STERIA INDIA LTD. (ESTWHILE XANSA INDIA LTD.),NOIDA vs. ACIT, NEW DELHI

The Ld. AR submits that both the issues are covered against the Revenue. In assessee’s own case for the earlier years vide consolidated order dated 26/9/2016 passed by ITAT Delhi Bench being ITA No. 2283/DEL/2011.

The Ld. DR submits that the Assessing Officer has recorded facts that the assessee do not have any documentary evidence as to how 25% of substances allowance paid by the assessee company. Thus, the Ld. DR submitted that the judgment in the earlier assessment year was on the basis of entire amount which was settled in the later years, therefore, the ITAT order will not be applicable in the present assessment year. The Ld. DR also relied on the Section 10(14) of the Act is for special allowance and is applicable in assessee’s case. As regards Section 10A of the Act, the Ld. DR submitted the case law of the Hon’ble Delhi High Court in case of CIT Vs. KEI Industries Ltd. (2015) 57 taxmann.com 412 (Delhi).

The Ld. AR submitted that the ITAT order dated 26/9/2016 clearly covers the present issues in the present assessment year.

We have heard both the sides it is pertinent to note that in assessee’s own case for Assessment Year 2004-05, 2005-06, 2006- 07, 2007-08 , 2008-09 & 2009-10 which is a subsequent years, the ITAT Delhi Bench held both the issues in favour of the assessee and against the revenue. The ITAT held as under: “29. On perusal of the above decision it is apparent that the 1st appellate authority has considered the provisions of Section 195 of the income tax act and held that this payment of subsistence allowance is only a reimbursement of expenditure which is not chargeable to tax in India and hence no withholding tax was required to be deducted from such payment and hence provisions of section 40a(i) does not apply. Even otherwise he held that such payment of subsistence allowance if not fully spent for the official purposes of the employees then it would be chargeable to tax in the hands of the employees only, and as it is an expenditure of the employer incurred wholly and exclusively for the purposes of the business, which cannot be disallowed in parts. We also concur with the reasons given that such subsistence allowance is supported by the evidence of the actual expenditure incurred for official purposes to the extent of 75% and for the balance 25%, employees have submitted a declaration of having spent in the said amount in the course of travel abroad. Therefore, we do not subscribe to the argument of the Ld. Departmental representative that 25% of expenditure has been claimed by the assessee without any evidence as employees have claimed such expenses from assessee by furnishing a declaration that this expenditure has been incurred by them. Reimbursement of expenses to the employees by employer on the basis of self-declaration for small amounts, for which it is difficult and sometimes cumbersome to obtain supporting by employees, is common prevalent practice and it is not an disallowable expenditure. Therefore, also we reject the contention of revenue that balance 25% expenditure is without any basis and evidence. He also held that the payment is business expenditure as it is paid by way of salary or remuneration to the employees. Similarly he set aside the disallowance for the purpose of verification of the assessing Officer in case if the total amount of expenditure on subsistence allowances not related to the previous year and then to make disallowance of the expenditure to that extent, if it is related to the earlier years. Ld. Departmental representative could not point out any quantification made by the Ld. AO about the amount expenditure related to previous year and earlier years. Therefore when the assessment order does not mention about the vouchers and declaration which are pertaining to earlier years, then in that case that verification needs to be done by the A.O. only, hence there is no infirmity in the order of Ld. CIT(A) in directing ld. AO to verify the claim of the assessee form that aspect and quantify the disallowance, if any. In view of this, we confirm the order of the first appellate authority deleting the disallowance of subsistence allowance expenses and dismiss ground no. 3 of the appeal of the revenue.”