2020 (2) TMI 520 - HC - Income Tax

Allowable expenses u/s 37 - Disallowances of foreign travel expenses - addition made on estimated variation in consumption of raw material and contribution Made to one Lady Ampthill Hospital - HELD THAT - The findings of facts are rendered by the learned Tribunal upholding the findings of the two Authorities below and thus all the three Authorities have concurrently held against the Assessee that only for want of production of relevant evidence by the Assessee the Authorities below came to the conclusion that the expenses incurred by the Assessee on various items as well as the contribution made to Lady Ampthil Hospital were not allowable expenses and the additions made on variation in the raw materials and production was also justified and unless such findings rendered by the Tribunal are found to be perverse by this court the Appeals under Section 260A of the Act are not maintainable. - Decided against assessee.

Summary

Issues:
1. Disallowance of foreign travel expenses
2. Addition made on estimated variation in consumption of raw material
3. Contribution made to Lady Ampthill Hospital

Disallowance of Foreign Travel Expenses:
The Tribunal upheld the disallowance of foreign travel expenses for the Assessment Years 1993-94 and 1994-95 as the Assessee failed to substantiate the expenses with necessary bills and vouchers. The lower authorities' orders were deemed reasonable, and the Assessee's appeal was dismissed. The court emphasized that expenses must be justified not only with substantive evidence but also verificatory evidence proving the business purpose of the expenditure.

Addition on Estimated Variation in Consumption of Raw Material:
The issue revolved around excess consumption of raw materials by the Assessee, a manufacturer of polymerization initiators and cross-linking agent formulations. The assessing officer found discrepancies in the quantity of finished products, wastage, and shortages during the manufacturing process. The Assessee's explanation was deemed insufficient by the CIT(A) and the assessing officer. The court noted that the Assessee failed to provide necessary details and comply with information requirements, leading to a lack of evidence justifying the increase in consumption. Consequently, the order of the lower authorities was upheld against the Assessee.

Contribution to Lady Ampthill Hospital:
The Assessee made a contribution of ?3,00,000 to Lady Ampthill Hospital for staff welfare, claiming it as an allowable business expense. However, the Assessee could not provide evidence that the contribution benefited the employees. The court found that the Assessee did not support the assertion that the contribution provided any benefit to the employees. Ultimately, the court reversed the CIT(A)'s orders, ruling in favor of the Assessee on this issue.

Conclusion:
The High Court dismissed the Appeals filed by the Assessee as the findings of the Tribunal and lower authorities were upheld due to the lack of relevant evidence produced by the Assessee. The court emphasized the importance of providing necessary documentation and evidence to justify expenses and contributions claimed as business expenditures. The Appeals were deemed not maintainable, and the questions of law raised were answered against the Assessee and in favor of the Revenue.