This appeal by the Assessee is directed against the Order dated 18.2.2015 of the Ld. CIT(A)-XX, New Delhi pertaining to assessment year 2010-11 on the following grounds:-
1. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in sustaining a disallowance of a sum of Rs. 4, 50, 982/- on account of Foreign Traveling Expenses, wherein the said expenditure was treated as “capital expenditure” as against the “revenue expenditure” being claimed by the assessee - appellant.
1.1 That in doing so, the learned Commissioner of Income Tax (Appeals) has arbitrarily rejected the detailed explanations and evidences filed by the assessee - appellant in order to support the claim of “revenue expenditure” and thus, the addition so sustained is unjustified and unsustainable in law.
1.2 That the learned Commissioner of Income Tax (Appeals) has further failed to appreciate the basic fact that the expenditure incurred on foreign travelling for purchase of machinery is a bonafide business expenditure necessary to run the business of the assessee - appellant, thus, treating the same as capital expenditure is uncalled for and unjustified in law.
2 That the learned Commissioner of Income Tax '(Appeals) has erred both in law and facts in sustaining a disallowance of a sum of Rs. 2,48,358/- on account of interest paid and claimed as deduction under section 36(1)(iii) of the Act.
2.1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate the basic fact that such disallowance was highly unreasonable and based on complete misconception of facts, as the said payment of interest had no nexus with the purchase of machinery and as such, the disallowance so made should have been deleted.
3 That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in sustaining a disallowance of Rs. 25, 33, 675/- under section 40(a)(ia) of the Act, on account of non - deduction of TDS on payment of interest being M/s L&T Finance Ltd.
3.1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate the basic fact that the said payment of interest amounting to Rs. 25,33,675/- was duly accounted as income by M/s L&T Finance Ltd. and due taxes were paid by M/s L&T Finance Ltd. on the same and in order to substantiate the said fact, confirmation form M/s L&T Finance Ltd, was also filed, which was arbitrarily - rejected by learned CIT (A) and thus, the disallowance so sustained is highly unjust and uncalled for on facts of the instant case.
4.2 That the learned Commissioner of Income has further failed to appreciate the basic fact that no disallowance is warranted of the expenditure incurred to the extent of expenditure paid uls 40(a)(ia) of the Act, and as the entire sum of interest stood “paid” during the year thus, there was no sum remaining to be “payable” at the end of the financial year 2009-10 relevant to instant assessment year 2010-11 and as such, no disallowance is called for and the disallowance so sustained deserves to be deleted.
5. That the learned Commissioner of Income Tax (Appeals) has further erred in law and on facts in sustaining the aforesaid additions in the hands of assessee -appellant, without giving any fair and proper opportunity of being heard to the appellant company, thereby, violating the principles of natural justice.
2. The brief facts of the case are that the assessee is a contractor engaged in laying pile foundations and upon a gross receipt of Rs. 8.14 crores a net profit of Rs. 9,43,966/- was declared by its return of income for A Y 2010-11 on 27.9.2010. However, AO vide order dated 22.03.2013 framed an assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter referred as the Act) at an income of Rs. 42,35, 515/- by making the various additions. Against the aforesaid assessment order, the assessee filed the appeal before the Ld. CIT(A), who vide its impugned order dated 18.2.2015 has dismissed the appeal of assessee firm. Aggrieved with the impugned order, the assessee is in appeal before the Tribunal.
3. During the hearing, learned counsel for assessee Sh. Salil Aggarwal Advocate argued the matter in detail with respect to all the grounds, except the ground no. 2 to 2.1, so raised in the memo of appeal and furnished following written submissions:
(a) That with respect to ground nos. 1 to 1.2, it is submitted that the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in sustaining, a disallowance of a sum of Rs. 4, 50, 982/- on account of Foreign Traveling Expenses, wherein the said expenditure was treated as “capital expenditure” as against the “revenue expenditure” being claimed by the assessee - appellant. It is submitted that the said expenditure has been incurred by the assessee firm for business purposes, as it was been incurred in the process of foreign tour of director for acquisition of machinery, and as such, since the entire expenditure has been incurred during the running of the business, as such, same needs to be allowed as revenue expenditure.
(b) That with respect to ground nos. 2 to 2.1, it is submitted that the learned Commissioner of Income Tax (Appeals) has erred both in law and facts in sustaining a disallowance of a sum ofRs. 2,48, 358/- on account of interest paid and claimed as deduction under section 36(l)(iii) of the Act.
(c) That with respect to ground nos. 3 to 3.2, it is submitted that learned CIT (A) has erred both in law and on facts in sustaining a disallowance of Rs. 25, 33, 675/- under section 40(a)(ia) of the Act, on account of non - deduction of TDS on payment of interest being MIs L&T Finance Ltd. In doing so, the learned CIT (A). has failed to appreciate the basic fact that the said payment on account of interest being paid to MIs L&T Finance and the same was also included in the income of MIs L&T Finance, as confirmed by the said party (at page 26 of the paper book). Thus, reliance is placed on the judgment of Hon'ble High Court of Delhi in the case of CIT vs Ansal Land Mark Townships Pvt. Ltd. reported in 377 ITR 635 on the proposition that “once the payee has included the amount paid by payer in its return of income and paid taxes on the same, then the payer cannot be said to be in default and thus, no disallowance be made under section 40(a)(ia) of the Act”.
4. On the contrary, the learned Sr. DR, Sh. T. Vasantha, relied upon the orders of lower authorities and reiterated the findings recorded by the lower authorities.
5. I have heard both the parties and perused the records available with me. With regard to ground nos. 1 to 1.2 are concerned, I find that one of the partner of the assessee firm went abroad to purchase a machine for the purposes of business and the same was subsequently purchased and put to use in the business of assessee firm as well. In such a scenario, the foreign travelling expenses incurred by the assessee firm, since admittedly is for the purposes of business needs to be allowed as revenue expenditure and as such, ground no. 1 to 1.2 of the assessee are allowed thereby deleting the addition of Rs. 4,50,982/-.
5.1 With regard to ground nos. 2 to 2.1 are concerned, since these grounds were not pressed by the Ld. Counsel of the assessee, hence, the same are dismissed as not pressed.
5.2 With regard to ground nos. 3 to 3.2 are concerned, I find that assessee had filed Certificate dated 28.3.2013 from MIs L&T Finance (at page 26 of the paper book filed by assessee) which reads as under:-
“L&T Finance
To
Pile Foundation Company
29/1, Savitri Nagar,
Near Sheikh Sarai, Phase-I,
New Delhi – 11 017
Reg.: Finance charges received from M/s Pile Foundation Company during the FY 2009-10 (AY 2010-11)
This is to certify that the finance charges received from M/s Pile Foundation Company by us has been duly reported as income in our books and accounts income tax return and that same has been charged to tax vide our income tax return filed on 29th September, 2010 and the tax due there on has been paid”.
Date: 28th day of March, 2013
Place: Mumbai
Sd/-
Kantilal Parmar
(Authorised Signatory)”
5.2.1 After carefully perusing the aforesaid Certificate, I am of the considered view that the addition in dispute is not tenable and therefore, I have no hesitation in deleting the impugned addition, as the payee has included the amount so paid by assessee in its return of income and thus, there is no need to make any disallowance under section 40(a)(ia) of the Act. Accordingly, I delete the addition in dispute and allow the ground no. 3 to 3.2 raised by the assessee.
6. In the result, the appeal of the Assessee is partly allowed.
The order pronounced in the open court on 31/08/2017.