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2015 (11) TMI 411 - BOMBAY HIGH COURT

2015 (11) TMI 411 - BOMBAY HIGH COURT - [2016] 382 ITR 607 - Disallowance of 'Export Promotion Expenses'- as per ITAT foreign travelling expenses incurred by the President, Director and the Executive Director were not incurred wholly and exclusively for the purpose of the business - Held that:- Before the authorities including the Tribunal the deduction was sought on the aforesaid travel expenses only on the ground that these expenses have been incurred for the purpose of meeting its foreign buy .....

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en by the Authorities under the Act to restrict the expenses of travel only to Singapore visit where the foreign buyer of the appellant is situated, cannot be said to be perverse. It is a possible view. The fact that the assessee's expenses on travel have been allowed for subsequent years or have been set aside by the Tribunal in the earlier Assessment Years or subsequent Assessment Years, would not by itself govern the issue. It all depend upon the claim made for deduction and the contention of .....

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e extent it holds that merely because a comparable has been used in the subsequent assessment year for determining the ALP, it would not ispo facto apply to determine the ALP in the subsequent Assessment Year. The issue be restored to TPO to determine whether or not the three comparables companies which have admittedly have been accepted as comparables for subsequent Assessment year can be considered as comparables for the subject assessment year. If the answer is in the affirmative by the TPO, .....

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: Mr. Arvind Pinto ORDER P. C. 1. Heard. This appeal under Section 260A of the Income Tax Act,1961 (the Act), challenges the order dated 8 May 2013 passed by the Income Tax Appellate Tribunal (the Tribunal). The Assessment Year involved is Assessment Year 2003-04. 2. The appellant-assessee urges the following questions of law for our consideration: "(1) Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in confirming the the disallowance of &# .....

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etermine the applicability of the three comparable to the subject Assessment Year, particularly after having held that merely the comparable relied upon by the appellant-assessee was accepted in the subsequent Assessment Year would not ispo facto applies to the subsequent Assessment Year? 3. Regarding Question (1): (a) The appellant-assessee is a 100% Export Oriented Unit manufacturing Switch Mode Power Supplies (SMPS) at the instance of its Associated Enterprise (A.E.) namely M/s.Quality Compon .....

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377; 85.90 lakhs incurred on its President and Directors for the purpose of marketing and selling its goods. The Assessing Officer held that the President and Directors of the Company had not only travelled to Singapore where the A.E. (QCS) is situated but also to other countries. The travel to Singapore was held to be for the purpose of business and the expenses of ₹ 5 lakhs incurred on visit to Singapore was allowed as business expenditure while the balance amount of ₹ 80.95 lakhs .....

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nal, the assessee contended that the travel expenses incurred in respect of the travel of its President and Directors to foreign countries were to have meeting and discussion with the buyers of its finished products. The Tribunal by the impugned order dated 8 May 2013 upheld the order dated 19 July 2011 of the CIT(A) to the extent of the claim made in respect of foreign travel expenditure. The impugned order holds that the appellant-assessee was only obliged to supply the SMPS to its A.E.(QCS) i .....

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elies upon the terms of the agreement which have been reproduced in the impugned order. In particular to point out that the appellant-assessee is required to travel abroad so as to carry out joint inspection of the raw material to be supplied by the raw material supplier at the instance of the A.E. (QCS) to the appellant-assessee. In the above view, it is the submission of the appellant that the aforesaid expenses were wholly and exclusively incurred for the purpose of business of the appellant- .....

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is court in the case "Commissioner of Income Tax Vs. Sales Magnesite (Pvt.) Ltd., (214 ITR 1 (Bom.)) ". It is also further pointed out by the learned Counsel for the appellant that for the subsequent years i.e. 2005-06 to 2011-12, these expenses have been allowed. However, for the Assessment Year 2002-03 and 2004-05, the Tribunal has set aside the matter for consideration of the Assessing Officer and it is still pending decision. In further support, it is submitted that the Board's .....

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to finish product at the instance of its A.E.(QCS) on the basis of the raw material and specifications made available to it. The contention placed before us is that the appellant-assessee is required to meet its raw material suppliers as is evident from the clauses of the agreement for the purpose of joint inspection of the raw materials alongwith its A.E. (QCS). However, we find that before the authorities including the Tribunal the deduction was sought on the aforesaid travel expenses only on .....

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e expenses are necessary to meet the foreign buyers. In this view of the matter, the view taken by the Authorities under the Act to restrict the expenses of travel only to Singapore visit where the foreign buyer of the appellant is situated, cannot be said to be perverse. It is a possible view. The fact that the assessee's expenses on travel have been allowed for subsequent years or have been set aside by the Tribunal in the earlier Assessment Years or subsequent Assessment Years, would not .....

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very narrow and would not take time. 6. The undisputed facts are that to determine the arm's length price (ALP), the appellant-assessee had, before the CIT(A) forwarded three more comparables. The basis of the appellant seeking to have the three comparables also examined was that the same had been considered as comparables for the subsequent Assessment Years. The CIT(A) called for a remand report from the Transfer Pricing Officer (TPO) as the TPO had no occasion to examine the issue. The rem .....

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d 19 July 2011 arrived at a margin of 5.42 %. 7. Being aggrieved, the Revenue carried the order dated 19 July 2011 of CIT(A) in appeal to the Tribunal. The Tribunal by the impugned order accepted the Revenue's contention that merely because the comparables have been accepted for the subsequent assessment year would not ipso facto lead to same comparables being applied to the subject assessment year. On merits, the Tribunal by the impugned order rejected all the three comparables. The first c .....

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