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PER PAWAN SINGH, JUDICIAL MEMBER:
This appeal by assessee under section 253 of the Income-Tax Act (“The Act”) is directed against the order of ld. CIT(A)-8, Mumbai dated 27.02.2016 for Assessment Year (AY) 2010-11. The assessee has raised the following grounds of appeal: 1.1 The ld. CIT (Appeals) has erred in confirming the disallowance of expenditure on foreign travel, boarding and lodging amounting to Rs.22,72,588/-. 1.2 The ld. CIT (Appeals) has erred in confirming the disallowance of expenditure on gifts amounting to Rs. 1,45,650/-.
2. Brief facts of the case are that the assessee is a Non-Banking Finance Company, Trading in Cotton Bales & Herbs filed its return of income for Scil Capital India Ltd. relevant AY on 15.10.2010 declaring total income of Rs. 1,24,19,812/-. The assessment was completed under section 143(3) of the Act on 11.03.2013.
The Assessing Officer (AO) while framing the assessment order besides the other addition and disallowance disallowed a sum of Rs. 22,72,588/- on account of expenditure on Foreign Travel Boarding and Lodging and expenditure on gifts for Rs. 1,45,650/-. On appeal before the ld. CIT(A), both the disallowance was confirmed. Thus, further aggrieved by the order of ld. CIT(A), the present appeal is filed before us.
We have heard Sh. J.D. Mistri, ld. Sr. Advocate ( ‘ld AR’) for assessee and SH. V. Justine ld. Departmental Representative (DR) for the Revenue and perused the material available on record. First Ground of appeal
relates to disallowance on account of expenditure on Foreign Travel expenses of Rs.22,72,588/-. The ld. AR of the assessee argued that AO made the disallowance on adhoc basis. It was argued that assessee is engaged in the business of Non-Banking Finance Company and Trading in Cotton Bales & Herbs. For exploring business revenue some of the Director of the assessee-company visited various countries viz South Africa, Malasia and Singapore. On the tour and travel of the Directors the assessee-company incurred expenditure of Rs. 3,59,551/- on purchase for Foreign Currency, flight ticket and Visa charges. The assessee-company also incurred Hotel lodging and boarding of Rs. 19,13,037/-. The expenditure was incurred wholly and exclusively for the purpose of business. The assessee provided 2 Scil Capital India Ltd. all necessary details called for during the assessment proceeding along with necessary evidences. The purpose of Foreign Tour and Travel was to enter into business contracts of trading in Cotton Bales & Herbs, both domestically and international market. Though, there was no business in the relevant AY. Initially Foreign Trip for introductive purpose and ultimately assessee received sufficient business in subsequent years. In support of his submission, the ld. AR of the assessee relied upon the decision of Tribunal in assessee’s own case for AY 2003-04 in ITA No. 2703/Mum/2011 dated 31.08.2012.
4. On the other hand, the ld. DR for the Revenue supported the order of authorities below. It was argued that assessee has furnished self-serving document which has no relevancy with the claim related with Foreign Travel Expenses. The assessee has merely furnished the copy of Visiting Cards of the persons to whom the Directors of the assessee allegedly held meetings.
5. We have considered the rival submission of the parties and have gone through the orders of authorities below. The AO during the assessment proceeding asked the assessee to provide complete details and expenses of Foreign Travel with bills and vouchers and justification of business purposes. The assessee furnished the details of expenses as recorded by AO in paragraph 9.2 of the assessment order. The AO not accepted the contention of assessee holding that assessee has provided only break up of 3 ITA No. 3642/M/2015- Scil Capital India Ltd. expenses and not provided any evidence to substantiate the expenses incurred wholly and exclusively for business purpose. The ld. CIT(A) confirmed the disallowance holding that assessee failed to prove the corroborative and supporting evidence. We have seen that the assessee has furnished the details of expenditure related with its Director Mr. Manish Mirani, Nayan Mirani & Tanmay Mirani. The assessee has also placed on record the details of the persons with whom the Directors of the assessee- company held business meeting. We have further noted that similar disallowance on account of Foreign Travel Expenses was made in assessee’s own case for AY 2003-04 and the assessee filed appeal before the Tribunal. The Tribunal allowed the similar expenditure. Considering the documentary evidences furnished by AO and the assessee is made export sale of substantial amount of Rs. 3,32,91,359/- in subsequent to the Foreign Trip of Directors of the assessee. Thus, considering the decision of Tribunal in assessee’s own case for AY 2003-04, the ld. CIT(A) was not justified in sustaining the addition/disallowance. Hence, the addition made on account of disallowance of Foreign Travel Expenses is deleted.
6. Ground No.2 relates to disallowance of gift of Rs. 1,45,650/-. The ld. AR of the assessee argued that during the relevant period, the representative of assessee-company made a various gift article like Writing Instrument, Wallet etc to Senior officials of the company. The AO disallowed the expenditure incurred on gift holding that assessee failed to prove the 4 Scil Capital India Ltd. business justification. The gifts were distributed by the assessee-company to its customer, Vendor to built healthy business relationship and the expenses made on such gifts are allowable under section 37 of the Act. In support of his submission, the ld. AR of the assessee relied upon the decision of Garware Synthetics (P) Ltd. vs. ITO (1982) 2 ITD 176 (Bom). On the other hand, the ld. DR for the Revenue supported the order of authorities below.
The ld. DR for the Revenue further argued that assessee has not furnished any record to prove that the so-called gifts were given wholly and exclusively for the purpose of business. 7. We have considered the rival submission of the parties and have gone through the order of authorities below. The AO disallowed the expenses on gift holding that assessee failed to prove the business justification for such expenses. The ld. CIT(A) confirmed the action of AO on the similar line.
We have noted that the assessee has filed the detailed gift along with tax invoices of Entrack International Trading Pvt. Ltd. for purchase of Leather Wallet 4CC Black, Leather Nitht flight Wallet 4CC with 8775, Writing Instruments Generation BP Black 13209, Belts Bowed Pall MAT PIN 9797, Belts Structure Ruthenium Shiny 38164 for Rs. 30,000/- and invoices of the Rose International for LLADRO 01007049-Endless Love (MRP 12,000/-), LLADRO 01006291-Love Nest (MRP 19,000/-), LLADRO 01006475- Happy Anniversary (MRP Rs. 22,000/-) for Rs. 45,050/-. - Scil Capital India Ltd.