ITAT Grants Depreciation for ETP, Upholds Foreign Travel Expenses.

The ITAT partly allowed the appeal, granting depreciation on the Effluent Treatment Plant (ETP) and allowing the full claim of foreign travel expenses for the Managing Director's trip to Germany. However, the disallowance for the UK trip was upheld. The ITAT found the ETP operational and capable of use with existing power load, contrary to the Assessing Officer's claim. For the foreign travel expenses, the ITAT disagreed with the AO's view of excessiveness, emphasizing the MD's higher position justifying higher expenses for the Germany trip.

---

---

Issues Involved:
1. Disallowance of depreciation on Effluent Treatment Plant (ETP).
2. Disallowance of foreign travel expenses of the Managing Director (MD).

Issue-wise Detailed Analysis:

1. Disallowance of Depreciation on Effluent Treatment Plant (ETP):

The assessee appealed against the disallowance of Rs. 20,80,484/- as depreciation on ETP. Initially, the ITAT had remanded the issue back to the Assessing Officer (A.O.) for re-examination. The A.O. and subsequently the CIT(A) upheld the disallowance, citing that the ETP was not put to use during the relevant financial year since the additional power load required for its operation was sanctioned only in the subsequent financial year.

The assessee provided several documents, including a Brewer and Engineer Certificate, PSEB demand notice, PPCB clearance certificate, and PPCB consent, to substantiate the claim that the ETP was installed and operational within the relevant financial year. However, the A.O. rejected these evidences, emphasizing that the additional power load was sanctioned only on 20.05.2009, thus concluding that the ETP could not have been operational in the impugned year.

The assessee contended that the ETP was operational on the existing power load due to the off-season of the beer industry, which required lower power consumption. The ITAT examined the facts and found that the plant was indeed installed and capable of being used with the existing power load. The ITAT held that the disallowance of depreciation was unwarranted and allowed the depreciation claim of Rs. 20,80,484/-.

2. Disallowance of Foreign Travel Expenses of the Managing Director (MD):

The assessee claimed Rs. 14,21,898/- as foreign travel expenses for the MD, which was initially disallowed due to lack of documentary evidence proving the business purpose. Upon reassessment, the A.O. allowed Rs. 2,17,195/- for the MD’s trip to Germany, disallowing the remaining amount as extravagant and possibly personal.

The assessee argued that the MD’s trips to the UK and Germany were for business purposes, including visiting breweries and attending a trade fair. The ITAT upheld the disallowance for the UK trip due to insufficient evidence proving its business purpose. However, for the Germany trip, the ITAT found the business purpose established, as the A.O. had allowed expenses for other employees on the same trip. The ITAT disagreed with the A.O.’s view that the expenses were excessive or personal, emphasizing the MD’s higher stature justifying higher expenses.

Thus, the ITAT allowed the full claim of Rs. 5,44,225/- for the Germany trip and upheld the disallowance for the UK trip, resulting in partial allowance of the assessee’s appeal.

Conclusion:

The appeal was partly allowed. The ITAT granted the depreciation on ETP and allowed the full claim of foreign travel expenses for the MD’s trip to Germany while upholding the disallowance for the UK trip.

---