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TMI Blog2016 (6) TMI 1402X X X X Extracts X X X X X X X X Extracts X X X X ..... rofessional expenditure in connection with acquisition. 3. The Brief facts of the case is that the assessee is in the business of manufacturing of Air Compressors and Engines and filed return of income on 14.10.2010 with total income of Rs. 88,06,76,132/- and return was processed u/s.143(1) of the Act and the case was selected for scrutiny and notice u/s.143(2) of the Act dated 26.08.2011 was issued. In compliance to notices, the ld. Authorised Representative of assessee appeared from time to time and filed details and explanation. The ld. Assessing Officer on perusal of profit and loss account found that assessee has claimed an expenditure of Rs. 1,76,97,063/- as foreign travel expenses incurred in the financial year 2009-2010 and the ld. Assessing Officer issued office letter dated 10.10.2012 to furnish the details of foreign travel expenses with name of the employees, designation in the company and purpose of visit and the same was furnished by the assessee. The ld. Assessing Officer verified that the assessee company has subsidiaries at France and China and the middle and senior level management personnel were sent to these countries for executing the work relating to subsidia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave gone through the detailed submissions made by the appellant and also analyzed the nature of business expenditure incurred. As seen from the details of the individual expenditure, statements etc. the vendor development related travel is definitely in the interest of the holding company since procurement of the components for the holding company was also done from China. Since the brand name of the company "ElGI" has to be maintained, the vendor development and product inspection do play an important role in the daily business activity of the appellant company. During the Financial Year 2009-10, M/s. Elgi India imported to the tune of Rs. 20 Crores from China, whereas, the total turnover of China Subsidiary itself was about Rs.1Crore only. Considering these facts, it is clear that the vendor development and product inspection has to be considered as the business expenditure of the appellant company. As submitted by the appellant, the foreign travel .expenditure relating to vendor development and product inspection amounting to Rs.11,80,255/- is to be allowed. The other head is regarding the submissions made for Import Purchase, Production and Gear Sourcing for ELGI INDIA, is in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld.CIT(A) that the amount of travel expenditure to subsidiary company should be apportioned and observed that the expenditure of foreign travel is incurred exclusively for conducting the business globally and there is nothing on record or valid reasons that this expenditure is incurred for the benefit of the Holding company. The ld. Authorised Representative submitted Annual report and drew attention to page nos.41 to 45 and Accounting standard 18 on related party disclosures tried to explain the reasons of gradual increase in sales compared to earlier years due to subsidiary company. But we are not convinced with the indirect beneficiary contribution by the subsidiary company in the progress of the assessee company on global business activities. We are of the opinion that expenditure of foreign travel to subsidiary companies shall be separately allocated to cost of project of subsidiary company and holding company and upheld the order of the Commissioner of Income Tax (Appeals) on this ground as the ld. Commissioner of Income Tax (Appeals) discussed the issue and gave finding on subsidiary company and restricted the disallowance to ?17,45,595/-. As the balance amount of ?2,07,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst this, the assessee assailed an appeal before Tribunal. 4.3 Before us, the ld. Authorised Representative explained the amalgamation of the company and the legal and professional charges incurred in connection with amalgamation and supported his arguments that Bombay Stock Exchange fees of Rs. 55,150/- is Revenue expenditure and ld. Commissioner of Income Tax (Appeals) has partly allowed the claim and sustained the addition as capital expenditure and prayed for allowing the claim. 4.4 Contra, the ld. Departmental Representative relied on the orders of Commissioner of Income Tax (Appeals) and opposed to the grounds. 4.5 We heard the rival submissions, perused the material on record. The ld. Authorised Representative contention that the amalgamation fees is in the nature of Revenue expenses and the facts are that the amount of Rs. 55,150/- was paid to Bombay Stock Exchange is not disputed and was paid in the process of amalgamation. The assessee company incurred this expenditure to merge M/s. Elgi Industrial Products Ltd for the smooth conduct of business and prime face this fees is paid once in life time for amalgamation of the company with enduring benefits we are of the opi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng part of regular business expenses to understand the acquisition and smooth conduct of business in Europe and has to be treated as Revenue expenditure and relied on the Apex Court decisions. The ld. Commissioner of Income Tax (Appeals) has examined the invoice of M/s. Stehin and Associates and also breakup of amount and came to a unilateral conclusion that the expenditure is nothing to do with regular business and expenditure is incurred for acquisition of shares of M/s. Belair, France and the assessee could not furnish evidence to prove that the said acquisition was in the course of carrying on of the assessee business and deleted the addition of Rs. 1,77,984/- and sustained expenditure of Rs. 19,55,555/- paid to M/s. Stehin and Associates. Against the order of Commissioner of Income Tax (Appeals), the assessee assailed an appeal before Tribunal. 5.3 Before us, the ld. Authorised Representative reiterated the submissions on acquisition made before assessment and appellate proceedings and this professional expenditure of Rs. 19,55,555/- was incurred in connection of acquisition of M/s. Belair, France towards expansion of assessee business in Europe and incurred wholly and exclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax (Appeals) has not called for the remand report while adjudicating on the disputed issue. The ld. Authorised Representative agitated the grounds of the Revenue as no fresh material was brought before Commissioner of Income Tax (Appeals) and the explanations filed before Commissioner of Income Tax (Appeals) are part of the assessment record. The assessee company has incurred the expenditure for Business reviews of subsidiary companies in foreign countries and no fresh material was filed before Commissioner of Income Tax (Appeals) and prayed for dismissing the appeal. 7.3 We heard the rival submissions, perused the material on record. The ld. Authorised Representative submissions that no fresh material was brought before Commissioner of Income Tax (Appeals). We perused the assessment order para 5 at page 7 the ld. Assessing Officer issued letter dated 10.10.2010 to furnish complete details of foreign travel expenses including name of employees, designation in the company, country visited, purpose of visit and amount spent. In compliance, the ld. Authorised Representative has provided the details of the expenditure incurred and the ld. Assessing Officer has examined the informatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure. Aggrieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals). 8.2 The ld. Commissioner of Income Tax (Appeals) considered the findings of the ld. Assessing Officer and discussed elaborately considering the judicial decisions and nature of technology at page 11 to 14 and examined the photographs of various parts and details of working of Holyroid Machine and discussed in reconditioning for spares observed at para 16 as under:- ''I had gone through the original purchase order placed by the appellant company with M/s. HOLROYD MACHINE TOOLS on 09.03.1996. As seen from the placement order along with the quotation given by M/s. HOLROYD, it is very clear that the CNC System control was a part of the machine and this technology becoming obsolete, it was replaced by modified electronic system. The CNC upgradation helped the appellant company to minimize the failures or to achieve the zero failure related to electrical and electronics circuits. As seen from the photos submitted by the appellant, the parts in the electrical panel were replaced with the updated Electrical Panel and Display Unit. As stated by the Assessing Officer in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnical report and pass the order on merits after providing adequate opportunity of being heard to the assessee and the ground of the Revenue is partly allowed for statistical purpose. 9. The last ground raised by the Revenue with regard to allowance of carry forward depreciation loss, the ld. Commissioner of Income Tax (Appeals) erred in not deciding the issue and remitting it back to the ld. Assessing Officer in violation of the provisions of Sec. 251(1)(a) of the Act and ld. Commissioner of Income Tax (Appeals) ought to have appreciated the fact that the ld. Assessing Officer had already decided the issue on the basis of very same evidences produced before the Commissioner of Income Tax (Appeals) and cannot therefore, review the decision of the Assessing Officer. 9.1 The assessee company in computation of income for the assessment year 2010-2011 claimed deduction of carry forward loss to the extent of Rs. 1,03,27,094/- and filed details explaining the additional brought forward depreciation of amalgamating company M/s. Egli Industrial Products Limited merged in financial year 2009-2010 amounting to Rs. 60,13,991/-. The ld. Assessing Officer found that additional depreciation of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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