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TMI Blog2016 (1) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... re to the following effect:- A. Whether, on the facts and circumstances of the case, the Tribunal was justified in reversing a well versed order of CIT(A) in rejecting the claim of business expenditure on account of foreign travel of professionally qualified son and daughter-in-law of only male partner of the appellant firm, both son and daughter-in-law being legal heirs of the partner also and having shown growth in firms business as a consequence of their foreign travel? B. Whether on the facts and circumstances of the case, the Tribunal was justified in disallowing the entire foreign travel expense on the only premise that it was not incurred by a competent person, without reversing the finding of the CIT (A) that evidence produced by assessee in the shape of e-mails etc. show actual business transactions of the assessee firm? C. Whether impugned order of ITAT is against the well settled law and principles as laid down in the case of Sassoon J. Davi and Co. P. Ltd. vs. CIT Bombay (1979) 118 ITR 261 (SC) and other judgments on the issue in dispute? D. Whether the order of the Tribunal is perverse and against the provisions of law? 2. Briefly stated, the facts necessary f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Rs. 32,54,766/- made on account of foreign travelling expenses vide order dated 30.3.3005 (Annexure A-2). Against the said order of the CIT(A), the revenue preferred an appeal before the Tribunal. The Tribunal vide its order dated 31.8.2007 (Annexure A-7) remitted the matter to the Assessing Officer to decide the same afresh. Against the order dated 31.8.2007 (Annexure A-7), the assessee moved miscellaneous application under Section 254(2) of the Act before the learned Tribunal to recall its order dated 31.8.2007 (Annexure A-8), remanding the matter to the Assessing Officer. The revenue filed its reply dated 1.2.2008 (Annexure A-9 Colly) to the said application. The Tribunal vide order dated 17.7.2008 (Annexure A-10) recalled its earlier order dated 31.8.2007 and the appeal of the revenue was ordered to be restored to its original number for hearing "afresh". Thereafter, after hearing afresh both the sides, the Tribunal allowed the appeal of the revenue vide order dated 28.11.2008 (Annexure A-1). However, the issue regarding deduction under Section 80HHC of the Act, the same was remitted to the Assessing Officer as was done vide earlier order dated 31.8.2007. Hence, the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication of the same for business purpose. Assessee furnished copy of account of the aforesaid expenses. Details furnished revealed that out of total travel expenses a sum of Rs. 39,14,814/- has been incurred on foreign travel. Out of these foreign travel expenses an amount of Rs. 32,54,766/- has been incurred for the foreign travel of Sh. Deepak Aggarwal & Smt. Shilpa Aggarwal. Reamining foreign travel expenses, claimed to have been incurred for travel of Directors and employees of the firm for representing the assessee in Hardware Show in Germany. 3.1. On perusal of details furnished by assessee, it was found that travelling has been undertaken by Sh. Deepak Aggarwal along with his wife Smt. Shilpa Aggarwal in the capacity of the son and daughter-inlaw of the partners. During the course of assessment proceedings it was submitted that they are neither an employee nor Manager nor Agent of the firm. Assessee was asked to establish that the travelling expenses have been incurred and the incurrence is wholly and exclusively for the purposes of business. Audit report did not indicate incurrence of travelling expenses by Sh. Deepak Aggarwal and Smt. Shilpa Aggarwal on behalf of the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried couple. Assessee was also confronted with these observations while examining books of accounts vide examination notes dated 21/01/04. The reply given by the assessee has already been discussed above. 3.4. Thereby it is clear and beyond doubt that the foreign tours undertaken by Sh. Deepak Aggarwal and Smt. Shilpa Aggarwal, being the son and daughter in law of the partners were completely personal tours and not wholly and exclusively for the purpose of business. Therefore the expenses debited under the head travelling a/c expended on foreign travel of Sh. Deepak Aggarwal and Smt. Shilpa Aggarwal are held not to be revenue expenses wholly and exclusively for the purpose of business of the assessee firm. Thus a sum of Rs. 32,43,766/- under the head Travelling Expenses is disallowed u/s 37(1) of the IT Act." 7. The Tribunal while reversing the findings of the CIT(A) on this issue had elaborately analyzed the material on record and concurred with the conclusion of the Assessing Officer with the following observations:- "10. We have heard the parties and have perused the material on record. Out of total expenses charged of Rs. 39.93 lacs, the assessee had suo moto debited the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in our considered opinion, is not in accordance with law. The legal requirement is that the expenditure ought to have been incurred by a competent person, i.e., the employee or the Manager, etc. of the assessee firm, which neither Shri Deepak, nor his wife Smt. Shilpa was. Rather, it has been admitted by the assessee firm that neither of these persons were taken in any capacity in the assessee firm; that it was the firm of the parents of Shri Deepak; and that Shri Deepak and Smt. Shilpa did not have any relationship with the firm other than being son and daughter-in-law of the two partners of the assessee firm. The assessee had, rather, contended before the learned CIT(A) that taking Shri Deepak and Smt. Shilpa on the rolls of the assessee firm as a employee would have downgraded the status of would be owners of the family firm. Moreover, before the A.O., the stand had been that Shri Deepak Aggarwal had been undertraining. Anyhow, the fact remains that neither Shri Deepak nor Smt. Shilpa had any capacity vis-a-vis the affairs of the assessee firm. As such the learned CIT (A) clearly erred in overlooking this material fact while deleting the addition." 8. The findings have been rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the business expediency, but because of Tatas, purchaser of the shares, made it a condition precedent under the agreement. Aggrieved with the decision of the Income Tax Officer, the company filed an appeal, which was dismissed. Further appeals before the AAC, the Tribunal and before the High Court, filed by the company, were dismissed, upholding the decision of the Income Tax Officer. In the further appeal to the High Court, a Division Bench of the Bombay High Court found that out of Rs. 1,64,899/-, only a sum of Rs. 21,000/- paid towards liability for payment of pension to some retired employees and/or widows of such employees, besides a sum of Rs. 16,188/- paid to Managing Director in lieu of 6 months' notice that had given prior to the termination of services was not liable to claim deduction. The High Court was of the view that a sum of Rs. 1,27,511/- paid to the employees and Director of the company by way of retrenchment of compensation had been incurred by the company for personal expediency and/or consideration, accordingly, disallowed the claim of the company to that extent. Still dissatisfied, the company approached the Apex Court, who held that as per the case of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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