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Wednesday, October 17, 2012

High Court, Kolkata held that, the foreign travel expenses shall be disallowed in entirety in absence of details/evidences & explanation for justification of undertaking such foreign tours in connection to business

The assessee was required to give the details of foreign visits and justification related to assessee's business. The assessee has replied that these are incurred for possible future expansion of business but no other details were given regarding what in the further expansion plan and which visit is for what particular project or purpose and in these visits which foreign concerns were contacted and what business dealing was made. In the absence of these details the assessee has not proved that these are related business activities. The appellant-assessee has not been able to discharge initial burden to prove that the expenses on account of foreign visits was relatable to business expenditure. 

Peerless General Finance & Investment Co. Ltd.
Commissioner of Income-tax, W.B.-I, Kolkata

IT APPEAL NO. 302 OF 2003

MAY 17, 2012

Facts of the case: the nature of the assessee's business is a non-banking financing that includes acceptance of deposit from public to pool for making investments within the limitation of prudential norms issued by the RBI, and it obviously precludes the possibility of any purpose of capital nature. The continuity of collection in foreign exchange and the long history of regular campaign over years per se is a circumstance of substantially evidentiary value.
Issue: The assessee claimed deduction on account of foreign tours undertaken at different times for business purposes of the company.

Assessee's contented that, both the assessing officer and the learned Tribunal had gone wrong not accepting this fact of collecting business from foreign countries and as such travel tour by the officials of the assessee to the foreign countries is an essential part of the business- that non-availability of formal evidence as recorded by the learned Tribunal, does not amount to a case of absence of evidence because the nature of campaign involving man to man and group contacts amongst the non-resident Indians produces no document- the standard of proof set by the learned Tribunal is not a pragmatic one- placing reliance on a judgment in case of CIT v.Coimbatore Salem Transport Co. (P.) Ltd. [1966] 61 ITR 480 (Mad.) that in a situation like this onus of proof is required to be discharged by the Revenue- enough evidence was produced giving list of names of the places and names of the personnel visited therefore no other proof was required- result of the foreign trip for the business purpose is not determinative factor as have been wrongly held by the learned Tribunal.

On the other hand revenue contended that, assessee-appellant failed to prove by supporting documents and evidence that there has been travel tour in connection with the business- Assessing Officer was perfectly justified in disallowing such claim- decision of the CIT (Appeals) allowing 50% of the claim was not legally sustainable as the same was based on surmises and assumptions- Tribunal has correctly reversed the judgment and order of the CIT (Appeals) as nothing was produced though repeated opportunity was given to produce the same. The appellant has not furnished full details and information with regard to following foreign trips by the personnel of the Assessing Officer.

Hon'ble High Court, Calcutta has held that, in order to claim deduction the assessee has to prove by adducing cogent evidence that it was incurred on account of business activities of the company. It appears as rightly pointed out by learned counsel for the respondent that despite opportunity being given they could not produce any materials that such foreign tour was undertaken in relation to the business of the company. Mere furnishing information and making of statement are not good enough to establish the case of foreign travel

Further stated that, "It will appear that the Commissioner of Income Tax (Appeals) has accepted mere statement made to be correct without caring for evidence and it would appear therefrom it is absolutely based on surmise and conjecture. We therefore find force in the submission of the learned Counsel for the respondent. Therefore the decision of the learned Tribunal is absolutely justified. We are of the view that the appellant-assessee has not been able to discharge initial burden to prove that the expenses on account of foreign visits was relatable to business expenditure. We are unable to accept the contention of Mr. Bagchi that materials produced before the learned Tribunal is quite adequate to hold that the foreign tour was relatable to business activity of the assessee company. We also fail to understand on what basis the Commissioner of Income Tax (Appeals) has allowed 50% we think it was completely guess work and it appears as if just because the Commissioner of Income Tax (Appeals) thinks that the aforesaid expenditure of disallowance should be granted and it was granted."

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