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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: D.T. GARASIA & SHRI MANOJ KUMAR AGGARWAL
Per D.T. GARASIA, Judicial Member:
The present appeal has been preferred by the Revenue against the order dated 20.03.2014 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2008-09.
Ground No.1 2. Ground No.1 is relating to the deletion of disallowance made by the AO in respect of travel and entertainment expenses amounting to Rs.22,42,266/-.
The short facts of the case are as under: During the year, the assessee has incurred travelling and entertainment expenses amounting to Rs.1,17,51,409/-. The assessee claimed a deduction for 2 M/s. Credit Suisse Consulting India Pvt. Ltd. the same under section 37(1) of the Act. During the course of assessment proceedings, the assessee has submitted the evidence only for expenses amounting to Rs.95,09,143/- i.e. to the extent of 81% of the expenses claimed. The Assessing Officer (hereinafter referred to as the AO) disallowed ‘travel and entertainment expenses’ amounting to Rs.22,42,266/- in respect of which the details were not furnished by the assessee. Therefore, AO has disallowed the same.
The matter carried to the Ld. CIT(A) and the Ld. CIT(A) has allowed the claim by observing as under: “4.5 I have considered the above submissions of the appellant as well as the facts and circumstances of the case. In my opinion, the appellant had reasonable cause in not being able to submit the details of balance expenses amounting to Rs.22,42,266/-. Hence, respectfully following the decisions of the Hon'ble Supreme Court in the cases of Jute Corporation of India, 187 ITR 688 (SC) and NTFC Ltd V CIT 229 ITR 383 (SC) and that of the Hon'ble Bombay High Court in the case of CIT v Prabhavati Shah 231 ITR 1 (Bom), additional evidences are admitted under Rule 46A of the I.T. Rules.
4.6 The Appellant has furnished plausible reasons for not being able to furnish the supporting evidences relating to the expenses claimed during the course of the assessment proceedings. These have been subsequently submitted during the course of appellate proceedings when they were available with the appellant. Also, the AO has not recorded any adverse inferences, so far as the merits of the expenses claimed and details submitted by the appellant in this regard are concerned. The Appellant, during the course of assessment as well as remand proceedings has submitted all the details of travelling and entertainment expenses. Hence, in my opinion, the AO was not justified in disallowing the amount of Rs.22,42,266/-. The disallowance is therefore deleted.”
We have heard the rival contentions of both the parties. We have gone through the order of Ld. CIT(A) and Ld. CIT(A) has admitted the additional evidence under rule 46A of the IT Rules. We find that Ld. CIT(A) has deleted the addition on the ground that assessee has furnished the supporting evidence relating to expenses during remand proceedings. Hence, Ld. CIT(A) has deleted the additions.
3 M/s. Credit Suisse Consulting India Pvt. Ltd.
We also find that in the case of Empire Industries Ltd. in ITA No.4065/M/2013 wherein the similar disallowance was made and the Tribunal deleted the same by noting that fringe benefit tax was paid on these expenses. Therefore, we restore this matter back to the file of the AO for limited purpose of verifying the fact that FBT have been paid on these expenses, if so, the impugned addition stands deleted. Therefore, ground No.1 of the Revenue is dismissed.
Ground No.2 7. Ground No.2 is relating to deletion of disallowance made by the AO in respect of travel and entertainment expenses amounting to Rs.19,01,829/-.
The short facts of the case are that the AO has disallowed travel and entertainment expenses amounting to Rs.19,01,829/- (being 20% of Rs.95,09,143/- in respect of which relevant details have been provided), on the basis that the supporting documents explaining the purpose for incurring these expenses were not furnished and payments made by a corporate credit card did not justify that it was incurred solely for business purposes. The AO also observed that the documents are self generated evidence and third party evidences are not available and accordingly, same are non-verifiable in nature.
Matter carried to the Ld. CIT(A) and the Ld. CIT(A) has allowed the claim of the assessee by observing as under:
“5 4 I have considered the above submissions of the appellant as well as the facts of the case. It is seen that the appellant, vide its letters dated 13 September 2010, has submitted copies of tickets/ bills/ invoice etc along with the originals issued by third parties and also internal payment vouchers during the assessment proceedings before the AO. The AO has verified the documents vis-á-vis the originals evidencing the expenditure of Rs 95,09,143/- towards travel and entertainment and not a single specific adverse inference has been drawn by the AO in relation to the same. The conclusions made by the AO for disallowance are purely on the basis of assumptions. The AO has not noted the fact that the appellant invoices its fees to its clients on a cost plus basis and accordingly,
4 M/s. Credit Suisse Consulting India Pvt. Ltd. there is no incentive to the Appellant by claiming additional expenses. In fact, a larger claim of expenses would result in additional income being earned by the Appellant. Therefore, in my opinion, the disallowance made by the AO is based on mere conjectures and surmises. Hence, there could be no justification for the said disallowance on the ground of personal or non-business purpose, in respect of the expenses claimed.”
We have heard the rival contentions of both the sides. Looking into the facts and circumstances of the case, we find that Ld. CIT(A) held that the assessee invoices its fees to its clients on a cost plus basis and accordingly, there is no incentive to the assessee by claiming additional expenses. He also observed that a larger claim of expenses would result in additional income being earned by the assessee, therefore, the disallowance made by the AO is based on mere conjectures and surmises. Hence, he held that there could be no justification for the said disallowance on the ground of personal or non- business purpose, in respect of the expenses claimed and accordingly he deleted the additions and our interference is not required. Moreover, Ld. A.R. has pointed out that FBT has been paid on these expenses. Therefore, the matter is restored back to the file of the AO for verification of this fact. If so, the impugned additions shall stand deleted. Hence, this ground of the Revenue is dismissed.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 06.07.2017.