Director Of Income Tax (It)-Ii v. M/S Panasonic Avionics Corporation

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 1769 OF 2013 Director of Income Tax (IT)-II Vs. M/s Panasonic Avionics Corporation ..Appellant ..Respondent .... Mr. Tejveer Singh, Advocate for Appellant.Ms. Megha Sharma, Advocate i/b PAS Legal for Respondent. .... CORAM : M.S. SANKLECHA & G.S. KULKARNI, JJ.DATED : 5 OCTOBER 2015 P.C.: This appeal filed by the revenue under Section 260A ofthe Income Tax Act, 1961 (the 'Act') challenges the order dated 28March 2013 passed by the Income Tax Appellate Tribunal (the'Tribunal'). The Assessment Year involved is A.Y. 2007-08. 2.Mr. Tejveer Singh, the learned Counsel for the revenueurges following question of law for our consideration: “Whether on the facts and circumstances of the caseand in law, the Tribunal was right in law in S.S.DESHPANDE allowing the traveling expenses of Rs.1,19,26,793/-incurred on the employees of the head office ontheir visit to the branch office of the assessee inIndia, despite the fact that the assessee failed toestablish exclusivity of expenditure for its Indianoperations?” 3.The respondent-assessee is a company incorporated inUSA and engaged in the business of maintenance of small TVs inAircrafts. The Assessing Officer during the course of the assessmentproceedings disallowed an amount of Rs.1.19 crores being travelingexpenses incurred on employees of the assessee company from USAto India for undertaking repair activity of TV sets in aircrafts. TheAssessing Officer by his order consequent to the directions of theDispute Resolution Panel disallowed the expenditure as HeadOffice Expenditure under Section 44C of the Act. This on theground that the respondent had failed to furnish the necessaryevidence in support of the expenditure. The alternative contentionof the respondent-assessee that in any view of the matter, theexpenses ought to be allowed under Section 37(1) of the Act wasalso rejected by the Assessing Officer. Thus the amount of Rs.1.19S.S.DESHPANDE2 / 6 crores claimed as expenditure was disallowed and added to therespondent-assessee's income. 4.On appeal, the Tribunal held that the issue of expenditureincurred on account of travel to and in India of employees from USAwould not fall within the meaning of Head Office Expenditure inClause (iv) of explanation to Section 44C of the Act as held by theTribunal in Addl. DIT (IT) Vs. Bank of Bahrain and Kuwait[1]. Thusthe impugned order allowed the respondent-assessee's appeal. Thealternative contention of the expenditure being allowable underSection 37(1) of the Act was also granted. This after the Tribunalsatisfied itself that complete details in respect of the travelingexpenditure incurred in respect of it's employees from USA hadbeen made available by the respondent-assessee and the revenuewas unable to point out any flaw therein. 5.We find that on the issue of travel expenses incurred inIndia on employees from USA is concerned as the same does not fallwithin the meaning of Head Office Expenses, the same cannot be1. (2011) 44 SOT 693 3 / 6 5.We find that on the issue of travel expenses incurred inIndia on employees from USA is concerned as the same does not fallwithin the meaning of Head Office Expenses, the same cannot be1. (2011) 44 SOT 693 3 / 6 disallowed under Section 44C of the Act. Moreover, this court in it'sorder CIT Vs. Emirates Commercial Bank Ltd.[2] has answered anidentical issue in a Reference in favour of the respondent-assesseetherein holding on similar facts that Section 44C of the Act will haveno application. Thus on principle there is no dispute that theexpenditure incurred on travel in India would not be covered by thedefinition of Head Office Expenses under Section 44C of the Act.On facts, the Tribunal has examined the evidence before it and hasrendered a finding of fact that the expenditure had been incurred inrespect of the travel within India and thus would not in the presentfacts be hit by Section 44C of the Act. Moreover, on the basis offactual satisfaction of the expenditure, no fault can be found withallowing the expenditure in the alternative under Section 37(1) ofthe Act. The finding of the Tribunal is essentially a finding of fact.This finding has not been shown to be perverse and/or arbitrary. Inlaw, it is an undisputed position that in the present facts Section44C of the Act would have no application as held by this Court inEmirates Commercial Bank Ltd. (supra). On facts the Tribunal wassatisfied that the expenditure was in fact incurred in India.2262 ITR 55 Accordingly, the question as proposed does not give rise to anysubstantial question of law. Hence not entertained. 6.Accordingly, appeal dismissed. No order as to costs. [G.S. KULKARNI, J][M.S. SANKLECHA, J.] CERTIFICATE Certified to be true and correct copy of the original signed Order.