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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI G.S.PANNU & SHRI RAM LAL NEGI
The captioned appeal filed by the assessee pertaining to assessment year 2009-10 is directed against an order passed by CIT(A)-14, Mumbai dated 27/09/2013, which in turn arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 30/12/2011.
2 (Assessment Year : 2009-10) 2. In this appeal, assessee has raised multiple Grounds of appeal, which we shall take-up in seriatim. The first issue relates to a disallowance of Rs.14,26,650/- made by the Assessing Officer out of travelling expenses. In this context, the relevant facts are that the appellant is a company, which is inter-alia, engaged in the business of hire of business assets, research and consultancy services, etc. During the year under consideration, the income earned by the assessee consisted of management consultancy fee received from Publicis Groupe Holdings BV, Netherlands. The Assessing Officer noted that assessee had debited total travel expenses of Rs.14,20,650/-, which included Rs.3,73,324/- towards domestic travel and the balance of Rs.10,47,326/- towards foreign travel. The Assessing Officer disallowed the entire expenditure on the ground that the assessee could neither prove the incurrence of the expenditure and nor the reasons for incurring such expenditure in relation to the earning of income from Publicis Groupe Holdings BV, Netherlands. We find that the CIT(A) has also affirmed the addition.
3. Before us, Ld. Representative for the assessee vehemently submitted that the factual aspects of the expenditure was fully explained before the Assessing Officer and also before the CIT(A) . For that purpose our attention has been drawn to Para-3 to 3.6 of the Statement of Facts annexed before the CIT(A) to justify that adequate explanation was furnished for the impugned expenditure. Ld. Representative for the assessee pointed out that the CIT(A) has without any justification dismissed the plea of the assessee by referring to the
4. On the other hand, Ld. Departmental Representative has defended the disallowance sustained by the CIT(A) by pointing out that explanation furnished by the assessee was not found to be not satisfactory.
5. We have carefully considered the rival submissions. The discussion in the orders of the authorities below reveal that the disallowance has been made in rather casual manner without pinpointing any particular infirmity. In fact, the details of expenditure which have been placed at Page 42 of the compilation list out the date of travel, places travelled, break-up of expenses namely, Air fares, hotel expenses, other expenses, etc. The assessee has also explained before the lower authorities that it was required to incur of travelling expenses on its executives and directors to travel to various places to meet clients as well as potential clients on various business matters, etc. It was also explained that since assessee company represented Publicis Groupe Holdings BV,Netherlands In India, for which it is earning management consultancy fee, there were several occasions when directors of the assessee company were required to travel and meet the officials of Publicis Groupe Holdings BV,Netherlands. It was, therefore, contended that the travel expenses are indeed relatable to the activity of management consultancy services. At the time of hearing, our attention was also invited to the fact that in case of domestic travel expenses, assessee has recovered a sum of 4 (Assessment Year : 2009-10) Rs.7,45,643/- from the clients and only the balance of Rs.3,70,324/- has been charged to the P&L Account. Be that as it may, we are only trying to bring out that varied and detailed submissions were made by the assessee before the lower authorities and the same have been unjustly rejected without pointing out any specific infirmity. Therefore, in our view, the disallowance was required to be worked out, if any, having regard to the fact-situation in the present year and not for any irrelevant reasons. We, therefore, set aside the order of CIT(A) and direct the Assessing Officer to delete the addition of Rs. 14,20,650/-.
6. The next issue relates to disallowance of Rs.3,70,043/- out of entertainment expenditure. The Assessing Officer noticed that assessee had incurred entertainment expenditure of Rs.6,16,738/- and on being asked to explain, the explanation furnished by the assessee was not found to be satisfactory. Accordingly, 60% of such expenses amounting to Rs.3,70,043/- was disallowed by the Assessing Officer on adhoc basis. The CIT(A) also retained the disallowance made by the Assessing Officer.
7. Before us, Ld. Representative for the assessee pointed out that in the assessment year 2008-09 the Tribunal vide its order in 2012 dated 30/4/2014 deleted the disallowance out of entertainment expenditure.
Ld. Departmental Representative on the other hand, supported the orders of the authorities below.
5 (Assessment Year : 2009-10) 9. Having perused the orders of the authorities below, it is evident that the entire disallowance is based on mere surmises and conjectures without any specific infirmity with regard to the non-business nature of the expenditure. The disallowance, in our view, is not merited and the same is directed to be deleted.
The next issue raised by the assessee is with regard to a disallowance of Rs.65,699/- made by the lower authorities by invoking the provisions of section 14A of the Act. Notably, assessee company had earned exempt income by way of dividend income and, therefore, Assessing Officer computed the disallowance at Rs.65,699/- under section 14A of the Act by applying the provisions of Rule 8D of the Income Tax Rules, 1962. The addition has since been affirmed by the CIT(Appeals).
Before us, the plea of the assessee is that the disallowance has been worked out by the Assessing Officer in a mechanical manner without recording a satisfaction as to why the disallowance of Rs.3,473/- suggested by the assessee was unjust or unreasonable.
Before us, the Ld. Departmental Representative for the Revenue has primarily defended the disallowance by pointing out that the same is in accordance with the formula contained in Rule 8D of the Rules.
Having considered the rival stand, it is quite obvious that in the present case, the Assessing Officer has proceeded to make the disallowance by invoking Rule 8D of the Rules without recording a satisfaction as to why the disallowance of Rs.3,473/- canvassed by the assessee was unreasonable having regard to the facts and 6 (Assessment Year : 2009-10) circumstances of the case. Ostensibly, the action of the Assessing Officer is not in accordance with the explicit requirement of recording a proper satisfaction contained in sub-section (2) of section 14A of the Act. As a consequence, we deem it fit and proper to set aside the order of CIT(Appeals) and direct the Assessing Officer to retain a disallowance of Rs.3,473/-only under section 14A and delete the balance. Thus, on this aspect assessee partly succeeds.
14. The last issue raised by the assessee is that the following additional Ground of appeal, which was raised before CIT(Appeals) has not been considered:-
“The learned Commissioner of Income tax (Appeals) erred in failing to consider the Additional Ground of Appeal raised before her during the hearing of the Appeal on 12th August 2013:- “The learned Assessing Officer erred in failing to consider “Rs.6,89,059/- being Short Term Capital Loss for the previous year ( to be carried forward to future years), in the computation of the Income for the previous year.” 14.1 In this context, the only plea of the asessee is that the matter be sent back to the file of the CIT(Appeals) to consider the aforesaid Additional Ground of appeal, which inadvertently has remained to be considered by the CIT(Appeals).
14.2 Ld. Departmental Representative for the Revenue has not opposed the plea of the assessee for remanding of the matter back to the file of CIT(Appeals).
14.3 At the time of hearing, Ld. Representative for the assessee has referred to a communication dated 12/08/2013 addressed to the CIT(Appeals), copy of which has been placed on record, whereby the 7 (Assessment Year : 2009-10) aforesaid issue was raised by way of an Additional Ground of appeal. It appears from the perusal of the order of the CIT(Appeals) that inadvertently the same has been overlooked and, therefore, we find merit in the plea of the assessee for the matter to be remanded back to the file of CIT(A) for considering it afresh in accordance with law. Thus, on this aspect assessee succeeds for statistical purposes.
In the result, appeal of the assessee is partly allowed as above.
Order pronounced in the open court on 13/07/2016