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TMI Blog2016 (3) TMI 547X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness Promotion Expenses - CIT(A) treated expenditure as business expenses and deleted the addition - Held that:- We are of the opinion that the magnitude of business is high and to develop business relations, it is common to incur expenditure on foreign visitors. Therefore, we do not interfere with the order of Commissioner of Income Tax (Appeals) on this ground and uphold the same. - Decided against revenue Disallowance of subscription to associations - CIT(A) deleted the addition - Held that:- We after hearing the rival submissions and perusal of subscriptions details paid to the Associations for improving business prospects in domestic and international markets and also participation fees paid to various seminars and conference and we confirm the order of Commissioner of Income Tax (Appeals) in deleting the addition - Decided against revenue Disallowance of motor car expenses - Held that:- We are of the opinion that the assessee firm maintaining large fleet of cars to the hierarchy of management and assessee disallowed expenditure on two cars which is not disputed but on remaining cars the assessee fails to maintain log book and not produced evidence in assessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in favour of assessee Disallowance 15% of receipts representing the expenditure reimbursed by the clients - Held that:- The matter needs to be examined and reimbursement does not take the character of income. Therefore, we set aside the order and direct the Assessing Officer to consider the issue in dispute after reconciliation and pass orders and allow the appeal of the assessee for statistical purpose. - I.T.A. No.2209/Mds/2010, I.T.A. No.93/Mds/2011 - - - Dated:- 11-2-2016 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER For The Assessee : Shri. R. Vijayarghavan, Advocate For The Department : Dr. Nischal, IRS, JCIT. ORDER PER G. PAVAN KUMAR, JUDICIAL MEMBER: These are cross appeals directed against the order of Commissioner of Income Tax (Appeals)-IX, Chennai in ITA No.61/09- 10, dated 25.10.2010 for the assessment year 2007-2008 passed u/s.143(3) and 250 of the Income Tax Act, 1961. 2. We take up Department appeal in ITA No.93/Mds/2011 for adjudication:- The assessee is in the business of Clearing Forwarding and Steamer Agents and filed return of income on 05.11.2007 admitting total income of ₹ 3,77 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report and submitted that the payment of money is not disputed and Revenue accepted as speed money to expedite the work to have a edge over the competitors and further supported his arguments on the Jurisdictional High Court decision of CIT vs. South India Corporation Agencies 293 ITR 237 (Mad) and prayed for deletion of disallowance. The ld. Commissioner of Income Tax (Appeals) relying on the findings of the above decision and held as at page no.7 of order as under The assessee paid incentives to Dock Labour Board Workers in order to achieve maximum output, but 50 percent. Of the same was disallowed by the Assessing Officer finding that the payments were not fully vouched by the persons stated to have received the amounts. The Commissioner (Appeals) and the Tribunal held that the entire payments were deductible . and based on the ratio of the case, the Commissioner of Income Tax (Appeals) directed the Assessing Officer to restrict the disallowance to 15% only and allowed the ground. Aggrieved by the order of the Commissioner of Income Tax (Appeals), the Revenue has filed an appeal before the Tribunal. 3.1 The ld. Departmental Representative submitted that the Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mand report of the Assessing Officer and treated expenditure as business expenses and deleted the addition. Aggrieved,, the Revenue is in appeal before Tribunal. 4.3 Before us, the ld. Departmental Representative submitted that the Commissioner of Income Tax (Appeals) has erred in deleting the addition even though assessee could not produce any supporting evidence and expenditure was incurred for the business. 4.4 On the other hand, the ld. Authorised Representative supported his arguments that the business promotion expenses incurred by the Partners and Senior Employees are in the nature of entertainment expenses and to develop the business. Considering the working of agencies, entertainment expenses are meager and relied on the order of the Commissioner of Income Tax (Appeals). 4.5 We are of the opinion that the magnitude of business is high and to develop business relations, it is common to incur expenditure on foreign visitors. Therefore, we do not interfere with the order of Commissioner of Income Tax (Appeals) on this ground and uphold the same. 5. The third ground raised by the Department with to regard to deletion of ₹ 8,69,067/- towards subscription to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce nor log book maintained or any evidence that the cars are used exclusive for the purpose of business. 6.4. Contra, the ld. Authorised Representative of the assessee filed list of cars and maintenance expenses at page Nos. 17 to 20 of paper book including registration certificates to support the bonafide of ownership. 6.5 We have heard the parties. We are of the opinion that the assessee firm maintaining large fleet of cars to the hierarchy of management and assessee disallowed expenditure on two cars which is not disputed but on remaining cars the assessee fails to maintain log book and not produced evidence in assessment proceedings and there is a scope for element of personal usage considering the luxury sedans. Therefore we set aside the order of Commissioner of Income Tax (Appeals) on this ground and confirm the order of the Assessing Officer. The ground of the Revenue is allowed. 7. The fifth ground raised by the Department on deletion of disallowance of foreign travel expenses ₹ 9,50,000/-. 7.1 The assessee firm incurred foreign travel expenses amounting to ₹ 19,00,000/- and in the assessment proceedings due to non availability of information the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied on the remand report satisfied that the assessee is having adequate credit balance in Capital Accounts and the interest payments to bank are on HP loans disbursed directly to the dealers and relied on the decision of Apex Court in the case of S.A. Builders vs. CIT 288 ITR 1, where it is held that the interest on borrowed funds advanced in the course of business cannot be disallowed and also supported with High Court decision in the case of Hotel Savera vs. CIT 239 ITR 795 (Mad) and CIT vs. Reliance Utilities Industries Powers Ltd. 313 ITR 340 (Bom) where it is held that if there is sufficient balance available in current or capital account to cover the advances no disallowance could be made and accordingly Commissioner of Income Tax (Appeals) deleted the addition. 8.3 Before us, the ld. Departmental Representative argued that the Commissioner of Income Tax (Appeals) has not appreciated that the assessee has failed to prove that such interest expenditure is related to the funds advanced to the sister concerns not for the purpose of business and relied on the judicial decisions. 8.4 Contra, the ld. Authorised Representative drew attention to the paper book explaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and if any net difference it is transferred to Profit and Loss Account. The ld. Commissioner of Income Tax (Appeals) upon examining the accounting treatment and invoice bills and reimbursement of expenses gave a elaborate findings in para 14.5 to 14.12 of his order considering the working mechanism and partly allowed by granting relief to the extent of ₹ 2,98,71,222/- 9.3 Before us, the ld. Departmental Representative argued that the Commissioner of Income Tax (Appeals) has erred in not considering the findings made by the Assessing Officer in assessment proceedings and ignoring the contentions raised by the Assessing Officer in remand report filed after verification of documentary evidence furnished by the assessee in appellate proceedings. 9.4 On the other hand, the ld. Authorised Representative drew our attention to the paper book page Nos.102 to 132 showing details of invoices raised in respect of clients. The confirmation letters are examined and accounting system reflected in the ledger accounts. Copy of reconciliation of balance as per the clients accounts and the firm books of accounts produced and difference is due to reimbursement of expenses. 9.5 After h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax (Appeals) confirmed the addition made by the Assessing Officer. Aggrieved by the order of the Commissioner of Income Tax (Appeals) the assessee assiled an appeal before the Tribunal. 11.3 Before the Tribunal, the ld. Authorised Representative argued the liability is fastened on the agency firm and the amounts were collected as per the guidance of Chennai Steamer Agents Association purely to safeguard against the interest of all agencies and ultimately depend on the outcome of writ petition decision of Hon ble High Court. The money collected has to be paid to Port Trust or refund to the customers as per decision of High Court. The amount collected pertaining to period from 06.07.1994 to 22.11.2000 and liability is reflected in the Books of Accounts. The firm has disclosed in its Audited Books of Accounts and there is no cessation of liability u/s.41(1) of the Act and cannot be treated as income. 11.4 Contra, the ld. Departmental Representative relied on the orders of the Commissioner of Income Tax (Appeals) and vehemently argued on this ground. 11.5 After hearing the rival submissions on this issue and Judicial Decisions and Jurisdictional High Court Writ Petition, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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