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TMI Blog2013 (1) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... import and export of diamonds and also generation of power from wind energy. During the year, the assessee claimed foreign traveling expenses of Rs.44,70,121/-. It was found by the A.O. that out of the aforesaid expenses, an amount of Rs.17,86,840/-, pertained to foreign travel of partners and the purpose of said visits was clearly mentioned in the books of account of the assessee as "Holiday". A detailed chart in this regard is given at pages 2 and 3 (para 2.4) of the assessment order. The assessee was required by the A.O. to explain why the aforesaid expenses should not be disallowed. It was stated by the assessee that the said expenditure was in the nature of business cum holiday trips and was incurred to keep up the overall efficiency of the partners and was quite useful for the development of the business. It was stated that the entire traveling and conveyance expenditure was subject to FBT and hence no separate disallowance was justifiable. According to the A.O., all the persons on whom the aforesaid expenditure was incurred were not partners. Further, at the time of accounting itself, the assessee, fully knowing the purpose of such visits, had made the relevant accounting e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the learned AR. The argument of the appellant that the expenditure had a dual purpose, viz., 'business cum holiday' evidently takes such expenditure outside the ambit of the allowance permissible u/s 37(1) of the Act, for the reason that it was apparently incurred not "wholly and exclusively" for the purpose of the business and the expenses incurred for a dual purpose do not qualify for deduction u/s 37(1) of the Act. On a plain reading of section 37(1), it is clear that the said section does not permit such any allowance from the point of view of the indirect advantages that may be secured as a result of the expenditure. The appellant has failed to furnish any evidence, either during the assessment proceedings or before me, to establish that any part of the aforesaid expenditure on foreign travel was incurred "wholly and exclusively" for business purposes. In the absence of any material evidence to justify the claim of the appellant u/s 37(1) of the Act, the action of the Assessing Officer in disallowing the aforesaid foreign travel expenses of Rs.17,86,840/- is in order and is accordingly confirmed. This ground of appeal is dismissed." 6. Before us ld. counsel of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was further observed by the A.O. that some of these persons were close relatives and associates of the assessee and that majority of these expenses were incurred on the sons/nephews of the partners. It was claimed by the assessee that these persons had visited Belgium, Hong Kong etc. for the purpose of business for verification of the quality of rough diamonds as well as the study the situation of the market. No evidence was, however, led by the assessee before the A.O. in regard to the details of such visits, the parties met, reports on the study conducted etc. The only reliance placed by the assessee was on the destination of these visits, claiming that the business of the assessee had connection with these places. According to the Assessing Officer, connection between the business of the assessee and the places visited by third parties, including the sons and nephews of the partners, was not relevant and that the assessee could neither produce any proof of the services rendered by these persons nor the details of business connection of such foreign travel undertaken by these persons. As the assessee failed to discharge its onus of proving that the said expenses were incurred wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant has not furnished any details in regard to the "business purpose" of the visits of the third parties, including son/nephews of partners, either before the Assessing Officer or before me. Further, these persons are neither employees nor partners of the assessee firm. As already discussed above in the first ground of appeal, for allowance of any expenditure u/s 37(1) of the Act, it must fulfil the test of having been incurred "wholly and exclusively" for the purpose of the business and not for personal purpose, and the onus to establish the same lies on the appellant. The mere fact that the laces visited had some business connection with the exports/imports of the appellant is neither relevant nor sufficient to discharge the onus cast upon the appellant. In view of the aforesaid facts and circumstances of the case, the disallowance of rs.14,55,625/- made by the Assessing Officer out of foreign travel expenses is in accordance with the provisions of section 37(1) of the Act and is accordingly confirmed. This ground of appeal is dismissed." 13. Before us, ld. counsel of the assessee reiterated the same submissions as made before the lower authorities and relying on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stamp charges on import of rough diamonds in its non-EOU division, no such claims had been made in the EOU division. On further verification, it was found by the Assessing Officer that both the EOU and non-EOU divisions have imported rough diamonds and also exported diamonds to various countries during the year. According to the Assessing Officer, it was apparent that the assessee firm's expenses under the aforesaid heads had been incurred for the whole of its business and it could not be denied that the benefits of advertisement and exhibition expenses accrued to both the divisions of the business and were not mutually exclusive to each other. Similarly, it was found by the Assessing Officer that the stamp charges on import of rough diamonds had been debited wholly to the non-EOU division, whereas there were imports by the EOU division also. As the said expenditures were incurred for the common benefit of both the divisions, the assessee was required by the Assessing Officer to explain why the said expenditures should not be distributed over both the EOU and non-EOU divisions on the basis of their turnover. It was submitted by the assessee that the EOU division deals in high quali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... availing of benefits u/s 10B of the Act. In the aforesaid facts and circumstances of the case, I am entirely in agreement with the views expressed by my learned predecessor in his appellate order for A.Y.2005-06 (supra). As the appellant has been unable to substantiate his claim by producing any material evidence in this regard, the Assessing Officer's action in apportioning the expenditure on the basis of the turnover of the two units is held to be in order and the disallowance made on this account is accordingly confirmed. This ground of appeal is dismissed." 20. Before us ld. counsel of the assessee reiterated the same submissions as made before the lower authorities and ld. D.R. relied on the order of the lower authorities. 21. Heard both parties and perused the record. We find that the A.O. has made disallowance of Rs.24,96,740/- on account of bifurcation of exhibition, advertisement expenses and stamp duty charges etc. towards EOU unit on prorata basis with reference to the overall turn over of two divisions i.e. EOU and non-EOU division. Similar addition was made during the A.Y. 2005-06. That addition was confirmed by ld. CIT(A) and the assessee did not challenge the order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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