Case Law Details
Laxmi Ventures (India) Ltd. Vs DCIT (ITAT Mumbai)
The issue under consideration is whether disallowance made against the foreign expense incurred for the foreign travelling of the officer is justified in law?
ITAT states that, the assessee had debited a sum on account of foreign travelling expenses for Europe visit and a sum on account of foreign travel for travelling to London. The assessee was asked to justify the business nexus of these foreign trips for the purpose of allowability by the ld. AO. The assessee submitted the ledger account alongwith copy of invoices issued by the travel agent. The ld. AO observed that all the three persons travelled to the same location i.e. Bombay to London during Europe visit. The ld. AO observed that assessee could not produce any other evidences to substantiate the business nexus by proving the purpose of visit by its Directors to these foreign countries and benefits derived by the assessee company thereon pursuant to such visits. Accordingly, AO disallowed a sum towards foreign travel expenses as not meant for the purpose of business of the assessee in the assessment. ITAT find that the assessee had stated before the ld. CIT(A) that these foreign trips were undertaken after due approval of the Board and were clearly for the purpose of business. It was pleaded that assessee company was having substantial export business in United Kingdom and further the assessee wanted to promote the sale of Soya – DOC- Hypro, which was a new variety of DOC (DE Oiled Cake) developed specially for the European market and introduced for the first time during the F.Y.2009-10 by the assessee. The assessee further pleaded that the turnover of Soya DOC Hypro have gone up substantially from F.Yrs 2009-10 to 2010-11 which was possible only as a result of these foreign visits wherein the Directors were able to promote the product of the assessee company in the European market. ITAT find that the ld. CIT(A) after verifying the Board resolution and appreciating the fact that turnover has substantially increased during the year under consideration pursuant to the said foreign visits observed that assessee had duly established the business nexus thereon and accordingly, deleted the disallowance made by the ld. AO. It is not in dispute that Soya DOC Hypro was a new variety of DE oiled cake developed specially for the European market by the assessee and the same has been launched for the first time during the F.Y.2009-10. Hence, this product required to be promoted in the European market for which the Directors of the assessee company had visited the relevant foreign country. It is also not in dispute that the turnover has substantially increased during the year as compared to the earlier year. This goes to prove that the benefits derived by the assessee pursuant to such foreign receipts by its Directors stands established by the business nexus. Hence, ITAT do not find any infirmity in the action of the ld. CIT(A) granting relief to the assessee. Accordingly, the appeal filed by the revenue is dismissed.
FULL TEXT OF THE ITAT JUDGEMENT
These cross appeals in ITA No.1631/Mum/2016, 1731/Mum/2017 and 2634/Mum/2017 for A.Y.2011-12 & 2012-13 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-13, Mumbai in appeal No.CIT(A)-13/DCIT-7(1)(2)/506/2015-16, CIT(A)-13/DCIT-7(1)(2)/572/2015-16 respectively dated 22/01/2016 & 13/01/2017 respectively (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 20/10/2014 & 19/03/2015 by the ld. Dy. Commissioner of Income Tax – 6(3) & 7(1)(2), Mumbai (hereinafter referred to as ld. AO).
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