2014 (4) TMI 24 - AT - Income Tax

Tribunal rules on Revenue's appeal, upholding disallowance under Section 14A, rejecting challenge to foreign travel expenses.

The Tribunal partially allowed the Revenue's appeal, upholding the disallowance of Rs. 1,09,473 under Section 14A. The Tribunal rejected the challenge to ... Deletion made u/s 14A of the Act – Invocation of Rule 8D of the rules – Held that:- The decision in Maxopp Investment Ltd. & Others Versus Commissioner of Income Tax [2011 (11) TMI 267 - Delhi High Court] followed - the matter is required to be sent back to the file of the Assessing Officer for re-computation of disallowance under Section 14A, without applying Rule 8D – but, the assessee’s requested to sustain the addition due to smallness of the amount – thus, the disallowance made by the AO is upheld – Decided in favour of Revenue. Deletion made on expenses – Expenses incurred on foreign travelling of directors – Admission of additional evidences – Held that:- CIT(A) was of the view that primary purpose of directors’ visit was to meet Senior Vice President of Fairbank Morse in support of which copies of relevant e-mails were produced before the CIT(A) - The assessee had also produced before the CIT(A) the evidence of other business meetings in Indianapolis and Munich - the foreign travel undertaken by the two directors who were actually engaged in the business of the assessee was for the purpose of business – thus, there is no need to interfere with the order of CIT(A) – Decided against Revenue. Issues involved:1. Disallowance of expenses under Section 14A read with rule 8D.2. Disallowance of foreign traveling expenses of directors.Analysis:Issue 1: Disallowance of expenses under Section 14A read with rule 8DThe Revenue appealed against the CIT(A)'s order deleting the addition of Rs.1,09,473 made by the Assessing Officer under Section 14A. The Revenue argued that the matter should be sent back for recomputation based on the decision of the High Court. The assessee, acknowledging the small tax effect, conceded to the addition. The Tribunal noted the decision of the High Court and the assessee's concession. Despite the request to sustain the addition due to the smallness of the amount, the Tribunal allowed the Revenue's appeal and upheld the disallowance of Rs. 1,09,473 under Section 14A. The Tribunal clarified that the decision should not be considered a concession on any legal issue and the assessee reserved the right to contest such disallowance in subsequent years.Issue 2: Disallowance of foreign traveling expenses of directorsThe Revenue challenged the CIT(A)'s decision to delete the addition of Rs.8,55,988 made by the Assessing Officer for foreign traveling expenses of directors. The CIT(A) allowed the expenses after considering evidence provided by the assessee, including details of business meetings and emails supporting the purpose of the travel. The CIT(A) found that the foreign travel was for business purposes as the directors were actively engaged in the company's business. The Tribunal, after reviewing the facts and the CIT(A)'s findings, upheld the decision to allow the foreign traveling expenses. The Tribunal rejected the Revenue's appeal on this issue, stating that there was no justification to interfere with the CIT(A)'s order.In conclusion, the Tribunal partially allowed the Revenue's appeal, upholding the disallowance under Section 14A and rejecting the challenge to the foreign traveling expenses of directors. The decision was pronounced on 7th March 2014.