TMI Blog2013 (1) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... n no such case was made out on behalf of the assessee that the persons who made foreign trips conducted business on behalf of the assessee and therefore, CIT(A) has categorically mentioned that the expenses incurred by the assessee on foreign travels of third party including sons and nephews of the partners were not incurred wholly and exclusively for the purpose of business and therefore he has confirmed the action of the A.O. in disallowing expenses of Rs.14,55,625/- - against assessee. Bifurcation of exhibition and advertisement expenses towards EOU units - Held that:- CIT(A) has confirmed the addition made during the year under appeal on the ground that assessee has not been able to produce any evidence in support of its contention that the expenditure was incurred only for the purpose of non- EOU division. There is no dispute about the fact that these expenses have been entirely debited to the non-EOU division. CIT(A), therefore, was of the view that these expenses have been debited to the non-EOU division to reduce its tax liability. Before us also the assessee has failed to substantiate its claim that this expenditure was incurred only for non-EOU division. Only general s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 entries clearly narrating the actual intent as Holiday . In the opinion of the A.O., if the argument that the said visits were in the nature of business cum holiday was accepted, then by the same logic, any expenditure made by a partner could be claimed as having a remote connection with the business. It was thus held by the A.O. that such a generalized claim could not be accepted as the assessee could not establish the business purpose of these visits. In the above facts, a sum of Rs.17,86,840/- pertaining to foreign traveling expenses incurred for the purpose of Holiday was disallowed by the A.O. on the ground that it was personal in nature. 5. Before ld. CIT(A) it was claimed on behalf of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore 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 assessee, reiterating the same submissions as made before the lower authorities, further submitted that foreign tour expenses were subject to FBT and there was payment of FBT as there was personal nature in such expenses and therefore, further disallowance out of these expenses was not justified on the part of the A.O. For making this submission reliance was placed in the case of Hansraj Mathuradas vs. ITO in ITA No.2397/Mum/2010. Ld. D.R., on the other hand, relied on the orders of the lower authorities and vehemently argued that order passed by the A.O. and sustained by ld. CIT(A) may kindly be upheld. 7. After hearing both the parties and perusing the record we find that the assessee, for the first time, has taken a plea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 wholly and exclusively for the purpose of its business, the foreign traveling expenses of Rs.14,55,625/- were disallowed by the A.O. 11. Before ld. CIT(A) ld. A.R. reiterating the submissions made during the assessment proceedings before the A.O. it was contended that in this nature of business, there is a custom to send some representatives for verification of the quality of raw materials to be purchased and/or to study the market etc. and that the expenditure was incurred for the purpose of the business. It was further contended that the details of the countries visited proves that the representative of the assessee had gone for either import or export. It was further contended that the major expenses were incurred on Shri Prem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid 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 order of the Tribunal in assessee s own case for A.Y. 2005-06 submitted that these disallowances should be restricted to 50% of the expenses incurred by the assessee. Ld. D.R., on the other hand, relied on the order of the lower authorities. 14. After hearing both the parties and perusing the record we find that during the assessment year 2005-06 relief was given to the assessee by ld. CIT(A) on the ground that assessee was able to make out a case that the persons who made foreign trips also conducted business on behalf of the assessee and therefore, ld. CIT(A) restricted the disallowance of the foreign traveling expenses to 50% of the expenses claimed and that order of ld. CIT(A) was confirmed by the ITAT, however, in the year under consideration no such case was made out on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 quality diamonds and hence no such expenditure on advertisement and exhibitions is required. Regarding stamp duty, it was claimed that the diamonds were received directly at Surat without stamp duty, for which no documentary evidence was led by the assessee. According to the Assessing Officer, both the EOU and non-EOU units imported rough diamonds and the assessee's claim was not tenable without any supporting evidence to prove that the diamonds were imported directly at Surat for the EOU unit and that the imported consignment was received at Mumbai only for non-EOU unit. Further, a similar disallowance was made in the A.Y.2005-06 in respect of advertisement and exhibition expenses (on pro-rata basis of the ratio of the turnover of the EOU division to the total turnover of the assessee), which had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of ld. CIT(A) before the ITAT though on other grounds the order of ld. CIT(A) for that year was challenged before the Tribunal. Ld. CIT(A) has confirmed the addition made during the year under appeal on the ground that assessee has not been able to produce any evidence in support of its contention that the expenditure was incurred only for the purpose of non- EOU division. There is no dispute about the fact that these expenses have been entirely debited to the non-EOU division. Ld. CIT(A), therefore, was of the view that these expenses have been debited to the non-EOU division to reduce its tax liability. Before us also the assessee has failed to substantiate its claim that this expenditure was incurred only for non-EOU division. Only general submissions have been made and in support of that submission no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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