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Income Tax Appellate Tribunal, KOLKATA BENCH “B” KOLKATA
Before: Shri Aby.T Varkey & Shri Waseem Ahmed
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
These are cross-appeal filed by the assessee as well as Revenue is directed against the common order of Commissioner of Income Tax (Appeals)-VIII, Kolkata dated 23.01.2012. Assessment was framed by DCIT, Circle-8, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 31.12.2010 for assessment year 2008-09.
& 646/Kol/2012 A.Y. 2008-09 Camac Leathers Pvt. Ltd. Vs. CIT(A)-VIII Kol. Page 2 Shri M.S. Murthy, Ld. Authorized Representative appeared on behalf of assessee and Shri Saurabh Kumar, Ld. Departmental Representative represented on behalf of Revenue. 2. Both the appeal are heard together and being disposed of by way of this common order for the sake of convenience.
First we take up assessee’s appeal in ITA No.815/Kol/2012. 3. The assessee has filed revised grounds of appeal as reproduced hereunder:-
1. That the Ld. CIT(Appeals) erred in upholding the addition of Rs.5,61,815/- in addition to disallowance of Rs.23,07,623/- and Rs.5,00,000/- on account of Management Fees and Placement Fes by the Ld. Assessing Officer in terms of Section 14A read with Rule 8(2)(ii) of the Income Tax Act, 1961 as there was no element of interest which was incurred in relation to income which did not form part of total income. Hence the addition of Rs.5,61,815/- is bad in law and against the cause of natural justice. Further the Ld. CIT(Appeals) had allowed the total interest paid on borrowed capital amounting to Rs.14,12,977/- thereby contradicting his own stand.
2. That the Ld. CIT(Appeals)has wrongly upheld the action of the Ld. Assessing Officer by disallowing the loss on Futures & Options amounting to Rs.16,52,816/- as a speculative loss and not allowing the same to be set off against the current year’s income and allowing it to be set off against speculative income in the succeeding assessment years, which is bad in law and against the cause of natural justice.
3. That the Ld. CIT(Appeals)erred in not allowing the loss of Rs.73058/- being the loss on Sale of Shares to be set off against income for the current year, which is bad in law and against the cause of natural justice.
4. For that your petitioner craves leave to add, alter, amend and/or modify all or any of the aforementioned clauses during the course of hearing of the appeal petition.”
4. First issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the order of Assessing Officer by sustaining the disallowance of ₹5,61,816/- u/s 14A r.w.r. 8(2)(ii) of Income Tax Rule, 1962. & 646/Kol/2012 A.Y. 2008-09 Camac Leathers Pvt. Ltd. Vs. CIT(A)-VIII Kol. Page 3 5. Briefly stated facts are that assessee is a private limited company and engaged in the business of manufacturing, processing and export of leather items. The assessee, during the year besides the income from the manufacturing activity has also earned dividend income amounting to ₹15,83,327/- which was claimed as exempted u/s. 10(34) of the Act. During the course of assessment proceedings, AO observed that assessee has not segregated its expenses of its manufacturing activity vis-à-vis investment activity. Therefore, the AO invoked the provision of Rule 8D of the IT Rules and made disallowance of ½ of average investment which comes to ₹5,61,815/- only. Accordingly, AO made the disallowance of ₹5,61,815/- u/s. 14A of the Act and added to the total income of assessee. 6. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that expense has been disallowed by AO under Rule 8D(20(ii) of the IT Rules i.e. interest expense. However, there was no borrowed which was fund utilized in the investment. All the loans were utilised by the assessee for the purpose of the manufacturing business and consequently the interest on such relates to the manufacturing activity. Thus, there is no question of making the disallowance of interest expense. The assessee further submitted the details of interest expense as under:- “(a) For packing credit (for utilizing facility with Rs. Indus Ind Bank secured against collection of bills) 11,68,456/- (b) For bank interest (for utilizing credit facility) 1,81,124/- (c) Interest on car loan (paid to ICICI Bank) 63,397/- 14,12,977/-“ In view of above, the assessee submitted that no interest expense has been incurred in relation to investment activity and consequently it can be inferred that no interest has been incurred in relation to the exempted income. However, Ld. CIT(A) disregarded the contention of assessee and confirmed the order of AO by observing as under:- “I have carefully considered the submissions put forth on behalf of the appellant. In CIT v. Wallfort Share & Stock Brokers (P) Ltd.[2010] 192 Taxman 211/326 ITR 1 (SC), the Hon'ble Supreme Court has held that Words ‘expenditure incurred’ in section 14A refer to expenditure on rent, taxes, & 646/Kol/2012 A.Y. 2008-09 Camac Leathers Pvt. Ltd. Vs. CIT(A)-VIII Kol. Page 4 salaries, interest, etc., in respect of which allowances are provided under sections 30 to 37, a return of investment or a pay back is not ‘expenditure incurred’ in terms of section 14A for attracting section 14A, there has to be a proximate cause for disallowance which is its relationship with tax exempt income. In CIT v. Hero Cycles Ltd. [2010] 189 Taxman 50/323 ITR 518 (Punj.&Har.) it has been held that disallowance under sec. 14A requires finding of incurring expenditure and where it is found that for earning exempted income no expenditure has been incurred, disallowance under sec. 14A cannot stand. However, it may be noted that sub-section (3) was inserted by the Finance Act, 2006 with effect from April 1, 2007, i.e., with effect from assessment year 2007-08, to provide that the provisions of subsection (2) will also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to assessment years 2000-01 and 2004- 05 respectively, and therefore, have no application to the facts of the present case in view of the insertion of the sub-section (3) under sec. 14A of the Act. The appellant has, otherwise, not disputed the working of the disallowance in terms of Rule 8D(2)(ii). Therefore, the Assessing Officer is justified in making the disallowance under sec. 14A of the Act by invoking Rule 8D of the IT Rules for the relevant assessment year 200878-09. Thus, the same is confirmed.”
Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us.
Before us Ld. AR for the assessee filed three sets of paper book volume I, II & III containing pages 1 to 48 and 1 to 100 & A1 to D6 respectively. He submitted that the disallowance has been made u/s 14A r.w.r. 8D(2)(ii) of the IT Rules in mechanical manner and without giving any opportunity to assessee. He further submitted that the AO has already made the disallowance of ₹23,07,623/- and ₹ 5 lakh on account of portfolio management and placement fees respectively. Therefore the disallowance us/s. 14A of the Act is not warranted. Ld. AR further submitted that AO has also made the disallowance of total interest of ₹14,12,971/- which was claimed as business expenditure in profit and loss account. The AO made the disallowance on the ground that this interest has been incurred on the borrowed fund which was utilized for the purpose of investment in security. However, it is pertinent to note that entire expense of interest claimed by assessee has already been deleted by Ld. CIT(A) by observing that the borrowed fund was utilized for the manufacturing activities. Thus the further disallowance of Rs. 5,61,815.00 is not warranted. & 646/Kol/2012 A.Y. 2008-09 Camac Leathers Pvt. Ltd. Vs. CIT(A)-VIII Kol. Page 5 On the other hand, Ld. DR vehemently relied on the order of Authorities Below.
We have heard the rival contentions of both the parties and perused the material available on record. In the instant case, AO has made the disallowance under the provision of Rule 8D @ ½ % of the average investment made by assessee. The assessee has taken the matter to Ld. CIT(A) where it was submitted that no borrowed fund has been utilized in the impugned investment and therefore no interest expense can be disallowed. However, Ld. CIT(A) disregarded the contention assessee by observing that provision of Section 14A requires to make the disallowance of the expenditure which are incurred by assessee under administrative head such as rent, taxes, salaries and interest etc. 8.1 From the above, we find that AO has nowhere mentioned that the disallowance is being made on account of interest expenses. The AO has invoked the provision of Rule 8D and made the disallowance merely by observing as under:- “No expenses were segregated for investment activity. Therefore, as per provisions contained u/s 14A read with Rule 8, ½ % of average investment which comes to Rs.5,61,815/- is disallowed u/s 14A of IT Act.”
From the above, we find that there is no whisper for making the disallowance under Rule 8D of the IT Rules for the interest expense. Therefore in our considered view the plea taken before Ld. CIT(A) by assessee was based on wrong assumption of fact. Thus, we hold that the disallowance was made by the AO on account of administrative expense. It is also pertinent to note that the management fees and placement fees for ₹23,07,623 and ₹ 5 lakh respectively were disallowed by the AO as these are direct expenses incurred by assessee for investment activity. Therefore this expense cannot be treated as administrative expense.
ITA No.815 & 646/Kol/2012 A.Y. 2008-09 Camac Leathers Pvt. Ltd. Vs. CIT(A)-VIII Kol. Page 6 8.2 However, we find force in the arguments placed by Ld.AR that the disallowance was made in a mechanical manner. Therefore we are of the opinion as envisaged from the order of AO order that no opportunity was given to the assessee by the AO before making such disallowance. The provisions of section 14A of the Act require the Assessing Officer to record his satisfaction after having reference to the books of account of the assessee before making any disallowance in relation to the exempted income. The ld. DR has also not brought anything on record contrary to the argument advanced by the ld. AR. In this regard we find the support from the order of Hon’ble Tribunal of Kolkata in the case of DCIT vs. Ashish Jhunjhunwala in for A.Y. 2009-10 dated 14.05.2013, wherein it was held as under:- “6. We find from the facts of the above case that the AO has not examined the accounts of the assessee and there is no satisfaction recorded by the Assessing Officer about the correctness of the claim of the assessee and without the same he invoked Rule 8D of the Rules. While rejecting the claim of the assessee with regard to expenditure or no expenditure, as the case may be, in relation to exempted income, the AO has to indicate cogent reasons for the same. From the facts of the present case it is noticed that the AO has not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at ½ % of the total value. In view of the above and respectfully following the coordinate bench decision in the case of J.K. Investors (Bombay) Ltd., supra, we uphold the order of CIT. This appeal of revenue is dismissed.”
The above order was subsequently confirmed by Hon'ble jurisdictional High Court in the case of CIT vs. Ashish Jhunjhunwala in GA No.2990 of 2013 & ITAT No. 157 of 2013. The relevant operative portion of the judgment is reproduced below:- “It is against the order of the Commissioner of Income Tax that the Revenue approached the Tribunal. The Tribunal has dismissed the appeal holding as follows: ‘While rejecting the claim of the assessee with regard to expenditure or no expenditure, as the case may be, in relation to exempted income, the AO has to indicate cogent reasons for the same. From the facts of the present case, it is noticed that the AO has not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average & 646/Kol/2012 A.Y. 2008-09 Camac Leathers Pvt. Ltd. Vs. CIT(A)-VIII Kol. Page 7 value of investment at ½% of the total value. In view of the above and respectfully following the coordinate bench decision in the case of J.K. Investors (Bombay) Ltd., supra, we uphold the order of CIT(A).’ We find no infirmity in the order under challenge. The appeal and the application are therefore dismissed.”
Similarly, we also rely on the order of this Co-ordinate Bench in the case of DCIT vs. REI Agro Ltd. in for A.Y. 2009-10 dated 14.05.2013, wherein it was held as under:- “9. We find from the facts of the above case that the AO has not examined the accounts of the assessee and there is no satisfaction recorded by the AO about the correctness of the claim of the assessee and without the same he invoked Rule 8D of the Rules. While rejecting the claim of the assessee with regard to expenditure or no expenditure, as the case may be, in relation to exempted income, the AO has to indicate cogent reasons for the same. From the facts of the present case it is noticed that the AO has not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at ½ % of the total value. In view of the above and respectfully following the coordinate bench decision in the case of J.K. Investors (Bombay) Ltd., supra, we uphold the order of CIT(A). This ground of appeal of revenue is dismissed.”
The above order was subsequently confirmed by Hon'ble jurisdictional High Court in the case of CIT vs. REI Agro Ltd. in GA No. 3022 of 2013 & ITAT No. 161 of 2013. The relevant operative portion of the judgment is reproduced below:- “The Assessing Officer also disallowed the expenditure under section 14A of the Income Tax Act, 1961 without first recording that he was not satisfied with the correctness of the claim as regards the claim that “no expenditure” was made by the assessee. The CIT, in the circumstances, allowed the appeal of the assessee and the Tribunal did not interfere. Challenging the order of the tribunal, the present appeal has been filed. We have heard Mr. Bhowmik and are of the opinion that no point of law ha been raised. Therefore, this appeal is dismissed.”
In view of above, we conclude that AO failed to record his ‘satisfaction’ as mandated under the provision of Sec. 14A r.w.r. 8D of the Rules. Therefore, in our considered view, no addition in the aforesaid facts and circumstances without recording the satisfaction can be made under the provision of Section & 646/Kol/2012 A.Y. 2008-09 Camac Leathers Pvt. Ltd. Vs. CIT(A)-VIII Kol. Page 8 14A r.w.r. Rule 8D of the Rule. Hence, this ground assessee’s appeal is allowed.
Next issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the order of AO by treating the loss on account of future and option activities for ₹16,52,816/- as speculative in nature. The AO has treated the loss of ₹16,52,816/- as speculation loss by 10. observing as under:- “12. Future Option Loss Rs.1652816/- (Speculation business): The assessee company suffered loss in Speculative transaction u/s. 43(3) but the same was not segregated and shown under the head Business speculation). The aforesaid loss segregated and assessed under the head Business (speculation) and loss incurred allowed to be carried forward.”
Aggrieved, assessee preferred an appeal before Ld. CIT(A) who confirmed the order of AO by observing as under:- “5.8 GroundNo.10: In this ground, the appellant has agitated the disallowance of loss incurred Future Option loss amounting to Rs.16,52,816/- which being relevant to hedging transactions ought to have been allowed by the AO. the appellant has not placed on record any material to establish that the transactions are not speculative transactions add that they are eligible transactions under sec. 43(5)(d) of the Act or that they are relating to hedging transactions. Therefore action of the Assessing Officer is disallowing the claim of the loss as business loss is upheld. However, the appellant is entitled for carry forward and set off of the loss against speculation profits in the succeeding assessment years(s).”
Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us.
Before us Ld. AR submitted that the loss incurred from the derivative activity are eligible transactions which falls in the exception provided under clause (d) to Section 43(5) of the Act. Ld. AR in support of assessee’s claim also drew our attention on pages A-1 to A-17 of Volume-III of paper book where copy of the ledger of future and option was placed. On the other hand, Ld. DR submitted that disallowance was made by the Authorities Below due to non-submission of necessary supporting evidence. Accordingly, Ld. DR prayed before the Bench to restore the matter back to the & 646/Kol/2012 A.Y. 2008-09 Camac Leathers Pvt. Ltd. Vs. CIT(A)-VIII Kol. Page 9 file of AO for fresh adjudication in accordance with law. In rejoinder Ld. AR conceded the submission raised by Ld. DR.
We have heard the rival contentions of both the parties and perused the material available on record. In the instant case, loss was treated by AO as speculation in nature which was also confirmed by Ld. CIT(A). However, Ld. AR before us submitted that losses were arisen from derivative activities which fall under the exception given under clause (d) to Section 43(5) of the Act. From the above, we notice that the necessary documents were not made available to the Authorities Below for verification. Therefore, in the interest of natural justice and fair play we remit the matter back to the file of AO for fresh adjudication in accordance with law and after providing reasonable opportunity of being heard to assessee. Hence, this ground of assessee’s appeal is allowed for statistical purpose.
Next issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the order of AO by not allowing the loss of ₹73,058/- on account of sale of shares to be set off against the income of current year.
During the course of assessment proceedings, AO observed that loss of ₹73,058/- from the sale shares is in the nature of speculation by virtue of explanation to Section 73 of the Act. Therefore the impugned loss cannot be set off against any other income other than speculation loss.
Aggrieved, assessee preferred an appeal before Ld. CIT(A) who confirmed the order of AO by observing as under:- “5.9 Ground No.11: This ground relates to disallowance of loss Rs.73,058/- being the loss on sale of shares. The appellant has not furnished complete details even during the appellate proceedings. Therefore, the claim that the said loss represents a business los shaving not been substantiated with any material evidence cannot be entertained. The action of the Assessing Officer on this score is upheld and the consequent addition in this regard is confirmed.” & 646/Kol/2012 A.Y. 2008-09 Camac Leathers Pvt. Ltd. Vs. CIT(A)-VIII Kol. Page 10 Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us.
Before us Ld. AR submitted that the necessary details were not submitted before the Authorities Below and therefore the matter may be restored back to the file of AO for fresh adjudication. In rejoinder Ld. DR for the Revenue has conceded the submission raised by Ld. AR to this point. He relied on the order of Authorities Below.
We have heard the rival contentions of both the parties and perused the material available on record. Upon careful consideration, we note that interest of natural justice will be served if the matter is remitted back to the file of AO. The AO is directed to consider the issue afresh and adjudicate the same in accordance with the law. The AO shall take into account the submissions of the assessee. Accordingly, we remit the issue raised by assessee. Needless to say the assessee should be granted adequate opportunity of being heard. Hence, this ground of assessee’s appeal is allowed for statistical purpose.
Last issue is general in nature and does not require any separate adjudication. 20. In the result, assessee’s appeal is partly allowed for statistical purpose. Coming to Revenue’s appeal in ITA No. 646/Kol/2012. 21. Grounds raised
by Revenue per its appeal as under:- “1) That, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in giving relief to the assessee, holding that the assessee’s Long Term Capital Gain from sale of mutual fund / shares was eligible for deduction u/s. 10(38) of the Act, without making it clear on record, the nature of evidence which has been relied upon by him to hold that Securities Transaction Tax (STT) has been paid or without giving the AO to verify the same. 2) That, on the fats and in circumstances of the cases and in law, the Ld. CIT(A) has erred in holding that the entire amount of claim of foreign travel expenditure was allowable, whereas the without considering that the assessee company had failed to substantiate with evidence that the foreign tour of wife of the director was related to business purpose of the assessee company, as has been held in any decisions of various forms and also ignoring that the places, visited by the director of the assessee company and his wife, has no business connection.” & 646/Kol/2012 A.Y. 2008-09 Camac Leathers Pvt. Ltd. Vs. CIT(A)-VIII Kol. Page 11
22. First issue raised by Revenue in this appeal is that Ld. CIT(A) erred in holding that the Long Term Capital Gains (LTCG) is eligible for deduction u/s 10(38) of the Act on the basis of additional evidence.
During the course of assessment proceedings, AO observed that LTCG of ₹26,73,145/- is not eligible u/s 10(38) of the Act on the ground that no Security Transaction Tax (STT) has been paid by assessee. Accordingly, AO taxed the aforesaid income at a special rate of tax i.e. 20% under the provision of Section 112 of the Act.
Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee submitted before Ld. CIT(A) that STT was paid on the sale of shares. Ld. CIT(A) after considering the submission of assessee deleted the addition made by AO by observing as under:- … … The submission of the appellant is found correct. The transactions are apparently exempt under sec. 10(38) of the IT Act. Therefore, taxing the LTCG on Mutual Funds and Shares by applying the provisions of Sec. 112 is held to be unjustified.”
The Revenue, being aggrieved, is in appeal before us.
Ld. DR before us submitted that no details were submitted by the assessee at the time of assessment proceedings suggesting that STT were paid by the assessee on the sale of mutual fund and share. Therefore Ld. DR requested the Bench to restore the issue to the file of AO for fresh adjudication. On the other hand, Ld. AR agreed with the submissions made by the Ld. DR for restoring the matter back to the file of AO for fresh adjudication in accordance with law.
We have heard the rival contentions of both the parties and peruse the material available on record. Upon careful consideration, we note that interest of natural justice will be served if the matter is remitted back to the file of AO. & 646/Kol/2012 A.Y. 2008-09 Camac Leathers Pvt. Ltd. Vs. CIT(A)-VIII Kol. Page 12 The AO is directed to consider the issue afresh and adjudicate the same in accordance with the law. The AO shall take into account the submissions of the assessee. Accordingly, we remit the issue raised by Revenue. Needless to say the assessee should be granted adequate opportunity of being heard. Hence, this ground of Revenue is allowed for statistical purpose.
Next issue raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the addition made by the AO for ₹6,09,724/- on account of foreign travel expenses.
The assessee in the year under consideration has claimed foreign travel expense on account of touring to Bangkok, Singapore and Goa. The necessary observation of the AO is reproduced below:- “S.K.Punwani, Director, visited Bangkok during May 2007, expense claimed is Rs.70,739/- Sunsil Punwani & Anita Punwani, Director & Director’s wife visited Singapore in Sept 2007, expenses claimed is Rs.5,02,307/- Sunil Punwani in March 2008 visited Goa, expense claimed is Rs.36678/-“ The AO during the course of assessment proceedings observed that assessee exports goods to Norway, Germany, Spain & France and there was no export made either to Singapore or Bangkok. Accordingly, AO observed that trip to above countries is of personal in nature and has no nexus with business exigency. Accordingly, AO disallowed the foreign travel expense and added to the total of the assessee.
Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that the directors had visited those countries to explore / developed the export market. Both the directors of the assessee-company are husband-and-wife. Shri S.K. Punwani has been acting as director for the last two decades and playing a very significant and important role in designing the products of the assessee-company as well as export of those items. The allegation of the AO that no export has been made by assessee to the aforesaid countries is unreasonable ground for & 646/Kol/2012 A.Y. 2008-09 Camac Leathers Pvt. Ltd. Vs. CIT(A)-VIII Kol. Page 13 disallowance. It is because the assessee has visited those counties to develop the export market. The assessee is having a business dealing with Netherland and gateway to Netherland is through is either via Bangkok or Singapore. The assessee also submitted that it has been incurring foreign travel expense for the last many years and these expenses in relation to the export turnover is of negligent value. The assessee in support of his claim has given statistics for the earlier assessment years as well as subsequent years. The assessee further submitted that no benefit was derived by it in the year in which foreign tour was conducted but the benefit of it was achieved in the subsequent years. Accordingly in the subsequent year export turnover was increased substantially. Ld. CIT(A) after considering the submission of assessee has deleted the addition made by the AO by observing as under:- “I have carefully gone through the submissions of the appellant. I have also gone through the material placed on record. It is seen that the Assessing Officer has not brought on record any material to suggest that the foreign travels were rather pleasure trips, which are in no way connected with the business affairs of the appellant company. The Assessing Officer has also not pointed out any specific item of expenditure of disallowable in nature. He has neither verified the reasonableness of such expenditure before making the impugned disallowance. On the other hand, with reference to past records, the claim of the expenditure under this head this year appears to be reasonable in proportion to the quantum of turnover. Therefore, having regard to the facts, the disallowance, in my opinion, is not correct and proper. The consequent addition of Rs.609,724/- is deleted resulting in relief to the appellant of like amount.”
The Revenue, being aggrieved, is in appeal before us.
Before us both parties relied on the order of Authorities Below as favourable to them.
We have heard the rival contentions of both the parties and perused the material available on record. In the instant case the disallowance was made by AO on account of foreign travel expenses incurred by assessee on the reasoning that assessee is not exporting any goods to the aforesaid countries. Accordingly, AO treated the same as personal trip of the directors of the & 646/Kol/2012 A.Y. 2008-09 Camac Leathers Pvt. Ltd. Vs. CIT(A)-VIII Kol. Page 14 assessee-company who are being husband-and-wife. However, Ld. CIT(A) deleted the addition made by AO by observing that foreign tour expenses were commensurate to the quantum of turnover as well as after considering the statistics of foreign tour expenses of the other years of the assessee- company.
From the foregoing discussion, we find that AO has admitted that assessee is engage in export business and currently exporting the products Norway, Germany, Spain & France. Thus, the undisputed fact is that assessee is into the business of exporting the products. Accordingly, we find that there is nothing wrong if a foreign trip is undertaken to Singapore, Bangkok to explore the business. We also find that assessee has been claiming foreign tour expenses in the earlier years as well as in subsequent year and the relevant extract is reproduced below:- “Comparative statement of foreign travel expenses vis-à-vis export turnover:- A.Y Foreign travel Export % exp. Rs/lakhs turnover Rs./lakhs 06-07 7.99 lacs 588 las 1.36 07-08 5.33 lacs 669 lacs 0.77 08-09 6.09 lacs 514 lacs 1.19 09-10 11.29 lacs 451 lacs 2.50 10-11 12.40 lacs 535 lacs 2.32 11-12 14.03 lacs 566 lacs 2.48 From the above precedent, it was observed that no disallowance was made by the Revenue in respect of aforesaid foreign tour expenses. In view of the above, we hold that the foreign trips to Bangkok and Singapore were conducted to explore the new market and thus, it was directly connected with the business of assessee. Thus, we hold no interference is called for in the order of Ld. CIT(A). Hence, we uphold the same. This ground of Revenue’s appeal is dismissed.