TMI Blog2015 (6) TMI 933X X X X Extracts X X X X X X X X Extracts X X X X ..... y to study market condition and to contact prospective consumers for the purpose of trading in LNG. It is not disputed that such expenditure is allowable, however, the expenditure disallowed on the basis that the assessee failed to establish business nexus. In view of the ratio laid down by the Hon’ble Apex Court the cases of CIT vs. Malayalam Planations Ltd.(1964 (4) TMI 9 - SUPREME Court ) and Madhav Prasad Jatia vs. CIT (1979 (4) TMI 2 - SUPREME Court ), we are of the considered view that the ld.CIT((A) was not justified in rejecting the ground on the basis that there is nexus between the expenditure incurred and the business of the assessee-company. Therefore, we hereby set aside the order of the ld.CIT(A) and direct the AO to delete th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant's business and being neither capital expenditure nor personal expenditure, it had got to be allowed u/s. 37 of the Income-tax Act, 1961, and that, in any case, it was not open to him to uphold the disallowance without dealing with the appellant's submissions. 3. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in not ordering cancellation of the levy of interest u/s. 234C prayed for by the appellant vide Ground No. 5 of its appeal. He ought to have appreciated, inter alia, that in the peculiar facts of the appellant's case, the ratio of the decision of the Gujarat High Court in Bharat Machinery and Hardware Mart's case (136 ITR 875) and of the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the submissions rejected the ground against the disallowance of travelling expenses. Aggrieved by the order of the ld.CIT(A), the assessee is now in appeal before us. 3. The ld.counsel for the assessee submitted that both the authorities below have failed to take note of the fact that the assessee has demonstrated the business nexus in respect of the expenditure incurred. The ld.counsel for the assessee drew out attention towards the statement of facts submitted before the ld.CIT(A), wherein it is submitted that the nature of business of the company requires appellant s official to travel and meet various people around the country and globe for entering into prospective trading business. It was further submitted that the trading in L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of business, the same is not allowable. Accordingly the disallowance made by the assessing officer is confirmed. 4.1. However, we find that before the ld.CIT(A), the assessee had made an elaborate submission by way of statement of facts which is reproduced hereunder:- 1. Disallowance of Travelling expenses of ₹ 9,90,879/- The appellant is in business of bulk trading of Liquified Natural Gas ('LNG'). The company has been in this business since its inception. It has entered into various contracts under earlier years and subsequent years with regards to the year under consideration. The nature of business of the company requires appellants' official to travel and meet various people around the country and glo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must confine its examination to the reality expect. The same understanding was elucidated by Madras High Court in the land mark judgment of Gobald Motor Service (P.) Ltd. 100 ITR 240. It was held that the expediency of the expenditure is not for the revenue to consider. That is a matter entirely left to the judgment of the assessee concerned. The jurisdiction of the revenue is under section 37 of the Act is, however confined to deciding the reality of the expenditure, namely whether the amount claimed as deduction was factually expended or laid out and whether it was wholly and exclusively for the purpose of the business. The apex court in various milestone decisions of CIT v. Malayalam Plantations Ltd. [1964] 53 ITR 140 (SC), Madhav Pra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure was incurred on travelling of the executives of the company to study market condition and to contact prospective consumers for the purpose of trading in LNG. It is not disputed that such expenditure is allowable, however, the expenditure disallowed on the basis that the assessee failed to establish business nexus. The assessee had also relied on the judgements of Hon ble Apex Court rendered in the case of CIT vs. Malayalam Planations Ltd. reported at (1964) 53 ITR 140(SC) and of Madhav Prasad Jatia vs. CIT reported at (1979) 118 ITR 200(SC) in support of the contention that for the purpose of business is wider in scope than for the purpose of earning profit. In view of the ratio laid down by the Hon ble Apex Court the cases of C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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