Ugs India (P) Ltd, vs Department Of Income Tax
- CitationI.T.A .No.-322/Del/2007
Ratio decidendi
The rule this decision rests on
Where an assessing officer disallows a portion of foreign travel expenditure by adopting the disallowance made in an earlier assessment year, without discussing the relevant facts or recording a finding, on the basis of the material on record, as to whether such expenses were incurred wholly and exclusively for the purpose of business in the year under appeal, the disallowance is not sustainable as it stands and the issue must be restored to the assessing officer to decide afresh on the facts of that year, after affording the assessee a reasonable opportunity of being heard.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
I.T.A .No.-943/Del/2008 (ASSESSMENT YEAR- 2004-05) ACIT, vs UGS India Pvt. Ltd., Circle-7(1), C. R. Building, 20, Community Centre, New Delhi Pushp Vihar, Madangir, New Delhi-110016 (APPELLANT) (RESPONDENT)
Appellant by Sh.K.M.Gupta, Adv. Respondent by Sh.Sanjay Prasad, CIT DR
Date of Hearing 20.04.2015 Date of Pronouncement 29.04.2015
ORDER PER DIVA SINGH, JM
These two appeals of the assessee and the Revenue in 2003-04 and 2004- 05 Assessment Years against the orders of CIT(A)-X dated 15.11.2006 and 19.12.2007 respectively have been remitted by the Hon'ble High Court back to the Tribunal vide their consolidated order dated 01.06.2007 in ITA Nos.- 322/Del/2007, 124/2008, 133/2008, 155/2008 and 1283/2010 on one issue only. Accordingly for the sake of convenience the issues are being decided by a common order. The Hon'ble High Court vide the above order was pleased only to restore these two appeals addressed in ITA No.-124/2008 & 1283/2010 for 2003 & 2004-05 assessment years with the following observations:-
ITA-124/2008
9. "Insofar as claim of foreign travelling expenses in this year is concerned, the order of the Tribunal reveals that the Tribunal has simply followed the order in the earlier assessment year and there is no discussion and no finding of fact on the basis of material on record is recorded as to whether any foreign travel expenses were incurred for the I.T.A .Nos.-322/Del/2007 & 943/Del/2008 purpose of business in this year or not. Therefore, the matter needs to be remitted back to the Tribunal to examine this issue afresh."
ITA-1283/2010
19. "As far as issue relating to expenditure on foreign travel is concerned, the order of the Tribunal reveals that the Tribunal has simply followed the order in the earlier assessment year and there is no discussion and no finding of fact on the basis of material on record is recorded as to whether any foreign travel expenses were incurred for the purpose of business int his year or not. Therefore, the matter needs to be remitted back to the Tribunal to examine this issue afresh."
2. It was a common stand of the parties before the Bench that the issue will have to go back to the AO as the relevant facts have not been discussed by the Assessing Officer. For ready-reference, attention was invited to the assessment order in 2003-04 assessment year. The same is reproduced hereunder for ready- reference:-
2. "The assessee company continues to derive income from the business of sale and service of computer software, development of software and rendering consultancy and other services. The assessee company was granted registration under STP-I vide order dated 21.03.2000 for development center at Pune. The assessee company is developing software for selling it to its parent company M/s Unigraphics Solutions Inc., USA.
4. The assessee company has incurred an expenditure of Rs.51,71,028/- on foreign travelling in the units other than the STP-I unit.
The assessee was specifically required to furnish the details of foreign travel along with purpose of the travelling. In its explanation, the assessee company has claimed that all the journeys have been undertaken for the purpose of business and has provided reasons thereof vide its submission dated 14.11.2005. The assessee company is also running an STP-I unit on which it has claimed deduction u/s 10A of the IT Act, 1961 and the expenditure on travel cannot be properly bifurcated. This issue has been discussed at length during assessment proceedings for the Assessing Years 2001-02 and 2002-03 wherein 50% of the expenses of travelling were disallowed. The additions has been confirmed by the Ld. CIT(A). I have no reason to differ with the findings of the earlier years and 50% of the expenses is disallowed as not incurred wholly and exclusively for the purpose of business of non STP-I units. Accordingly, an addition of Rs.25,85,514/- is made on this account. In view of the above discussion, I am satisfied that the assessee has furnished inaccurate particulars of income and has concealed its income within the meaning of income and has concealed its income within the meaning of Explanation 1 to section 271(1)(c) of the I. T. Act. Accordingly, penalty proceedings u/s 271(1)(c) read with section 274 are being initiated separately on this issue."
(emphasis provided)
3. More or less similar findings it is seen has been recorded by the AO in 2004-05 assessment year vide its order dated 21.12.2006 :-
2 I.T.A .Nos.-322/Del/2007 & 943/Del/2008
4. "The assessee company has incurred an expenditure of Rs.63,32,763/- on foreign travelling in the units other than the STP-I unit. The assessee was specifically required vide order sheet entry dated 15.11.2006 to furnish the details of foreign travel along with purpose of the travelling. In its explanation, the assessee company had claimed that all the journeys have been undertaken for the purposes of business and has provided reasons thereof vide its submission dated 22.09.2006. The assessee company is also running an STP-I unit on which it had claimed deduction u/s 10A of the IT Act, 1961 and the expenditure on travel cannot be properly bifurcated. This issue has been discussed at length during the proceedings for the AY 2001-02 and 2002-03 and 2003-04 wherein 50% of the expenses of travelling were disallowed. The additions has been confirmed by the ld. CIT(A). I have no reasons to differ with the findings of he earlier years and 50% of the expenses is disallowed as not incurred wholly and exclusively for the purpose of business of non STP-I unit. Accordingly an addition of Rs.31,66,382/- is made on this account."
(emphasis provided)
4. Accordingly in view of the above considering the facts in the light of the pleadings of the parties before the Bench, we find that in the absence of any discussion on facts in the assessment orders for the years under consideration the issue necessarily has to be restored to the AO. Accordingly the appeal of the assessee and the Revenue in the respective assessment years are being restored back to the AO with the direction to decide the issue raised therein qua the addition made by way of a disallowance discussing the relevant facts in the respective years. Needless to say that before passing the order the assessee shall be afforded a reasonable opportunity of being heard.
5. In the result both the appeal of the assessee and the appeal of the Revenue are allowed for statistical purposes.
The said order was pronounced in the Open Court on 29th April, 2015.
Sd/- Sd/- (I.R.RAO) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: the 29th April, 2015 *Amit Kumar* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT
ASSISTANT REGISTRAR ITAT NEW DELHI
3
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