2015 (10) TMI 1706 - AT - Income Tax

Addition on account of foreign traveling expenses - Held that - As decided in assessee s earlier AYs after considering the facts of the case as well as various details submitted by A.R. before the A.O. as well as the arguments made by him, inclined to agree with the arguments of the A.R. that there was no justification for making this disallowance. Accordingly the AO is directed to delete this addition since they have been already reflected in From No. 16 of the Directors and are part of their remuneration package approved by the Board of Directors of the Company. - Decided in favour of assessee. Addition on account of provision of gratuity and leave encashment - Held that - In the present case, the assessee by way of scientific methodology had established that the impugned provisions were recognized by using a substantial scientific methodology and estimation which was also certified by an actuarial specialist. In this situation, the provision for gratuity and leave encashment made by the assessee are held to be fully explained or sustainable and the same is allowable as per ratio laid down by the Hon ble Apex Court in the case of Rotork Controls (2009 (5) TMI 16 - SUPREME COURT OF INDIA). Accordingly, we are unable to see any infirmity or any other valid reason to interfere with the impugned order and we upheld the same. Accordingly, sole ground of the Revenue being devoid of merits being dismissed.- Decided in favour of assessee.

Summary

Issues involved:
1. Deletion of addition of foreign traveling expenses.
2. Deletion of addition on account of provision of gratuity and leave encashment.

Analysis of the Judgment:

Issue 1: Deletion of addition of foreign traveling expenses
The Revenue challenged the deletion of the addition of foreign traveling expenses made by the Assessing Officer (AO). The Counsel of the assessee referred to a previous decision by the ITAT in the assessee's own case for the assessment year 2008-09, where a similar issue was decided in favor of the assessee. The ITAT upheld the decision of the Ld. CIT(A) to delete the addition, stating that the expenses were part of the remuneration package of the Directors and were reflected in Form No. 16. The ITAT dismissed the appeal by the Revenue, following the precedent set in the earlier case for the assessment year 2008-09. Consequently, the issue in ground no. 1 was decided against the Revenue and in favor of the assessee.

Issue 2: Deletion of addition on account of provision of gratuity and leave encashment
The second issue pertained to the deletion of the addition on account of provision for gratuity and leave encashment. The Departmental Representative (DR) contended that the CIT(A) had deleted the addition on incorrect grounds. However, the Counsel of the assessee argued that the provisions were based on scientific methodology and certified by an actuarial expert. The ITAT noted that the CIT(A) granted relief to the assessee as the provisions were explained and computed based on scientific methodology. The ITAT relied on the decision of the Hon'ble Supreme Court in Rotork Controls Ltd. vs. CIT, emphasizing the conditions for recognizing a provision. The ITAT upheld the decision of the CIT(A) and dismissed the appeal by the Revenue, following the principles laid down by the Supreme Court. Consequently, the issue in ground no. 2 was decided against the Revenue and in favor of the assessee.

In conclusion, both issues raised by the Revenue were decided in favor of the assessee based on the precedents set in the assessee's own cases for the previous assessment year. The appeal filed by the Revenue was dismissed by the ITAT, upholding the decisions of the CIT(A) in deleting the additions of foreign traveling expenses and provision for gratuity and leave encashment.