Blackstone Advisors India P.Ltd, ... vs Department Of Income Tax

Dy.Commissioner of Income Tax बनाम/ M/s Blackstone Advisors India -6(1), Pvt.Limited Vs. Room No.506, 5th Floor, 5th Floor, Express Tower, Nariman Aayakar Bhavan, Point, M.K.Road, Mumbai-400021 Mumbai-400020 (अपीलाथ /Appellant) .. ( यथ / Respondent)

थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AACCB7376D

अपीलाथ ओर से / Assessee by: Shri Vivek Batra

यथ क ओर से/ Revenue by:: Shri Girish Dave

सन ु वाई क तार ख / Date of Hearing : 8.1.2015 घोषणा क तार ख /Date of Pronouncement : 8.1.2015

आदे श / O R D E R

Per B.R.BASKARAN, Accountant Member:

The appeal filed by the Revenue is directed against the order dated 27.3.2012 passed by the ld. CIT(A)-14, Mumbai and it relates to the assessment year 2007-08.

2. The revenue is aggrieved by the decision of ld. CIT(A) in deleting the disallowance of Rs.21,31,011/- made out of travelling expenses and further in partially granting relief against the disallowance made out of lodging expenses.

3. The facts relates to the case are stated in brief. The assessee is carrying business of providing investment advisory services to the affiliated entities. The ITA No4196/M/2012 2

AO noticed that the assessee has claimed a sum of Rs.1.94 crores as travelling expenses. The AO observed that the assessee has received advisory income from companies located in New York and London. However, on examination of travelling expenses, it is revealed that the assessee has incurred travelling expenses of Rs. 21,92,950/- for undertaking travel to other cities also. Accordingly, the AO took the view they are not related to the business and accordingly disallowed the same. The AO further noticed that the assessee has incurred lodging expenses of Rs.51,40,870/-. Since the assessee could not furnish the relevant details, he disallowed 25% of the same.

4. In the appellate proceedings before the ld. CIT(A), the assessee furnished the details relating to the travelling expenses that was disallowed by the AO. Hence the ld. CIT(A) called for a remand report from the assessing officer. After considering the remand report, the ld. CIT(A) sustained the addition to the extent of Rs.55,939/- only and deleted balance amount of disallowance made out of traveling expenses. In respect of lodging expenses, the ld. CIT(A) noticed that the assessee has failed to furnish necessary details. However, he felt that the disallowance of 25% made by the AO was on higher side. Accordingly, he sustained the disallowance to the extent of Rs.5,00,000/- and deleted the balance amount of Rs.7,85,200/-. Aggrieved, the revenue has filed this appeal before the Tribunal.

5. We have heard the parties and carefully perused the record. With regard to the disallowance made out of travelling expenses, we notice that the assessee has furnished details of travelling expenses supported by the names of hotels, places visited, particulars and purpose of visits with a copies of invitation, business secured etc. Though in the remand report, the AO stood by disallowance made in the assessment order, we notice that the ld. CIT(A) has objectively examined the matter and accordingly rendered his decision. For the sake of convenience, we extract below the operative portion of the order of ld. CIT(A) on this issue :

"4.10 I have considered the above submissions of the appellant along with additional evidences furnished, remand report of the AO as well as the response of the Appellant to the remand report of the AO. The ITA No4196/M/2012 3

Appellant vide its letters dated October,2009, November 9,2009 November 30, 2009 had provided the details of the travelling expenses as requested by AO. As discussed above, during the course of appellate proceedings, the appellant furnished further evidences in respect of above travelling expenses and the same were made available to the AO for sending of the remand report. The Appellant is engaged in the business of providing investment advisory services and hence employees of the appellant company have to attend various meetings with investors, shareholders of target companies, bankers, lawyers and consultants etc. These meetings are held at various places depending on location of counterparty and based on convenience of all parties. During the appellate and remand proceedings, the appellant has explained the nature and purpose of travelling expenses in respect of all the invoices except for invoice number 11679 at S. No. 5 amounting to Rs. 55,939/- as outlined in Para 4.2 above. The appellant is however totally silent about the place, purpose etc of the visit in respect of the said item No. 5 above, and no details of this expenditure have been furnished even at appellate stage. When disallowance has been made in respect of certain specific items, it was the duty of the appellant to substantiate with evidence the genuineness of the claim of such specific expenditure. Therefore, in my opinion, the disallowance made by the AO to this extent of Rs.55,939!- is justified. The balance of disallowance, however deserves to be deleted as in my opinion, the explanation and evidence produced are satisfactory,"

As stated earlier, the ld.CIT(A) has considered this issue in the proper perspective and accordingly decided the same. From the Assessment order, we notice that the AO has disallowed the claim only for the reasoning that the assessee did not generate any income from the cities to which travelling was undertaken. However, in our view, the correct test is whether the said travelling expenditure was incurred for the purposes of business or not. The ld. CIT(A) has noticed that the impugned travelling was undertaken for attending various meetings with investors, shareholders of target companies, bankers, lawyers and consultants etc. Hence, the ld. CIT(A) has given finding that the travelling expenses have been incurred for the purpose of business. Before us, the revenue did not file any material to controvert the finding so given by the ld. CIT(A). Under these set of facts, we do not find any reason to interfere with the order of ld. CIT(A) on this issue.

6. The next issue relates to disallowance made out of lodging expenses for want of proper evidences. As stated earlier, the AO disallowed 25% of the lodging expenses claimed by the assessee, whereas the ld.CIT(A) has restricted ITA No4196/M/2012 4

the same to the extent of Rs.5 lakhs. For the sake of convenience, we extract below the relevant operative portion of the order of ld. CIT(A):

"6.5 I have considered the above submissions of the appellant along with additional evidences. I have also considered the appellant's reply against the remand report and have examined the facts and circumstances of the case. The appellant has submitted sample copies of invoices/supporting documents in connection with the lodging expenses. But it is also a fact that he complete details as required by the AO have not been furnished even at the appellate state. However in my opinion, the disallowance made by the AO is on a higher side. Therefore, looking to the overall facts and circumstances of the case, as well as in view of my observations in respect of ground No.1 and 2 and in the interest of natural justice, I consider it appropriate to sustain the disallowance to the extent of Rs.5,00,000/-. The balance amount of Rs.7,85,200/- is deleted."

We notice that the AO has made ad hoc disallowance at the rate of 25% of the Lodging expenses without any basis. Even though there is no basis for the disallowance sustained by Ld CIT(A), yet we notice that the Ld CIT(A) has examined the some of the vouchers and accordingly came to the conclusion that the disallowance made by the AO was on the higher side. Accordingly, he restricted the disallowance to Rs.5 lakhs. Under these set of facts, we are of the view that the ld. CIT(A) has taken a conscious decision by considering the facts concerning the issue. Hence, we uphold the order of ld. CIT(A) on this issue.

7. In the result, the appeal of the revenue is dismissed.

The above order was pronounced in the open court on 8th Jan, 2015.

घोषणा खल ु े यायालय म दनांकः 8th Jan, 2015 को क गई ।

sd sd

(आय.पी. बंसल/I.P. BANSAL) (बी.आर. बा करन,/ B.R. BASKARAN) या यक सद य / Judicial Member लेखा सद य/Accountant Member मुंबई Mumbai: 8th Jan,2015.

व. न.स./ SRL , Sr. PS ITA No4196/M/2012 5

आदे श क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. आयकर आयु त(अपील) / The CIT(A)- concerned 4. आयकर आयु त / CIT concerned 5. वभागीय त न ध, आयकर अपील य अ धकरण, मंब ु ई/ DR, ITAT, Mumbai concerned 6. गाड फाईल / Guard file.

आदे शानुसार/ BY ORDER,

true copy सहायक पंजीकार (Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई /ITAT, Mumbai