What did the Tribunal hold?

The Tribunal restricted the disallowance of travelling expenses to 50% due to lack of complete discussion by lower authorities and the assessee's failure to prove business nexus. The disallowance of late PF contribution was deleted, following a co-ordinate bench ruling on the due date calculation.

The assessee's appeal concerned disallowance of travelling expenses and late payment of employees' PF contribution. The Assessing Officer disallowed travelling expenses for failing to justify payments to seven parties, and the CIT(A) upheld this. The PF contribution was disallowed for being deposited after the due date.

What were the issues?

Whether travelling expenses were sufficiently justified and whether the due date for PF contribution deposit was correctly calculated.

Mehta Tubes Ltd. vs DCIT | ITAT Ahmedabad 2017

Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH AHMEDABAD

Hearing: 08.12.2017Pronounced: 18.12.2017

PER S. S. GODARA, JUDICIAL MEMBER

This assessee’s appeal for assessment year 2010-11 emanates against the CIT(A)-VIII, Ahmedabad’s order dated 06.08.2014, in case no. CIT(A)- VIII/DCIT/Cir.4/69/13-14, upholding Assessing Officer’s action disallowing travelling expenses of Rs.2,55,933/- and late payment of employees contribution towards PF of Rs.20,232/-; respectively , in proceedings u/s. 143(3) of the Income Tax Act, 1961; in short “the Act”. Heard both the parties. Case file perused.

ITA No. 2981/Ahd/14 [Mehta Tubes Ltd. vs. DCIT(OSD)-1] - 2 - A.Y. 2010-11 2. We come to the former issue of travelling expenses disallowance amounting to Rs.2,55,933/-. The assessee had debited a total amount of Rs.6,05,909/- as travelling expenses. The Assessing Officer noticed it to have failed to explain the justification of the impugned expenses coming to Rs.2,55,933/- as paid to seven parties in the relevant previous year. He therefore disallowed the same in assessment order dated 15.03.2013. The CIT(A) confirms the said disallowance after rejecting assessee’s explanation to have incurred the impugned expenditure for the purpose of its business supported by all due vouchers. He holds that the assessee’s explanation has again failed to prove any nexus between its business vis- à-vis the impugned expenses. This leaves the assessee aggrieved.

Learned counsel representing assessee vehemently contends that both the lower authorities have failed to appreciate the relevant backdrop of facts. The relevant list of expenses forms part of the case record. It emanates therefrom that the assessee has paid an amount of Rs.1,19,778/- to M/s. Thomas Cook Ltd. on 31.10.2009. The assessee pleads to have acquired foreign exchange from the said payee. We find no such material in the case file which could indicate such foreign exchange currency acquisition. We therefore find no reason to agree with assessee’s contentions qua the said payee entity. We however notice that the remaining parties, relevant ledgers and payment details have not been discussed in both the lower proceedings. Coupled with this, the assessee has also not discharged its onus between the impugned expenditure and its business purposes. We therefore deem it appropriate that larger interest of justice would be met in case the impugned disallowance is restricted to 50% only subject to a rider that the same shall not be treated as a precedent in any preceding or succeeding assessment year. The assessee’s instant substantive ground is partly accepted in above terms.

We now advert to assessee’s latter substantive ground challenging both the lower authorities’ action disallowing its employees’ contribution towards PF of Rs.20,232/-. It emerges that the wages in question of Rs.10,491/- and Rs.9,741/- pertained to August 2009 and January 2010 months as paid on 02.09.2009 and 02.02.2010 respectively. Both the lower authorities hold that the said deposits on

ITA No. 2981/Ahd/14 [Mehta Tubes Ltd. vs. DCIT(OSD)-1] - 3 - A.Y. 2010-11 25.09.2009 and 23.02.2010 were made much after the corresponding due dates coming to be on 20.09.2009 and 20.02.2010. We however find that a co-ordinate bench order in Rajratna Metal Industries Ltd. vs. ACIT ITA No.950/Ahd/2015 holds that the relevant due date has to be calculated from the date of actual salary payment and not the one based on salary accrual. Learned Departmental Representative fails to draw any distinction on facts. We therefore accept assessee’s instant substantive ground.

This assessee’s appeal is partly allowed in above terms. [Pronounced in the open Court on this the 18th day of December, 2017.]

Sd/- Sd/- (PRADIP KUMAR KEDIA) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 18/12/2017 True Copy S.K.SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।

MEHTA TUBES LTD.,AHMEDABAD vs. THE DY.CIT, (OSD)-1, CIRCLE-4, AHMEDABAD

What did the Tribunal hold?

What were the facts?

What were the issues?

Which sections of the Income-tax Act were involved?

Recent GST High Court judgments