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TMI Blog2014 (8) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... d that:- The approach of the Tribunal in restricting the disallowance of the foreign travel expenses to 10% of the amount claimed by the assessee is more than a reasonable approach - It cannot be said to be vitiated either on the ground of perversity or error of law apparent on the face of the record – Decided against assessee. - Income Tax Appeal No. 337 of 2012 - - - Dated:- 30-7-2014 - S. C. Dharmadhikari And B. P. Colabawalla,JJ. For the Appellants : Mr. Nitish Gandhi And G. Dalal For the Respondent : Mr. Arvind Pinto JUDGMENT [Per B. P. Colabawalla, J. ] 1. This Appeal under Section 260A of the Income Tax Act, 1961 has been filed by the Appellant/Assessee challenging the order dated 28th February, 2011 passed by the Income Tax Appellate Tribunal (for short ITAT ), insofar as the ITAT upheld the findings of the Assessing Officer and the Commissioner of Income Tax (Appeals) in (i) disallowing the foreign travel expenses incurred by the Appellant/Assessee and (ii) disallowing interest expenses incurred on borrowed funds under Section 36(1)(iii) of the Act. 2. Mr. Gandhi, the learned counsel appearing on behalf of the Appellant/Assessee submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant on 26th October 2005 disclosing a total income of ₹ 3,21,55,460/-. The income was arrived at after deducting amongst others, the expenses on foreign travel of ₹ 36,60,906/- and interest expenses in the sum of ₹ 27,87,772/-. The said return of income was selected for scrutiny and thereafter the Assessing Officer passed the assessment order under Section 143(3) of the Act. As far as interest and foreign travel expenses are concerned, the Assessee was called upon to explain the same. After considering the explanation and the documents submitted by the Assessee, the Assessing Officer took the view that the expenses for traveling to the Middle East by the Directors and auditors of the Appellant/Assessee was virtually meant for the incorporation of Kemsol Ltd., and that the Appellant/Assessee had failed to prove that these expenses were incurred for its own business affairs. Hence, the Assessing Officer disallowed 20% of the total travelling expenses and added back same to the total income of the Appellant/Assessee. As far as disallowance of interest paid on borrowed funds is concerned, the Assessing Officer found that the Assessee had made a fresh investment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel appearing on behalf of the Appellant/Assessee submitted that the Appellant/Assessee had acquired 60% of the shares in M/s.Kemsol Ltd, which was a company that had a branch office in Dubai and carrying on a similar business to that of the Appellant/Assessee. The purpose of acquiring a substantial stake in M/s. Kemsol Ltd was to have a greater foot hold in the Middle East enabling the Appellant/Assessee to increase its trading business in the Middle East as also in India. He submitted that the investment in M/s. Kemsol Ltd. by the Appellant/Assessee was shown as trade investments in the books of the Appellant/Assessee and was a prudent business strategy adopted by the Appellant/Assessee. In view thereof, he submitted that the authorities below had erred in disallowing the interest paid on the borrowed funds that were used for the purpose of acquiring a majority stake in M/s. Kemsol Ltd. He submitted that the payment of interest on the borrowed funds was for the purpose of the Assessee's business and therefore, deductible under Section 36(1)(iii) of the Act. On the same parity of reasoning, he submitted that the foreign travel expenses incurred by the Appellant/Assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected. This is more so when one takes into account that the Appellant/Assessee already had an indenting agent in the Middle East, namely M/s. Sasol. It is in these circumstances, that the ITAT came to the conclusion that the interest paid on borrowed funds was not for the purpose of the business of the Appellant/Assessee. In this factual backdrop, we are of the view that the ITAT was correct in its approach, both legally and factually in passing the order that it did. In the facts of the present case, the view taken by the ITAT is certainly a possible one. We do not find that the order of the ITAT is either perverse or vitiated by any error of law apparent on the face of the record, that requires our interference. 10. We shall now deal with the judgements, the reliance on which was placed by Mr. Gandhi. The reliance placed by Mr. Gandhi on the judgment of this Court in the case of Commissioner of Income-Tax v/s Srishti Securities Pvt Ltd reported in (2010) 321 ITR 498 (Bom) is wholly misplaced. The ratio of the said judgment clearly states that the only enquiry to be made is whether the payment of interest was in respect of capital borrowed for the purpose of the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on services as the latter was engaged in the business of providing telecommunication services. In view of this factual backdrop, the CIT (Appeals) as well as the ITAT held that the investments made by the Assessee Company in its subsidiary were for furthering the business interests of the Assessee. It is in view of these concurrent findings of fact that this Court held that there was no justification to disallow the deduction, which was otherwise eligible under Section 36(1)(iii) of the Act. In the present case, the concurrent findings of fact of the lower authorities are against the Appellant/Assessee and as noted above, these concurrent findings can in no way said to be perverse or vitiated by error of law apparent on the face of the record. 13. Lastly, the reliance placed on the judgment of the Supreme Court in the case of Deputy Commissioner of Income-Tax v/s Core Health Care Ltd reported in (2008) 298 ITR 194 (SC), is also of no assistance to the Appellant/Assessee. In the facts of that case the borrowed funds on which interest was paid was used for installing new machinery. We fail to see, how this judgment comes to the assistance of the Appellant. In the facts of that cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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