2014 (7) TMI 1101 - AT - Income Tax

Disallowance of R&D expenses - Held that - The issue in this ground of the assessee being identical with the issue in the appeal of the assessee for the immediate preceding Asstt.Year 2004-05, wherein the same was restored by the Tribunal to the file of the AO vide order dated 25.6.2012 (2012 (7) TMI 697 - ITAT, AHMEDABAD), and we being in agreement with the order of the Tribunal, restore this issue to the file of the AO for de novo decision after providing reasonable opportunity of hearing to the assessee with similar directions for verification as contained in the order of the Tribunal dated 25.6.2012 (2012 (7) TMI 697 - ITAT, AHMEDABAD) for the earlier Asstt.Year 2004-05 Disallowance of foreign traveling expenses - Held that - Assessee could not prove the business purpose of the expenditure on foreign travel. - assessee could not give any details of the business purpose of the foreign trips. The so-called details of the foreign travel expenses filed by the assessee before the Revenue authorities and copy filed in the compilation before us, shows that the details consisted of amount spent on air-ticket, medi-claim charges, hotel, taxi and other expenses have been mentioned. There is no detail of places or name of cities visited by the director of the assessee-company, nor any detail of the persons or business concerns visited, was given. The onus to establish that the foreign trip was undertaken for business purpose is with the assessee, which the assessee has failed to discharge in this case. Mere mentioning the name of the country visited along with mentioning of the total amount of expenditure under various heads of the expenses like, hotel bills, air-ticket etc. does not indicate or establish the business purpose of the foreign travel expenses incurred by the assessee-company. In the facts and circumstances of the case of the assessee, we hold that in the absence of even elementary evidence to prove the business purpose of the foreign travel undertaken by the directors of the assessee private ltd. company, the expenditure was rightly disallowed by the ld. CIT(A). - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of Research & Development expenses for assessment years 2005-2006 and 2006-2007.
2. Disallowance of foreign traveling expenses for assessment year 2005-2006.
3. Disallowance of expenses under section 40(a)(ia) for assessment year 2006-2007.

Issue 1: Disallowance of Research & Development expenses for assessment years 2005-2006 and 2006-2007:
- The appellant contested the disallowance of Research & Development expenses by the AO and confirmed by the CIT(A) for both assessment years.
- The ITAT, Ahmedabad Bench had previously restored a similar issue for the immediate preceding assessment year 2004-05 to the file of the AO for reconsideration.
- The Tribunal agreed with the previous order and decided to restore the issue of disallowance of Research & Development expenses for both years to the AO for a fresh decision after providing a reasonable opportunity of hearing to the assessee.

Issue 2: Disallowance of foreign traveling expenses for assessment year 2005-2006:
- The appellant challenged the disallowance of foreign traveling expenses by the AO and upheld by the CIT(A) for the assessment year 2005-2006.
- The appellant failed to establish the business purpose of the foreign travel expenses incurred, as evidenced by incomplete details provided regarding the trips.
- The Tribunal found that the assessee did not discharge the onus to prove the business purpose of the foreign travel, leading to the confirmation of the disallowance by the CIT(A).

Issue 3: Disallowance of expenses under section 40(a)(ia) for assessment year 2006-2007:
- The appellant disputed the disallowance of expenses under section 40(a)(ia) by the AO for the assessment year 2006-2007.
- The Tribunal observed that the TDS amount was deposited by the assessee before the due date of filing the return, rendering the provision of section 40(a)(ia) inapplicable to the case.
- Consequently, the Tribunal allowed the ground raised by the appellant regarding the disallowance of expenses under section 40(a)(ia) for the assessment year 2006-2007.

In conclusion, the Tribunal partially allowed the appeal for the assessment year 2005-2006 for statistical purposes and allowed the appeal for the assessment year 2006-2007 for statistical purposes. The issues of Research & Development expenses and foreign traveling expenses were remanded to the AO for fresh consideration, while the disallowance under section 40(a)(ia) was ruled in favor of the appellant.