DCIT CIR 3(1), MUMBAI vs. CREDIT SUISSE CONSULTING INDIA P.LTD, MUMBAI

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.

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.

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.

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.

Matter carried to the Ld. CIT(A) and the Ld. CIT(A) has allowed the claim of the assessee by observing as under:

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.