2010 (7) TMI 151 - HC - Income Tax

Court grants condonation for delay in appeal filing challenging deletion of expenses under Income Tax Act. Upholds Tribunal decision.

The court granted condonation of a 100-day delay in re-filing the appeal. The appeal challenged the deletion of interest and foreign traveling expenses ... Interest on advance – Foreign Travel Expenses – Held that: - as in past assessment years, the interest expenditure had been allowed, it was not open to the Assessing Officer to disallow the said expenditure in the year under consideration. - it would not be equitable to permit the Revenue to take a different stand in respect of expenses which were the subject matter of previous years’ assessments. In our opinion, consistency and definiteness of approach by the Revenue is necessary in the matter of recognizing the nature of an account maintained by the assessee so that the basis of a concluded assessment is not ignored without actually reopening the assessment. - as the revenue has not been able to point out as to which expenses of foreign travel as claimed by the assessee is not for the business purpose and as the assessee has produced the evidences in relation to the foreign travel before the Assessing Authority and the same has also been accepted by the Ld. CIT(A), the addition on this account more so on ad-hoc basis, is unjustified and the same is deleted Issues:1. Condonation of delay in re-filing the appeal.2. Challenge under Section 260A of Income Tax Act, 1961 regarding deletion of interest and foreign traveling expenses.Condonation of Delay:The judgment begins with an application for condonation of a 100-day delay in re-filing the appeal, which is granted by the court based on the reasons provided in the application. The application is disposed of accordingly.Challenge under Section 260A - Deletion of Interest:The appeal was filed challenging the order passed by the Income Tax Appellate Tribunal (ITAT) regarding the deletion of interest and foreign traveling expenses. The counsel for Revenue argued that the ITAT erred in law by deleting the addition of interest and foreign traveling expenses. The ITAT, in its decision, considered various factors such as the history of the imprest payment, absence of disallowance in previous years, substantial share capital of the company, and the nature of the expenditure. It cited the decision of the High Court of Karnataka and concluded that no disallowance of estimated interest could be made for the relevant assessment year. The court agreed with the ITAT's reasoning, emphasizing the importance of consistency in assessing expenses and the need for a definitive approach by the Revenue.Challenge under Section 260A - Deletion of Foreign Traveling Expenses:Regarding the deletion of foreign traveling expenses, the ITAT observed that the disallowance was made on a presumption without concrete evidence that the travel was not for business purposes. The court noted that the Managing Director's travel to various locations had a connection with the business of textile and garment manufacturing. The ITAT found that the expenses were substantiated with evidence and that the disallowance was ad-hoc and unjustified. Consequently, the court upheld the ITAT's decision to delete the addition of foreign traveling expenses, stating that no substantial question of law arose in this case. The appeal was dismissed in limine with no order as to costs.This detailed analysis covers the issues of condonation of delay in re-filing the appeal and the challenges under Section 260A of the Income Tax Act, 1961, specifically addressing the deletion of interest and foreign traveling expenses as per the judgment of the Delhi High Court.