunal had held that disallowance made by the AO was to be restricted to 1/4th of the expenditure. He further held that the AO had disallowed the entire expenditure debited to P&L account to Rs.5.77 lakhs that he was not justified in disallowing the same, that the assessee had made advance of share application money of Rs.12.03 crores that had been included by the assessee in the investment, that the shares had not been allotted, that the same had to be excluded from average investment. Accordingly, he directed the AO to recomputed the disallowance. 3.2.Before us, the Authorised Representative (AR) stated that AO had not expressed dissatisfaction with correctness of the claim made by the assessee , that assessee on its own had made disallowance of Rs.2.88 lakhs , that the Tribunal had restricted the disallowance to 1/4th of disallowance of earlier year. The Departmental Representative (DR) left the issue to the discretion of the Bench. 3.3.We find that the AO had disallowed the entire expenditure appearing in the P&L account invoking provision of section 14A, that the expenditure included depreciation of Rs.51,113/-, that disallowance of depreciation should not have been made. Following the order of the Tribunal for earlier year we direct AO to restrict the disallowance to 25% of the expenditure disallowed by the assessee i.e. Rs.2.88 lakhs.Second Ground of appeal is partly allowed. 4.Last Ground of appeal is about disallowance toward foreign travelling expenses. During the assessment proceedings the AO found that assessee had debited Rs.4.78 lakhs to P&L account under the head ‘tour and travelling expenses’. On enquiry it was found that the expenditure was incurred on account of travelling of the director and his wife. He held that travelling was more of personal nature. He asked the assessee to explain as to why travelling expenses should not be disallowed in view of the fact that no business activity was carried out by director/wife. As per AO the assessee did not furnish any valid reason except the reason that directors were staying in Dubai and were visiting India .He held that tour and travelling expense of director and members of his family should not have been shown as business expenditure.Finally, he made disallowance of Rs.4.78 lakhs. 4.1.In the appellate proceedings, the FAA held that the AO had disallowed entire expenditure debited to P&L account .He directed the AO make a partial disallowance in respect of the expenses towards foreign travelling which arose on account of directors wife accompanying 1580/M/16(11-12) Grewal Export P.Ltd.