ACIT, MANGALORE vs. M/S LAMIA INTERNATIONAL,

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ITA 74/BANG/2014Status: DisposedITAT Bangalore02 May 2017AY 2010-116 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the CIT(A)'s deletion of disallowances under Section 40A(2) was based on proper appreciation of evidence and dismissed the revenue's grounds. It also upheld the CIT(A)'s decision regarding consumables and foreign travel expenditure.

What were the facts?

The assessee, a partnership firm engaged in exporting automobile parts, filed its return of income. The Assessing Officer made certain disallowances, including for expenses on consumables and foreign travel. The CIT(A) deleted some disallowances and restricted others.

What were the issues?

Whether disallowances made by the AO for expenses on consumables and foreign travel were justified, and whether the CIT(A) erred in deleting or restricting them.

Which sections of the Income-tax Act were involved?

Section 40A(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CIRCUIT BENCH AT MANGALORE

Before: SHRI INTURI RAMA RAO & SHRI SUDHANSHU SRIVASTAVA

For Appellant: Shri K.A.Chandrashekar, JCIT(DR)
Hearing: 03/02/2017Pronounced: 02/05/2017

Per INTURI RAMA RAO, AM :

1.

This is an appeal filed by the revenue directed against the order of the CIT(A), Mysore, dated 11/09/2013 for the assessment year 2010-11.

2.

The revenue raised the following grounds of appeal:

3.

Briefly facts of the case are that the respondent-assessee is a partnership firm duly formed under the provisions of the Partnership Act. It is engaged in the business of export of automobile springs, brake drums and disk, bolts and nuts etc., Return of income for the assessment year 2010-11 was filed on 03/09/2010 declaring total income of Rs.1,07,54,050/-. Subsequently, the case was taken up for scrutiny assessment and the assessment was completed by the ACIT, Range-2, Mangalore,

Page 3 of 6 vide order dated 17/12/2012 u/s 143(3) [hereinafter referred to as 'the Act' for short] by disallowing the following:

4.

Being aggrieved by the above order, an appeal was preferred before the CIT(A). The above disallowances were deleted except in case of foreign travel expenditure where the disallowance was restricted to an amount of Rs.1 lakh.

5.

Being aggrieved, the revenue is in appeal before us. The disallowance u/s 40A(2) was deleted by the CIT(A) vide para.4.6 of his order which reads as under:

This observation of the CIT(A) is based on proper appreciation of evidence. Further learned DR had not filed any comparable case

Page 4 of 6 in support of the contention of the AO. In the circumstances, we do not find any reason to interfere with the order passed by the CIT(A). Hence, ground appeal No.2 and 3 filed by the revenue are dismissed.

6.

Ground Nos.4, 5 & 6 relate to deletion of expenditure incurred on consumables of Rs.25,91,193/- incurred on consumables and curing the defects. The only case of the AO is that increase in expenditure is not proportionate to the increase in sales and therefore is not allowable. The CIT(A) after considering material placed before him restricted the disallowance to the extent of Rs.5,99,038/-. It is trite law that no expenditure can be disallowed merely based on surmises and conjectures. Therefore, we do not find any fallacy in the order of the CIT(A) in this regard.

As regards violation of rule 46A of the IT Rules, learned DR has not brought out anything to show that additional evidence was filed before the CIT(A) by the respondent-assessee. In the absence of any additional evidence,12. question of violation of provisions of rule 46A of the IT Rules does not arise. Hence, ground Nos.4, 5 & 6 are dismissed.

7.

The ground No.7 relates to disallowance of foreign travel expenditure. The CIT(A) had confirmed the disallowance to the extent of Rs.1 lakh as against the claim ofRs.2,85,956/-. It is submitted that foreign travel expenditure was incurred on account of visiting European countries to inspect the equipment,

Page 5 of 6 manufacturing process etc. Therefore, the expenditure was incurred wholly and exclusively for the purpose of business and the same is allowable. The observation made by the CIT(A) are as under:

We do not find any reason to interfere with the order of the CIT(A). Hence, the grounds of appeal are dismissed.

8.

In the result, the appeal filed by the revenue is dismissed.

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