ITA NO. 1931/Del/2010
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "B", NEW DELHI
BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER
AND
SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
I.T.A. No. 1931/Del/2010
A.Y. : 2003-04
DCIT, Circle 11(1), vs. M/s Filatex (India) Ltd.,
New Delhi 42, Community Centre,
C.R. Bldg., New Friends Colony,
New Delhi 110 092 New Delhi
(PAN/GIR NO. : AAACF0027B)
(Appellant ) (Respondent )
Assessee by : Sh. Ashwani Kumar, CA
Department by : Sh. Ajit Kr. Singh, Sr. D.R.
ORDER
PER SHAMIM YAHYA: AM
This appeal by the Revenue is directed against the order of the
Ld. Commissioner of Income Tax (Appeals)-XIII, New Delhi dated
22.2.2010 pertaining to assessment year 2003-04.
2. The grounds raised read as under:-
i) On the facts and circumstances of the case and in law,
the Ld. Commissioner of Income Tax (A) has erred in
deleting the addition of ` 8,73,571/- on account of
foreign travel expenses.
ii) On the facts and circumstance of the case and in law,
the Ld. Commissioner of Income Tax (A) has erred in
deleting the addition of ` 64,09,609/- made on account
prior period expenses.
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iii) The appellant craves leave to add, alter or amend any
ground of appeal raised above at the time of hearing.
Apropos ground no. 1:-
3. During the year assessee company incurred expenditure of `
17,47,142/- on foreign travel. The assessee was asked proof of
business purpose. Assessee filed detail of foreign travel expenditure.
Assessing Officer opined that no documentary evidence certifying that
these travels are expedient to obtain business has been filed.
Assessing Officer further observed that the assessee company has not
been able to link up the visits to other countries with the results
achieved in the subsequent assessment years also. Assessing Officer
held that since all these details are not available, the entire expenses
on foreign travelling cannot be allowed to the assessee on account of
business consideration. Assessing Officer further opined that there is
an element of personal tour involved by the Directors in these visits.
Hence, the expenditure of ` 8,73,571/- (being 50% of ` 17,47,142/-)
incurred on foreign travelling was disallowed and added back to the
assessee's total income.
4. Before the Ld. Commissioner of Income Tax (A) assessee
submitted additional details. It was submitted by the assessee that
assessee has provided complete details of foreign travel giving therein
names and designation of the persons who travelled, period of travel,
country visited and amount spent and purpose of tour. Assessee
company further submitted that the assessee was not asked to furnish
any further details. After going through the assessee's submissions,
assessment order and the written submissions of the assessee
company, Ld. Commissioner of Income Tax (A) found that Assessing
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Officer has not been able to identify any case where the business
expediency or genuineness of the foreign travel expenditure was not
proved. Moreover, he found that complete details of foreign travel
expenses were furnished during the course of assessment
proceedings. Hence, Ld. Commissioner of Income Tax (A) held that
there was no laxity on the part of the assessee company in filing the
relevant details. Furthermore, Ld. Commissioner of Income Tax (A)
gave a finding that from the perusal of the details of traveling
expenditure, it is clear that these are entirely related to the purposes
of the business and as such there is no ground for the disallowance
thereof.
5. Against the above order the Revenue is in appeal before us.
6. We have heard the rival contentions in light of the material
produced and precedent relied upon. We find that assessee has
submitted complete details of foreign travelling before the authorities
below. Furthermore, Ld. Commissioner of Income Tax (A) has given a
finding from the details that it is quite clear that expenditure was
entirely related to the purpose of business and as such there was no
ground for the disallowance thereof. Assessing Officer has not
been able to identify any case where the business expediency or
genuineness of the foreign travel expenditure was not proved. Under
the circumstances, we do not find any infirmity in the order of the Ld.
Commissioner of Income Tax (A) on this issue. Hence, we uphold the
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order of the Ld. Commissioner of Income Tax (A) and decide the issue
against the Revenue.
Apropos ground no. 2
7. On this issue Assessing Officer made the addition holding as
under:-
"The assessee has debited an amount of ` 65,49,610/-
being prior period expense. This expenditure has been
certified to be related to prior period as per the Tax Audit
Report. The assessee was asked to explain as to why the
same should not be disallowed. The assessee vide his letter
dated 18.8.2005 merely submitted as under:-
Details of prior period expenses
PARTICULARS EXPENSES INCOME
REPAIR TO PLANT & MACH. 80584
REPAIR TO PLANT & MACH. 62624
LEGAL & PROFESSIONAL EXP. 14250
ELECTIRCITY EXP. 34929
TELEPHONE EXP. 37332
PRITNING & STATIONERY 2091
REPAIR AND MAINTENANCE 25270
INTEREST ON RUPEE LOAN 6409609
STAFF WELFARE 1550
REPAIR AND MAIN. (BLG.) 27119
CARRIAGE OUTWARD 8000
TOTAL 6626484
NET OF EXPENSES OVER INCOME (RS.) 6549610
When asked to substantiate as to why the same should not
be disallowed, the assessee merely stated that all the prior
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period expenses, debited to profit and loss account has
already been added back while computing the taxable
income of the company of this year. While going through
the computation of income filed with the return of income, it
reveals that prior period expenses amounting to `
1,40,001/- only has been added back. Further, as the said
amount of expenses has been qualified by the auditor
himself and as per provisions of section 37(1) of the Act, no
prior period expense were allowable. Thus, the prior period
claimed amounting to ` 64,09,609/- (` 65,49,610 (-)
1,40,001) is hereby disallowed and added back to the
income of the assessee company."
8. During the appellate proceedings, assessee submitted that
expenses pertaining to prior period amounting to ` 65,49,610/-.
However, out of the same, ` 1,40,000/- had already been added back
in the computation of income. As regards ` 6,409,609/- it was
submitted that the same represented interest on rupee loan paid by
the company to IDBI as per the restructuring package intimated to the
company. In this respect, necessary correspondence were filed
before the Assessing Officer. The said payment of interest on term
loan has duly been certified and mentioned by the Auditors in their Tax
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Audit Report at Annexure VI-A wherein a sum of ` 64,09,609/- has been
shown as incurred and paid during the year. Furthermore, assessee
submitted that the above Debt Restructuring Scheme was approved
only in the instant assessment year under appeal and was
communicated vide IDBI's letter dated 10.12.2012, hence, the liability
to pay interest has crystallized and been ascertained only in this year
and as such is allowable during this year. Considering the above, Ld.
Commissioner of Income Tax (A) deleted the disallowance in this
regard.
9. Against the above order the Revenue is in appeal before us.
10. We have heard the rival contentions in light of the material
produced and precedent relied upon. We find that disallowed
expenditure in this regard related to interest on Rupee Loan paid by
the assessee to IDBI as per the Restructuring package intimated by
the IDBI vide letter dated 10.12.2012. The said letter was duly
produced before the Assessing Officer as well as Ld. Commissioner of
Income Tax (A). The Tax Auditors have also reported the fact of the
payment in this regard. Further, we find that the above Debt
Restructuring Scheme was approved and communicated to the
assessee vide letter dated 10.12.2012. Hence, assessee's submission
that ascertained liability to pay interest has crystallized and has been
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ascertained only in this year is quite cogent one. Under the
circumstances, we uphold the order of the Ld. Commissioner of Income
Tax (A) on this issue and decide the issue against the Revenue.
11. In the result, the appeal filed by the Revenue stands dismissed.
Order pronounced in the open court on 08/2/2013.
Sd/- Sd/-
TOLANI]
[R.P. TOLANI] [SHAMIM YAHYA]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date 08/2/2013
"SRBHATNAGAR"
Copy forwarded to: -
1. Appellant 2. Respondent 3. CIT 4. CIT (A)
5. DR, ITAT
TRUE COPY
By Order,
Assistant Registrar,
ITAT, Delhi Benches
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