2022 (11) TMI 1031 - AT - Income Tax

Tribunal rules in favor of assessee, rejects disallowances

M/s. Express Industrial Services Pvt. Ltd. Versus ACIT Circle 3 (1) (2), Mumbai

M/s. Express Industrial Services Pvt. Ltd. Versus ACIT Circle 3 (1) (2), Mumbai - TMI Issues:1. Disallowance u/s.14A of the Act r.w.Rule 8D(2) of the Rules.2. Disallowance of foreign travel expenses.3. Adhoc disallowance of expenses at reduced rates by the CIT(A).4. Challenge against the sustained adhoc disallowance by the CIT(A).5. General ground not requiring specific adjudication.Issue 1: Disallowance u/s.14A of the Act r.w.Rule 8D(2) of the Rules:The appeal addressed disallowance under Rule 8D(2) of the Rules concerning investments yielding exempt income. The Tribunal found the assessee had sufficient own funds, thus no disallowance of interest under Rule 8D(2)(ii) was warranted. For disallowance under Rule 8D(2)(iii), the Tribunal directed the AO to consider only investments yielding exempt income, allowing the appeal for statistical purposes.Issue 2: Disallowance of Foreign Travel Expenses:The challenge involved disallowance of foreign travel expenses. The Tribunal noted the necessity of foreign visits for business opportunities, emphasizing the expenses were incurred for business purposes. It was clarified that no personal element of expenditure was debited in the company's books. The Tribunal directed the AO to delete the disallowances made on foreign travel expenses.Issue 3: Adhoc Disallowance of Expenses at Reduced Rates by the CIT(A):The Tribunal addressed the adhoc disallowance of expenses, reduced by the CIT(A) from 20% to 5%. It was highlighted that expenses were incurred for business purposes, such as travelling to meet customers and experts. The Tribunal directed the AO to delete the adhoc disallowance, emphasizing the expenses were wholly and exclusively for business purposes.Issue 4: Challenge Against the Sustained Adhoc Disallowance by the CIT(A):The appeal challenged the sustained adhoc disallowance by the CIT(A) at reduced rates. The Tribunal examined various expenses, including travelling, sales promotion, office maintenance, and staff welfare. It concluded that these expenses were incurred wholly and exclusively for business purposes, directing the AO to allow deductions for the same.Issue 5: General Ground Not Requiring Specific Adjudication:The final ground raised by the assessee was of a general nature and did not necessitate specific adjudication. The Tribunal allowed the appeal for statistical purposes, pronouncing the order on the mentioned date.This detailed analysis of the judgment highlights the key issues addressed by the Appellate Tribunal ITAT MUMBAI, providing insights into the reasoning and outcomes for each issue raised in the appeal.