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M/s. Pearl Bottling Pvt. Ltd. Versus Addl. CIT, Range-4, Visakhapatnam

2016 (6) TMI 81 - ITAT VISAKHAPATNAM

Disallowance of Directors foreign travel expenditure - Held that:- On perusal of the financial statements of the assessee for the relevant financial year, we find that in the Director report attached to financial statements, the assessee has reported the name of Mr. Ruchirans Jaipuria in the key managerial personal. The other Director Smt. Payal Jaipuria’s name did not find in the key managerial, personal position. Therefore, we are of the view that the assessee has filed to prove that Mrs. Paya .....

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ter considering the relevant details filed by the assessee uphold the order of the A.O. We do not see any error or infirmity in the order passed by the CIT(A) - Decided against assessee

TDS u/s 194A - non TDS on finance charges - Held that:- Considering the ratio of the coordinate bench decision, in the case of M/s. Merilyn Shipping & Transporters (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ), we are of the opinion that no disallowance can be made u/s 40(a)(ia) of the Act for the amounts w .....

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i Prasad, DR ORDER Per G. Manjunatha, Accountant Member This appeal filed by the assessee is directed against the order of CIT(A), Visakhapatnam dated 20.9.2013 and it pertains to the assessment year 2008-09. 2. The brief facts of the case are that the assessee company which is engaged in the business of manufacture and trading in soft drinks filed its return of income for the assessment year 2008-09 on 29.9.2008 declaring nil total income after setting off the depreciation loss brought forward .....

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A.O. noticed that the assessee has incurred Directors foreign travel expenditure of ₹ 29,44,193/-. Therefore, requested to furnish the details of foreign travel expenditure along with purpose for which the Directors have incurred the travel expenditure. In response to the show cause notice, the assessee submitted that the Directors of the company have visited Dubai, Australia, Singapore and London to meet the executives of PEPSI Company to discuss the marketing and production plan of the c .....

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expenditure. Similarly, the A.O. noticed that the assessee had incurred an amount of ₹ 12,28,901/- towards finance charges. To ascertain the claim of the assessee, with reference to deduction of TDS under the respective provisions of the Act, issued a show cause notice and asked to explain whether the TDS has been deducted in respect of interest payments. In response to the notice, the assessee company submitted a breakup of the bank charges and also contended that the finance charge repr .....

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ustify the foreign travel expenditure of the Directors. Though assessee contends that the Directors have visited foreign countries to discuss with the executives of the PEPSI holding in respect of company s operations, failed to furnish any evidences in support of its claims. With these observations, disallowed the foreign travel expenditure of ₹ 29,44,193/-. Similarly, in respect of finance charges, the A.O. observed that though, assessee needs to deduct TDS u/s 194A of the Act in respect .....

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edings along with justification of expenses incurred for business purposes and therefore, no disallowance is called for. It was further argued that the Directors foreign travelling expenses are related to business purpose of the assessee. The Directors have attended the business meeting at abroad with PEPSICO executives to discuss business in India and also to meet the NRIs for mobilizing the funds for the purpose of expansion of business. It was further argued that the expenditure was purely in .....

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not be made. The CIT(A) after considering the explanations of the assessee held that though assessee made various claims in respect of foreign travel expenditure, failed to file any evidence to justify the claims. The assessee has not explained why it could not produce any evidence in support of the claim. The claim of the assessee that it has paid the fringe benefit tax on such expenditure cannot substitute the evidence to be produced to prove the claim that the expenditure was incurred only an .....

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of the section 40(a)(ia) of the Act. Aggrieved by the CIT(A) order, the assessee is in appeal before us. 5. The first issue came up for our consideration is disallowance of Directors foreign travel expenditure. The A.O. disallowed a sum of ₹ 29,44,193/- towards Directors foreign travel expenditure. The Ld. A.R. submitted that the A.O. was not correct in disallowing the foreign travel expenditure, as the travel expenditure has been incurred exclusively for the purpose of business of assess .....

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mobilizing the funds for the expansion of the company s business. The A.O. failed to appreciate the fact that the expenditure has been incurred exclusively for the purpose of business. The A.R. further submitted that after meeting the company executives, it was helped the business profile of the company in India and company could achieve more turnover. Therefore, the A.O. was not correct in holding that the assessee has not produced any evidences in support of the claim. 6. On the other hand, t .....

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of invitations or letters from the PEPSICO holding to invite the Directors for the meeting. In the absence of any evidences, the A.O. was justified in disallowing the foreign travel expenditure. 7. We have heard both the parties and perused the materials available on record. The A.O. disallowed the Directors foreign travel expenditure for the reason that the assessee has failed to produce any evidences to show that the expenditure is incurred exclusively for the purpose of business of the asses .....

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eign countries and submitted that the Directors have met the executives in respective countries and discussed the annual operating plan for the current year 2007 and also about the details of product to be manufacture, size of pack, quantity, price structure, etc. so as to achieve the desired operating results. The assessee also filed few letters addressed to one Mr. Abdul Latif, President of AMEA (Asia, Middle East, Africa) PEPSICO company Inc. and conveyed their gratitude for having arranged t .....

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enditure of the nature described in section 30 to 36 of the Act and not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended only and exclusively for the purpose of business or profession of the assessee. Therefore, any expenditure incurred in relation to the business of the assessee and exclusively for the purpose of business of the assessee is allowed as deduction in computing the income under the head Profits & Gains of business or professi .....

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aims to have incurred the expenditure exclusively for the purpose of business, it has failed to furnish any evidences in support of its claim. The assessee contended that two of its Directors have visited countries like Dubai, Australia, Singapore and London to meet the officials of PEPSICO holding to discuss the marketing and future expansion plan of the company in India. In support of its contentions, filed few letters addressed to the executives of the PEPSICO holding situated in respective c .....

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idence in the form of agreements between the foreign lenders for arrangement of borrowings for the purpose of the company. We further observed that two of the Directors Mr. Ruchirans Jaipuria and Mrs. Payal Jaipuria have visited the foreign countries to meet the PEPSICO officials for the business expansion of the company. The assessee filed a paper book containing various details including financial statements of the assessee for the relevant financial years. On perusal of the financial statemen .....

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the meetings in abroad to discuss about the future plan of the company. Under these circumstances, we are of the considered view that the assessee has failed to discharge the onus cast upon it to prove the expenditure incurred exclusively for the purpose of business of the assessee. Therefore, we are of the view that the A.O. has rightly disallowed the foreign travel expenditure. The CIT(A) after considering the relevant details filed by the assessee uphold the order of the A.O. We do not see a .....

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ng the disallowance made by the A.O. by invoking the provisions of section 40(a)(ia) of the Act. The A.R. further submitted that the finance charges paid to the finance companies in respect of hire purchase agreements is not interest which attracts the provisions of TDS u/s 194A of the Act. Therefore, the A.O. was not correct in disallowing the amount by invoking the provisions of section 40(a)(ia) of the Act. Alternatively, the Ld. A.R. submitted that though assessee has not deducted TDS on suc .....

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terials available on record. The A.O. disallowed finance charges of ₹ 5,56,121/- by invoking the provisions of section 40(a)(ia) of the Act. The A.O. was of the opinion that the assessee has failed to deduct TDS u/s 194A of the Act, therefore, the finance charges cannot be allowed as deduction in computing the profits and gains of business or profession. It is the contention of the assessee that the finance charges paid to finance companies represents the hire purchase charges paid for acq .....

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