2017 (11) TMI 382 - AT - Income Tax

Disallowance made towards advances written off - initiation of steps to recovery of debts - Held that - The assessee had written off the advances given in the normal course of business to aforesaid three parties after taking necessary steps for recovery of the same and also preferring civil suits and criminal suits, wherever possible, as the case may be. The assessee had also enclosed the necessary evidences in this regard before the Ld. AO. Hence, it would be factually incorrect to state that no legal steps were taken by the assessee for recovery of the dues. The relevant evidences with regard to steps taken by the assessee for recovery of these advances and consequential write off thereon are enclosed. We find that the issue under dispute is squarely covered by the Co-ordinate Bench decision of this Tribunal in favour of the assessee in assessee s own case for the assessment year 2009-10 2017 (11) TMI 363 - ITAT KOLKATA wherein held he advances were given by the assessee in the normal course of its business and when a loss arises due to non-recovery of such advances and when the same is irrecoverable and written off as such, the same should be allowed as a loss while computing the profit and gains of business. - Decided in favour of assessee Disallowance of foreign travel expenditure - payment for commercial expediency - Held that - In the instant case, the senior employees of the assessee visited foreign countries and it has generated revenue to the assessee in the form of brokerage income on tea/coffee. Further, the said expenses have been incurred out of commercial expediency and hence it should be viewed from a businessman s point of view. The assessee had incurred similar foreign travel expenses in earlier years also. The revenue had accepted the same till assessment year 2009-10 by allowing the same as business expenditure. The scrutiny assessment orders for the assessment years 2007-08 and 2009-10 framed u/s 143(3) of the Act dated 31.12.2009 and 30.12.2011 respectively are filed by the Ld. AR in this regard. When there is no change in the facts and circumstances of the case during the year under appeal, then there is no need for the Revenue to take a different stand ignoring the principle of consistency. Reliance in this regard is placed on the decision of Hon ble Supreme Court in the case of Radhasaomi Satsang vs. CIT (1991 (11) TMI 2 - SUPREME Court ). - Decided in favour of assessee

Issues Involved:
1. Disallowance of advances written off as trading loss.
2. Disallowance of foreign travel expenses.

Issue 1: Disallowance of Advances Written Off as Trading Loss

The primary issue to be decided is whether the CIT(A) was justified in deleting the disallowance of ?82,34,907/- towards advances written off. The assessee, a company engaged in tea/coffee auctioneering, financing, and rubber handling, claimed this amount as a trading loss. The AO disallowed the claim, stating that the assessee did not provide sufficient documentation to prove the advances had become irrecoverable during the assessment year. The CIT(A) deleted the disallowance, noting that the advances were made in the normal course of business and should be allowable as a trading loss.

The CIT(A) referenced several judicial pronouncements, including decisions from the Hon'ble Supreme Court and various High Courts, which supported the principle that advances given in the course of business are incidental to business and their write-off should be allowed as a trading loss. The CIT(A) also noted that similar claims had been allowed in the assessee's own case for the previous assessment year.

Upon review, the Tribunal found that the assessee had indeed taken necessary steps for recovery, including legal actions, and had provided adequate documentation to the AO. The Tribunal upheld the CIT(A)'s decision, referencing a prior Tribunal decision in the assessee's favor for the assessment year 2009-10, and dismissed the revenue's appeal.

Issue 2: Disallowance of Foreign Travel Expenses

The second issue is whether the CIT(A) was justified in upholding the disallowance of ?27,73,244/- incurred by the assessee on foreign travel. The assessee's senior officials traveled to various countries for business purposes, and the expenses were claimed as allowable business expenses. The AO disallowed the claim, arguing that the foreign travel expenses did not directly benefit the assessee's auctioneering business and instead benefitted Indian manufacturers.

The CIT(A) upheld the AO's decision, stating that the assessee, being a tea auctioneer and not an exporter, did not need to incur such expenses. The Tribunal, however, found that the foreign travel was undertaken to gather information on the requirements of foreign importers, which indirectly facilitated the assessee's business by generating brokerage income from tea auctions. The Tribunal emphasized that business expenses should be judged from the perspective of a prudent businessman and not the revenue authorities.

The Tribunal referenced several judicial precedents, including decisions from the Hon'ble Supreme Court and High Courts, which supported the principle that expenses incurred out of commercial expediency should be allowed as business deductions. The Tribunal also noted that similar expenses had been allowed in previous years and that the principle of consistency should be maintained.

The Tribunal concluded that the foreign travel expenses were incurred wholly and exclusively for the business purpose of the assessee and directed the AO to delete the disallowance. As a result, the assessee's appeal was allowed, and the revenue's appeal was dismissed.

Conclusion:
The Tribunal upheld the CIT(A)'s deletion of the disallowance of advances written off as trading loss and directed the AO to delete the disallowance of foreign travel expenses. The assessee's appeal was allowed, and the revenue's appeal was dismissed.

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