Hindustan Unilever Ltd Vs ACIT (ITAT Mumbai)
ITAT Mumbai held that foreign travelling expenses in respect of spouses who accompanied on official tour with some of the company employees is allowable expenditure.
Facts- During the course of assessment the A.O noticed that assesse has debited an amount of Rs.40,04,260/- on account of foreign travelling expenses in respect of spouses who accompanied on official tour with some of the company employees. The Assessing Officer has disallowed such foreign travelling expenses on the basis of similar disallowance made in assessment year 1999-2000 on the reason that expenditure of foreign travelling of the spouses was wholly and exclusively not for the purpose of business.
The assesse filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the ground of appeal of the assessee.
Conclusion- We have perused the decision of ITAT vide ITA No. 2031/Mum/2004 for assessment year 1998-99 wherein the identical issue on similar fact has been adjudicated in favour of the assessee after referring the decision of the coordinate benches of the Tribunal in assesse’s own case for assessment year 1985-86 to assessment year 1997-98. Consistent with the view taken by the coordinate bench as referred above we allow the ground of appeal of the assesse.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
Both these appeals filed by the assesse and the revenue are pertained to assessment year 2000-01 based on similar fact and identical issue therefore for the sake of convenience these appeals are adjudicated together.
“1. The learned CIT(A) erred in not allowing Rs.40,94,260/- being business expenditure on foreign travel in respect of spouses who accompanied some of the company employees on official four
2. The learned CIT(A) erred in not directing the assessing officer to allow full deduction of Rs.15,46,24,982/- under Sec 80-I and 6,61,48,74,180/- u/s 80-IB as claimed by the appellant
2.1 The learned CIT(A) erred in confirming that for the purposes of section 80-I and 80-IB the profits derived from the new industrial undertakings ought to be reduced by the amount of certain common expenses incurred at the Head Office on central departments such as Audit, Legal & Secretarial Shares dept, Selection & Training. Central accounts & Treasury etc. which cannot be identified with any of the industrial undertakings of the appellant eligible for deduction u/s 80-I and 80-IB.
2.2 The learned CIT(A) erred on facts in disposing of ground no 3 to 6 of the appellant’s appeal on the assumption that the Assessing Officer has only apportioned expenses of purchase department advertisement and transport He failed to appreciate that the appellant on its own had allocated the expenses of purchase department advertisement, transport and other expenses.
2.3 The learned CIT(A) failed to appreciate that the appellant was in appeal against the allocation of only those Head Office overheads which in any case have to be incurred by the appellant irrespective of the new undertakings eligible u/s 80-I & 80IB and are in no way dependent on the said new industrial undertakings and therefore cannot be considered and allocated in arriving at the amount of profits derived from the said undertakings
3. Without prejudice to Ground 2 above, the learned CIT(A) erred in not directing the assessing officer that, if the common head office expenses referred to above in Ground 2 are to be allocated for claiming deduction u/s 80-I & 80-IB then on same basis, the common income credited to the profit & loss account but not allocated by the appellant to the individual units should also be allocated and accordingly, considered in computing the profit and gains of the said undertakings eligible u/s 80-I/80-IB on principles of equity and justice and consistent accounting practice
4. The learned CIT(A) erred in confirming that for the purposes of allowing deduction under Sec 80-I/80-I8, in respect of Concentrated Detergent Powder undertaking at Chhindwara DFA undertaking at Orai and Chemical undertaking at Daman, the profits derived by the undertakings are required to be reduced by the losses/unabsorbed depreciation in respect of these undertakings determined in earlier years
4.1 He failed to appreciate and ought to have held that the losses/unabsorbed depreciation of earlier years had already been set-off against profits from other undertakings/activities and there was no losses/unabsorbed depreciation, which had been brought forward in the current year
4.2 He also failed to appreciate that as laid down in Section 80AB of the Act, deduction under Sec 80-I/IB is to be allowed with reference to the amount of profits included in the Gross Total Income and cannot be notionally reduced by amounts which are not actually reduced in arriving at the Gross Total Income
5. The learned CIT(A) erred in holding that the Royalty amounting to 15,55,63,403/- is to be allocated to the profits and gains derived from industrial undertakings eligible for deduction u/s 80-I and 80-IB.
6. The learned CIT(A) erred in holding that sale of miscellaneous products(scrap) and foreign exchange gain are required to be included in total turnover for the purposes of computing deduction under sec. 80HHC
6.1 He failed to appreciate that sale of miscellaneous products(scrap) and foreign exchange gain comprises of receipts other than those arising from sale of regular products and cannot be considered as turnover.
7. The learned CIT(A) erred in confirming that 90% of the following amounts are to be reduced from the profits & gains from business for the purposes of allowing deduction under Sec. 80HHC
