TMI Blog2013 (10) TMI 749X X X X Extracts X X X X X X X X Extracts X X X X ..... ift made by the assessee – Held that:- Value of articles distributed by the assessee to its employees comes within the ambit of ‘perquisites’ employed in Section 17(2)(iii)© of the IT Act which is covered under the definition of ‘Salaries’ as provided in Section 17(i)(iv) of the Act. Therefore, before distributing articles to the employees, the assessee ought to have deducted the tax at source on the value of such articles - Ld.Assessing Officer has rightly charged the interest u/s.201(1A) of the Act – Decided against the Assessee. Allowability of foreign travel expense – Commissioner (A) deleted addition on account of foreign travel expenses amounting to Rs.1,81,130/- - Expenditure towards foreign travel was for the purpose of the assessee’s business - Various Executives are necessarily required to travel to abroad to study the market and development of the market - Assessee is having export business and requires it employees to go abroad – Deduction of foreign travel expense allowed – Decided in favor of assessee. - ITA No.3088,3119/Ahd/2003 - - - Dated:- 23-1-2013 - Mukul Kr Shrawat and A Mohan Alankamony, JJ. For the Appellant : Shri M K Patel, AR For the Responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ethroid (SP) and non-synthetic pyrethroid (NSP) under two separate divisions, known as SP Division and NSP Division . The assessee company has purchased only an NSP Division of M/s. Mitsu Industries Ltd. As per the agreement, the NSP Division of M/s.Mitsu Industries Ltd. was transferred to M/s.Mitsu Pesticides Ltd. (assessee). (c) At the business premises of M/s.Bilag Industries Ltd. a survey u/s.133A of the IT Act dated 19/01/2000 was conducted. A statement of Shri Anjum G.Bilakhia, Director was recorded. There was an enquiry in respect of non-compete receipts . A survey report has also been furnished. Certain information were placed on record, briefly discussed hereunder: (d) M/s. Bilag Industries was formerly known as M/s.Mitsu Industries Ltd. (e) The Mitsu Industries Ltd. entered into a Joint Venture in foreign collaboration with AgrEvo S.A. Germany/France. Therein it was named as M/s.Bilag Industries Ltd. (f) M/s.Mitsu Industries Ltd. had entered into a Jt.Venture with Hoechst Schering AgrEvo S.A. (AgrEvo) by transferring 51% equity shares by individual share holders namely (i) Anjum Bilakhia (ii) Yunus Bilakhia (iii) Zakar Bilakhia to the aforesaid for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me product line Hoechst Schering AgrEvo of France. The gist of terms and conditions of the joint venture agreement is as under:- 1. Hoechst Schering AgrEvo purchase 51% shares of M/s. Mitsu Industries Ltd. from its promoters. 2. The Company be renamed as Bilag Industries Pvt.Ltd. 3. The promoters of Mitsu Industries Ltd. be paid a certain sum towards the purchase price of the share sold. 4. The promoters of Mitsu Industries Ltd. and associate companies where the promoters have substantial share holdings and control be bound and subjected to undertake non compete obligation for a period of 4 years. The said obligation as stated in the agreement is reproduced as under. Subject to clause (d) below as from the Closing Date, as long as the Confirming parties hold shares in the Company and for as period of four (4) years thereafter, the Confirming Parties themselves or any of them directly or indirectly through any other Affiliate(s) of them or any of them or howsoever shall refrain from any activity which may compete directly or indirectly with the business of the Company relating to the Products. (Article 13 of the Joint Venture Agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s.Mitsu. Pesticides be taxed under the head income from other source alternatively and without prejudice to applicability of section 2(24) (iv) and section 28(iv) of the I.T.Act. A. I shall give appropriate reply in an hour. .. Q.No.25. You have produced original copies of the said agreement dtd. 3.7.99 between AgrEvo Mitsu Industries show cause why original agreement does not contain any exhibits. Where is exhibit 13(c)? It may be mentioned that you had produced two original agreement, and in none of them accompanied by exhibit? A. We are searching for the exhibit. . Q.No. Shri Bilakhia, you will appreciate that the copy of exhibit 13(c) given by you is totally unsigned and accordingly the same cannot be treated forming part of the agreement. Please clarify if you have something to say to the contrary. A. There is a Xerox copy there is some error on the Xerox copy while Xeroxing. (j) The assessee has given a reply that the actual payment of non-compete fees was received after obtaining Foreign Investment Promotion Board approval from the Government of India. However, the AO was not convinced a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .A. (France)dated 3/07/1999 on the terms and conditions that the Hoechst Schering AgrEvo S.A. (France) shall purchase 51% shares of Mitsu Industries Limited from its promoters. Thereafter, the said company shall be renamed as Bilag Industries Pvt.Ltd. The promoters of Mitsu Industries Limited shall be paid an amount towards the purchase price of the shares sold. Ld.AR has contested that the promoters of Mitsu Industries Ltd. and the Associate Companies where the promoters have substantial shareholding were also subjected to undertake non-compete obligation for a period of 4 years. In this connection, ld.AR has drawn our attention on the clauses of noncompete conditions laid down in Article-13 of the Joint Venture. With this background, ld.AR has added that the assessee, i.e. Mitsu Ltd.(formerly known as Mitsu Pesticides Ltd.) is also a company where Bilakia family was holding 100% shareholding and control. As per the said J.V. agreement, the assessee company was also bound to undertake non-compete obligation for 4 years. Ld.AR thus argued that all the promoters and group companies of the Bilakhia group have been deprived of their source of income during the period of restrictive co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 172 of the Paper Book. Thus it is seen that neither the appellant is a party to the agreement nor is the appellant a signatory to the agreement. In fact the appellant is not even mentioned as a confirming party in the agreement. 3. Thus it is clear that the agreement entered into by other persons cannot be binding on the appellant. It is also to be noted that no sane person would make a payment of non compete fees to the extent of Rs.10,00,00,000/- without making the person who is expected to offer competition sign binding agreements. Neither the appellant company nor any other person or its directors have signed this agreement representing the appellant company. The appellant has thus received the money not as a non compete fees because it never was a party to the non compete agreement. The claim by the AR of the appellant that the company endorsed the agreement which is mentioned in the audit report is clearly an afterthought because no primary evidence has been produced to show that the agreement was signed by the appellant company. It would also not be out of place to mention that the audit report is prepared by the auditor only after the end the Financial Year. 4. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 8. The genuineness of the agreement also is questionable as in the affairs of the selling party are not transparent. The valuation reports prepared to arrive at the value of the assets of the enterprise has not been furnished despite directions of the Bench. It would be seen that the purchasers i.e. Hoechst Schering Agr Evo GMBH has purchased 51% of shares of Bilag Industries Ltd. (formerly Mitsu Industries Ltd.) which has assets worth Rs.92 crores for a sum of Rs.253.09 crores. 9. This figures mentioned in para 3.1.4 of the agreement which is on page 185 of paper book where in it is mentioned that the net worth of the company shall be Rs.92 Crores. Similarly on para 3.3 of the agreement on page no. 186 of the paper the considerations of 253.09 crores is mentioned alongwith the fact that the shares to be transferred to the purchases is 51%. 10. Thus it would be seen that for a sum of Rs.253.09 crores the purchaser have purchased assets worth only (Rs.95 crores X 51/100) = Rs. 48.45 crores. The self serving nature of the arrangement of the sellers i.e. the Bilakhia Family would be obvious when it is seen that the Non Synthetic Pyrethroid Business division of Bilag I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of non pyrethroid items though it was stated to be on behalf of the appellant. Thus the non compete transactions is clearly a sham because one cannot offer competition to oneself. 15. It is also to be seen that non compete fee of Rs.15,00,00,000/- is paid to two directors Shri Y. G. Bilakhia and Shri A. G. Bilakhia and the confirming parties have been precluded from carrying on any activity which may compete directly or indirectly with the business of the company i.e. Bilag Industries Ltd. (formerly Mitsu Industries Ltd.) further as per the non compete clause in the agreement specifically stipulated as under: "In particular neither the Confirming Parties themselves or any of themselves or any of them or directly or indirectly through any other Affiliate(s) of them or any of them or howsoever shall, except through the Company. (i) Perform directly or indirectly or through contracts with third parties any research, development, manufacture, formulation, marketing, distribution and/or sale of Products; (ii) grant licenses relating to the Products to any third party in any country whatsoever; (iii) directly or indirectly mange, operate, join ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such payment has been made to other entities. 18. Further the agreement itself is a self serving document as the complete facts have not been presented to the Bench by the AR of the appellant. The Bench during the course of hearing on 13.02.2012 had required the AR to produce the details of valuations of assets for the purpose of purchase of the undertaking which would show the extent of goodwill and mode of determination of the price paid. The case was adjourned by the Bench to 16.02.2012. However, the AR of the appellant did not produce the said details. Even the annexures to the agreement mentioned in the agreement itself have not been furnished. The fact that these details have not been produced clearly indicate the agreement of non compete is truly a sham and only a device to evade tax. This is obvious from the following details which are extracted from the account and agreement and paper books filed by the appellants. 19. In view of the above it is clear that as far as the non compete fee of Rs.10 crore is concerned the money received is not for not offering competition and hence is entirely taxable. Yours faithfully, Sd/- (RAVINDRA KUMAR) Commissioner of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts which has been restated by LD DR in such a Manner to suit his point of view. 3. In this paragraph the LD DR is stating that the amount of Rs.10.cr is not non-compete fee. 1. In view of the fact that the appellant was not the party to the agreement. 2. Disclosure of the binding nature of non-compete agreement in the audit report is clearly an after thought Our Comments: 1. The company has ratified and adopted the non-compete agreement by passing a resolution of board of directors and disclosed the same in the notes to the accounts which has been filed with the return of income and filed with the registrar of companies. 2. The accounts and notes to the accounts reflect facts of the company during the particular year and constitute public documents whose contents are binding upon the company. 3. Even without signing the agreement by adopting a declaration in the meeting of the BOD and by handing over the same to the beneficiary company the non-compute obligations have become statutorily binding on the company, hence the contention of the LD DR about the binding nature of the agreement is not as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thetic Pyrothoid pesticides (i.e SP) and pesticides other than synthetic pyrothoid (i.e. NSP).The Indian promoters at that point of time opted to continue manufacturing NSP and there was no question of purchasing the same business which were owned by them and carried on for last 8 years at that point of time. As per the agreement they hived off manufacturing of NSP products to the appellant company along with all infrastructure including machinery and employees. The machinery consists of mainly reactors and the appellant company was thus capable of manufacturing and offering competition to the joint venture company being the same field. Without considering the actual facts the Ld DR has kept on repeating in this written submission that the appellant is not capable of offering competition. 7. Same as above. 8. In paragraph 8 9 of the rejoinder the LD DR has given the figures of the transaction. He has simply commented that the genuineness of the agreement is questionable; this is mere allegation without any substance. 9. Same as above. 10. In Para 10 11 the LD DR has mentioned that while the synthetic pyrethoid was sold for 5 times book value to the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercial agreement between the foreign company and the appellant company. The taxability of such receipt which has been disclosed to the Government of India and approved by it is the subject matter of this appeal and the assessment has been completed by the Learned assessing officer after considering all the facts which are on record. The legal aspect of the transaction has been approved by the government of India which is now been characterized by the learned departmental representative as a sham transaction. This is merely an attempt to redirect the proceeding before the bench by characterizing the dispute as a question of genuineness of the transaction. The real ground of appeal is as to whether the non-compete fee received by the appellant is liable for tax during the assessment year 2000-2001. 18. This is evident from Para 18,where in the Ld DR has wrongly mentioned that the appellant company had sold its undertaking. Hence there is no question of valuation of assets, or determination of goodwill as far as the appellant is concerned. The shares were sold by Mr. A Mr. Y of the Bilakhia family who are 100% shareholder of the appellant company and their cases have been adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produce or process any article or thing or right to carry on any business, which is chargeable under the head "Capital gains"; (ii) any sum received as compensation, from the multilateral fund of the Montreal Protocol on Substances that Deplete the Ozone layer under the United Nations Environment Programme, in accordance with the terms of agreement entered into with the Government of India. Explanation : For the purposes of this clause,- (i) "agreement" includes any arrangement or understanding or action in concert,- (A) whether or not such arrangement, understanding or action is formal or in writing; or (B) whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings; (ii) "service" means service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial nature such as accounting, banking, communication, conveying of news or information, advertising, entertainment, amusement, education, financing, insurance, chit funds, real estate, construction, transport, storage, processing, supply of electrical or oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following Directors - Mr. Yunus Gafulbhai Bilakhia, born on 13th October, 1957 in Vanda, Bhavnagar, Gujarat, domiciled at Parishram , Vapi-Daman Road, Chala, Vapi 396 191; Mr.Anjum Gafulbhai Bilakhia, born on born on 2nd August, 1961 in Vanda, Bhavnagar, Gujarat domiciled at Parishram , Vapi-Daman Road, Chala, Vapi 396 191; Mr.Zakir Gafulbhai Bhilahia, born on 20th February, 1970 in Vanda, Bhavnagar, Gujarat, domiciled at Parishram , Vapi-Daman Road, Chala, Vapi 396 191; (hereinafter referred to as the Confirming Parties , acting jointly and severally) (MIL and the Confirming Parties are hereinafter wherever the context so requires collectively referred to as Mitsu ), Mr.Rashida Y.Bilakhia, born on 10th August, 1961 in Fifad, Bhavnagar, Gujarat, domiciled at Parishram , Vapi-Daman Road, Chala, Vapi 396 191; Mrs.Hanifa A.Bilakhia, born on 26th March, 1967 in Mohwa, Bhavnagar, Gujarat, domiciled at Parishram , Vapi-Daman Road, Chala, Vapi 396 191; Mrs. Jiluben G.Bilakhia, born on 22nd February, 1938 in Jasadan, Rajkot, Gujarat, domiciled at Parishram , Vapi-Daman Road, Chala, Vapi-396 191; Ms.Anima Zakir Bilakhia, born on 30th July, 1975 in Bharuch, Gujarat, domiciled at Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference of holding any share by the assessee, i.e. Mitsu Limited. Further, our attention has also been drawn on clause 3.5, i.e. Transfer of Shares held by MIL in MINT . It is mentioned that at the time of transfer of the non-pyrethroid assets of MIL to Mitsu Pesticides Limited, which shall be prior to the Closing Date, Mitsu Pesticides Limited shall pay the entire consideration amount payable for the non-pyrethroid assets, including for the shares held by MIL in MINT and other companies. Provided however, transfer of shares held by MIL in MINT being subject to RBI approval, the same shall be transferred to Mitsu Pesticides Ltd. only after obtainment of the approval of RBI. It is agreed and intended that the shares held by MIL in MINT do not and shall not form part of the Assets and MIL shall hold the shares of MINT in trust for Mitsu Pesticides Limited till obtainment of the RBI approval for transfer of the MINT shares to Mitsu Pesticides Limited. Immediately upon execution hereof, Mitsu has all make the necessary application to RBI for transfer of the shares of MIL in MINT to Mitsu Pesticides Limited. In the event of the RBI directing any other price for sale and transfer of MIN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they may cease to be the shareholders in the Company, they have agreed to be bound by the obligations under this Article. Mrs. Bilakhias, if they remain shareholders of the Company after Closing shall also be bound and be entitled to the obligations and the rights respectively, applicable to the Confirming Parties under Article 12 as well, as if they are the Confirming Parties. Subject to the aforesaid, Mrs. Bilakhias shall have no rights or obligations under any other provisions of this Agreement. 7.4. Therefore we have examined the signatories of this agreement and we have noted that on one hand, this agreement was signed for Hoechst Schering AgrEvo GmbH and Hoechst Schering AgrEvo S.A. and on the other hand, this agreement was signed by Mitsu Industries Ltd. and following are the confirming parties:- 1. Yunus Gafulbhai Bilakhia, 2. Anjum Gafulbhai Bilakhia and 3. Zakir Gafulbhai Bilakhia 7.5. In the light of the above facts, now it is evident that the assessee-company i.e. Mitsu Limited was promoted by one Shri Anjum G.Bilakhia and his brother Shri Yunus G.Bilakhia during the year 1991. The assessee-company was originally known as Mitsu Pesticides Ltd. . La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng asset which is being transferred. It is plainly a promise, rather a gentleman promise, not to compete in that field of business for which on transfer a consideration is received. Therefore, in our humble opinion, the payment of non-compete fees is made with the soul purpose to Ward Off a competitor. 7.9. Applying a common man understanding, a payee should be apprehending a definite and ascertained competition likely to be infested. Because of that certainty a payee consider it imminent as also necessary to pay an amount of non-compete fees to safe-guard its future business prospect. 7.10. In case of a breach, the payee has to be empowered with a suitable legal remedy. Therefore, an agreement should be legally binding on the signatories of both the sides to the effect so that it confers right to sue in case of breach. Hence, it ought to be an enforceable right in the code of law. 7.11. It is worth to clarify that when a business man signs a negative covenant not to carry on any manufacturing activity or a trade activity in respect of a product for a certain period of time, it amounts only to self imposed restriction and the payment received as a fees is not a transfer. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Asst.CIT and Shri Anjum G.Bilakhia vs. Asst.CIT in ITA Nos.3086 3087/Ahd/2003 respectively for A.Y. 2000- 01 order dated 04/01/2008. The foremost distinction is that these two Directors are the parties of the agreement. In the capacity of Directors of M/s.Mitsu Industries Ltd., they have signed the JV Agreement, therefore the non-compete obligation was applicable on these two signatories. On those facts, it was held that the non-compete fees was not chargeable to tax in the hands of these two persons. 8.1. In this regard, we have also considered a case-law which is heavily relied upon by the assessee. In the case of Guffic Chem Pvt.Ltd. 332 ITR 602 (SC), the assessee was carrying on the business of manufacturing and selling of pharmaceutical preparations. The assessee has received a sum of Rs.50 lacs from Ranbaxy as non-competition fees. The assessee agreed to transfer its trade-mark to Ranbaxy and in consideration for such transfer, the assessee agreed that it shall not carry on directly or indirectly the business hitherto carried on by it. On those facts, the Tribunal had held that the amount was a capital receipt, but the High Court reversed the decision. On appeal, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at. Likewise, in the case of PF payment, it was noticed that the amount was deposited within the succeeding month. In view of the evidence on record, reliance was placed on two decisions; namely Vinay Cement 213 CTR 268 (SC) and Alom Extrusions 319 ITR 306(SC). In the case of Alom Extrusions, the Hon ble Apex Court has held that the omission of second proviso to section 43B and the amendment of first provision by Finance Act, 2003 were made to bring about the uniformity in payment of tax, duty, cess and fees on one hand and contributions to employees welfare funds on the other hand. The change in the said provision through amendment was curative in nature and thus effective retrospectively with effect from 1st April-1988. Earlier, in the case of Vinay Cement Ltd., the Apex Court has held that the contribution made to Provident Fund before filing of the return could not be disallowed u/s.43B of IT Act as it stood prior to the amendment with effect from 01/04/2004. In the light of these decisions and considering the dates of payment, we are of the view that the disallowance was wrongly made by the AO. We hereby direct to delete the addition. 11. Ground No.6 reads as under: 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x (Appeals) has erred in not directing the Learned Assistant Commissioner of Income Tax to correctly compute the deduction admissible to the appellant company U/s.80IA/80IB of the Income Tax Act. 12.1. At the outset, ld.AR has informed that the ground in question was a general ground which was later on corrected by filing an additional ground. The additional ground reads as under:- 02. On appreciation of the facts and circumstances of the case the Learned Commissioner of Income Tax (Appeals) ought to have directed to Learned Assessing Officer not to exclude the following items of income for the purpose of calculating deduction U/s.80IA/ 80IB of the Act. Export benefit 69323263 Interest received 600305 Rent 95000 Discount 688696 Exchange difference 1500103 Misc.Receipt 137463 Advance license Benefit receivable 978959 Insurance Claim 27930 Sale of scrap 437903 12.1. Even in regard to additional ground, at the outset, ld.AR has informed that the issue was not ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. On appreciation of the facts and circumstances of the case and law, the Learned Commissioner of Income Tax (Appeals) has erred in not directing the Learned Assistant Commissioner of Income Tax to correctly compute the deduction admissible to the appellant company U/s.80HHC of the Income Tax Act. 14.1. At the outset, ld.AR has informed that ground No.9 is general in nature, therefore specific ground has been raised by filing additional ground which is now reproduced below:- 03. On appreciation of the facts and circumstances of the case the Learned Commissioner of Income Tax (Appeals) ought to have directed the Learned Assessing Officer to grant deduction U/s.80HHC of the Act by including non compete fees received by the appellant as profits of business in view of the specific findings that such income has got a nexus with the manufacturing business of the appellant company. 14.2. The assessee is asking for a claim through this additional ground for the first time at the stage of second appeal. We have been informed that no such claim was made in the past either before the AO or before ld.CIT(A). In the light of the decision of Goetz India ..284 ITR 323 (SC) now it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... site in the hands of the employees. It was also informed that the TDS was deducted. The AO has disallowed the same, which was confirmed by ld.CIT(A). 17. Now, before us a decision of the Tribunal in assessee s own case is placed, wherein ITAT A Bench Ahmedabad vide order dated 19.11.2004 titled as M/s.Bilag Industries Pvt.Ltd. vs. ITO (in ITA Nos.1584 1585/Ahd/2001 for A.Y. 2000-01) has held as under:- 5. We have duly considered the rival contentions. We do not find any merit in the contentions of the assessee. The ld. Assessing Officer has rightly held that value of articles distributed by the assessee to its employees comes within the ambit of perquisites employed in Section 17(2)(iii) of the IT Act which is covered under the definition of Salaries as provided in Section 17(i)(iv) of the Act. Therefore, before distributing articles to the employees, the assessee ought to have deducted the tax at source on the value of such articles. How the definition of gift employed in Transfer of Property Act has any relevancy with the dispute raised by the Assessing Officer is not discernible from the written submission? As far as the alternative contention is concerned, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the stay in foreign country was not furnished. The AO has thus held that 1/5th of the expenditure was to be disallowed amounting to Rs.1,81,130/-. The said addition was contested before ld.CIT(A) who has held that the issue was covered by an order of the ITAT Ahmedabad, cited before CIT(A). With this background, we have heard both the sides. In this regard, it is worth to reproduce a portion of the explanation of the assessee, reproduced from the assessment order as under:- 9. Disallowance out of Foreign Travelling Expenses - Rs.1,81,130/- On going through the Profit Loss account A/c. in schedule 18 it is observed that the assessee has debited foreign travel expenses of Rs.9,05,648/- out of traveling expenses of Rs.28,98,347/-. The assessee was required to furnish name, designation of the person, duration of stay in various cities of foreign countries and justification of the stay of particular number of days in a particular city of foreign countries as required under Rule 6D. In the details filed with the letter dated 08.02.2002, the assessee has though given name of the person and countries visited but has not given duration of stay in each country. For example, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the visit of the Employees and Managers out of country. It appears that the expenditure towards foreign travel was for the purpose of the assessee s business. It is not the case of the Revenue that the employees as also one of the Director have visited the foreign country for their personal purposes. The AO has presumed that part of the expenditure was not wholly and exclusively for the purpose of the business but according to us, there was no basis for such presumption. We therefore hold that considering the nature of visits to foreign countries the foreign travel expenditure deserves to be allowed. The view taken by ld.CIT(A) is hereby upheld and this ground of the Revenue is dismissed. 21. Ground No.3 reads as under:- 3. On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) Surat has erred in deleting addition on account of miscellaneous expenses amounting to Rs.40,842/-. 21.1. Under the head miscellaneous expenses a sum of Rs.2,04,730/- was stated to be incurred for tea, coffee, etc. 1/5th of the said expenditure, i.e. Rs.40,842/- was disallowed by the AO. The CIT(A) has reversed the disallowance and dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.1500103/- (4) Advance licenses benefit Rs. 978959/- (5) Discount Rs. 688696/- (6) Miscellaneous receipts Rs.137463/- 24.1. In this regard, the ld.AR Mr.M.K.Patel has informed that each head of receipts have been considered by several Courts and a view has to be taken in the light of the following decisions:- (a) Scrap Sale - 258 ITR 785 (Guj.) 95 ITD 199 (SB) (Ahd.) (b) Exchange difference - 282 ITR 144 (Guj.) Amba Impex (d) Advance Licence Benefit - 81 ITD 553 at 658 (Ahd.) United Phosphorous 275 ITR 284 (Guj.) India Geletaine 24.2. Further, in respect of Insurance claim, discount and miscellaneous receipts, the main contention of the assessee is that the receipts are having direct nexus with the export activity of the assessee. The ld.CIT(A) has given a finding that these receipts were in fact having a direct nexus with the business activity of the assessee. In the absence of any contrary material as well as following the decisions quoted hereinabove, we find no force in this ground of the Revenue, hence dismissed. 25. Ground No.7 reads as under:- 7. On the facts and in the circumstances ..... 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