Commissioner Of Income Tax,Chennai v. M/S.irbaz Shoe Company

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 05.01.2015 CORAM The Honourable Mr.JUSTICE R.SUDHAKARandThe Honourable Mr.JUSTICE R.KARUPPIAH Tax Case (Appeal) Nos.1019 and 1020 of 2014& M.P.No.1 of 2014 Commissioner of Income Tax,Chennai..... Appellant in both T.C.As Vs. M/s.Irbaz Shoe Company,No.2(487) Kilpauk Garden Road,Kilpauk, Chennai - 10..... Respondent in both T.C.As APPEALs under Section 260A of the Income Tax Act against theorder dated 20.9.2013 made in I.T.A.Nos.1032&1033/Mds/2012 on thefile of the Income Tax Appellate Tribunal 'A' Bench, Chennai forthe assessment years 2005-06 and 2007-08. against the order of the Income Tax Appellate Tribunal A BenchChennai in ITA Nos.1032 & 1033/Mds/2012 in assessment years 2005--2006 & 2007-2008 against the order of the Commissioner of Income Tax (Appeals)XII Nungambakkam Chennai 600 034 dated 21.2.12 in ITA No.348 &349/2009-2010. against the order of the Assistant Commissioner of Income TaxCircle XIII Chennai 34 dated 31.12.2009 in AAAFI5586 M inassessment year 2005-06 & 2007-2008. The above Tax Case (Appeals) are filed by the Revenue asagainst the order of the Income Tax Appellate Tribunal raising thefollowing substantial question of law: https://hcservices.ecourts.gov.in/hcservices/ "T.C.(A)No.1019 of 2014: Whether on the facts and in the circumstances of thecase, the Income Tax Appellate Tribunal was right inholding that foreign travel expenses incurred towardsthe wife of the partner is an allowable deduction?T.C.(A)No.1020 of 2014: Whether on the facts and in the circumstances ofthe case, the Income Tax Appellate Tribunal was right inholding that foreign travel expenses incurred towardsAdirano Nathalini and others are allowable deductioneven though no business connection was proved?" 2. The respondent/assessee, a partnership firm, is engaged inthe manufacturing of leather shoe uppers. The assessee filed itsreturn of income for the assessment years 2005-06 and 2007-08admitting a total income of Rs.1,08,20,770/- and 24,99,170/-respectively. The return of income for the assessment year 2005-06was processed under Section 143(1) of the Income Tax Act. Later onthe said assessment was reopened under Section 147 of the IncomeTax Act and notice under Section 148 of the Income Tax Act wasissued to the assessee. The Authorised Representative of theassessee objected to the reopening of the assessment stating thatthe foreign travel expenses have been incurred to bring buyers toIndia as it is a practice in this trade. The Assessing Officer,while completing the assessment for both the assessment years, notsatisfied with the explanation of the assessee, disallowed theassessee's claim on foreign travel expenses spent on the wife ofthe partner of the firm and also on others. 3. Aggrieved by the said order of assessment, the assesseepreferred appeals before the Commissioner of Income Tax (Appeals).The Commissioner of Income Tax (Appeals) found that during thefinancial year 2004-05, the assessee incurred foreign travelexpenses and the Tax Audit Report revealed that the expenses arepersonal in nature. The Commissioner of Income Tax (Appeals)further found that the assessee's wife is neither a partner nor anemployee of the assessee firm. Therefore, the Commissioner ofIncome Tax (Appeals) held that the assessee failed to establish thebusiness connection with the travelling expenses of the wife of thepartner. Accordingly, the Commissioner of Income Tax (Appeals)dismissed the appeals holding that in the absence of any details,it is very difficult to believe the assessee's explanation. 4. Aggrieved by the order of the Commissioner of Income Tax(Appeals), the assessee preferred further appeals before the IncomeTax Appellate Tribunal. 4. Aggrieved by the order of the Commissioner of Income Tax(Appeals), the assessee preferred further appeals before the IncomeTax Appellate Tribunal. 5. It is seen from the order of the Tribunal that the assesseeis a shoe company and has been issued with a certificate ofexporter/importer code. On a perusal of the partnership deed, thehttps://hcservices.ecourts.gov.in/hcservices/Tribunal found that the said partnership deed revealed that the assessee-firm came into existence on 01.07.1993 and Smt.Ravia Aejazwas one of the founder partners. The Tribunal took on record thesaid document and held that the said Mrs.Ravia Aejaz had travelledin the capacity of the partner herself of the assessee firm, whichis an importer/exporter of the shoe products and hence the expensesincurred by the said person is wholly and exclusively for thepurpose of the business. For the assessment year 2007-08, theTribunal held that no cogent reason was cited to disallow theassessee's claim. Hence, the foreign travel expenses incurred toAdirano Natalini along with other persons are wholly andexclusively for the purpose of business. Accordingly, the Tribunalallowed the appeals filed by the assessee. 6. Aggrieved by the order of the Tribunal, the Revenue hasfiled the present appeals before this Court. 7. Learned Standing Counsel appearing for the Revenuereiterating the findings of the Assessing Officer and Commissionerof Income Tax (Appeals) submits that the assessee has notestablished the business connection with the travelling expenses ofthe wife of the partner. In support of his contention, he placedreliance on the decision of this Court reported in (2003) 261 ITR193 ( D.B.Madan V. Commissioner of Income Tax), wherein it was heldthat if the object of the foreign tour by the assessee’s wife wasto attend on the assessee and for his personal comforts, theexpenditure would not qualify for deduction though the result ofsuch expenditure may increase the efficiency of the assessee inattending to his business. He further submits that the wife ofthe assessee herein was not associated with the firm of theassessee and she was not the partner of the firm. Hence, the orderof the Tribunal may be set aside. 8. Heard learned standing counsel appearing for the Revenueand perused the materials placed before this Court. 9. On a perusal of the order of the Tribunal, we find that asper the partnership deed, the wife of the assessee was one of thepartner of the firm. Hence, the Tribunal was justified in grantingthe benefit to the assessee on the basis of the partnership deed.We find no reason to discredit the finding of fact, more so, afterperusing the assessment order passed under Section 143(3) read withSection 147 of the Income Tax Act, which contains no reason as towhy it should not be treated as business income. The mere ipsedixit of the Officer is not a ground to deny the claim made by theassessee. 10. The reliance placed by the learned Standing Counselappearing for the Revenue on the decision reported in (2003) 261ITR 193 ( D.B.Madan V. Commissioner of Income Tax) ishttps://hcservices.ecourts.gov.in/hcservices/distinguishable on facts. The facts therein is that the wife of the assessee therein had travelled along with her husband citinghealth ground and was not associated with the company either as apartner or in any other official capacity. In the present case, thewife is the partner of the assessee firm as per the partnershipagreement. Hence, the expenses incurred towards foreign travel ofthe wife of the assessee along with other persons should be treatedas expenditure incurred wholly and exclusively for the purpose ofthe business. 11. In view of the above, we see no question of law much lessany substantial question of law arises for consideration in theseappeals. Accordingly, both the appeals are dismissed. No costs.Consequently, M.P.No.1 of 2014 is also dismissed. the assessee therein had travelled along with her husband citinghealth ground and was not associated with the company either as apartner or in any other official capacity. In the present case, thewife is the partner of the assessee firm as per the partnershipagreement. Hence, the expenses incurred towards foreign travel ofthe wife of the assessee along with other persons should be treatedas expenditure incurred wholly and exclusively for the purpose ofthe business. 11. In view of the above, we see no question of law much lessany substantial question of law arises for consideration in theseappeals. Accordingly, both the appeals are dismissed. No costs.Consequently, M.P.No.1 of 2014 is also dismissed. Sd/-Assistant Registrar//True Copy//Sub Assistant RegistrarslTo1. The Income Tax Appellate Tribunal 'A' Bench, Chennai2. The Commissioner of Income Tax (Appeals)-XII, Chennai.3. The Assistant Commissioner of Income Tax, Circle XIII, Chennai.+ 2ccs to Mr.J.Narayanasamy, Advocate Sr.97T.C.(A) Nos.1019 and 1020 of 2014& M.P.No.1 of 2014 MG(CO)Eu 22.1.15