Delhi High Court
Commissioner Of Income Tax vs Nokia Inida P. Ltd. on 6 May, 2010
Author: Badar Durrez Ahmed
THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 06.05.2010
+ ITA 486/2010
COMMISSIONER OF INCOME TAX ... Appellant
- versus -
NOKIA INIDA P. LTD. ... Respondent
Advocates who appeared in this case:
For the Appellant : Ms Prem Lata Bansal with Ms Anshul Sharma
For the Respondent : None
CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE V.K. JAIN
1. Whether Reporters of local papers may be allowed to
see the judgment ?
2. To be referred to the Reporter or not ?
3. Whether the judgment should be reported in Digest ?
BADAR DURREZ AHMED, J (ORAL)
1. The Revenue is in the appeal before us on two aspects.
2. The Assessing Officer had disallowed 25% of the foreign travel
expense and had also made disallowance with regard to the claim in respect
of the provision for warranty made by the Assessing Officer. The
disallowance of 25 % was reduced to 10% by the Commissioner of Income
Tax (Appeals) in respect of foreign travel expenditure. Ultimately, the
Income Tax Appellate Tribunal deleted the entire disallowance. The
Commissioner of Income Tax (Appeals) had also upheld the disallowance
on account of the claim of provision made for warranty. The Income Tax
Appellate Tribunal agreed with the assessee's contentions and deleted this
disallowance also.
3. The Income Tax Appellate Tribunal, by virtue of its order dated
05/12/2008 in respect of the assessing year 2000-01, i.e., the year in
question, came to the conclusion that the assessee had established that the
expenditure on foreign travel on employees was in the realm of the
commercial expediency. This is also clearly evident from the facts and the
learned counsel for the Revenue had not been able to point out any evidence
on record to the contrary. She, however, submitted that the Commissioner
of Income Tax (Appeals) had reduced the disallowance from 25 % to 10 %
and had not deleted the entire disallowance in view of the fact that the entire
duration of the stay of the field engineers of the assessee, who had gone
abroad, could not be attributed entirely to business purposes. She drew our
attention to the conclusion drawn by the Commissioner of Income Tax
(Appeals) to explain the logic behind the decision of the said Commissioner
of Income Tax (Appeals) to reduce the disallowance from 25 % to 10 %.
The relevant observations made by the Commissioner of Income Tax
(Appeals) are as under:-
"Thus, I have to conclude that the AO was justified
in disallowing a part of the foreign traveling
expenses, but it appears, in view of the above
explanations that disallowance of 25% was rather
high. The main reason for holding as such is the
fact that the AO has mainly focused o the long
duration foreign trips, which are by and large
undertaken by its filed engineers, by sending
whom the appellant company has actually earned
revenue in the form of service charges, which have
been charged on per day basis at rates as high as
US$ 600, as against the nominal salaries paid to
such engineers in India, Hence, an addition of 10%
out of the foreign traveling expenses appears to be
reasonable, and addition to this extent is upheld.
Appeal on this issue is therefore party allowed."
4. But, the very reason given by the Commissioner of Income Tax
(Appeals) for reducing the disallowance from 25 % to 10 % is what goes in
favour of the assessee. It is clear that the field engineers, who were sent
abroad, were actually earning revenue for the company in the form of
service charges and the company was earning as much as US $ 600 per day.
The Commissioner of Income Tax (Appeals) thought this to be a ground for
reducing the disallowance from 25 % to 10 % which, in the view of the
Income Tax Appellate Tribunal, was ground enough for deleting the entire
disallowance. Once the assessee company was receiving charges in respect
of the field engineers, who had gone abroad, the travel expenses in respect of
such field engineers could not have been disallowed. The Tribunal has
correctly appreciated the law and arrived at the correct conclusion. There is
no tangible evidence or material on record to suggest otherwise. Thus, in the
absence of any perversity in the factual findings, we cannot interfere with
the said findings of the Tribunal.
5. Insofar as the question of claim of provision for warranty is
concerned, the Tribunal held as under:-
"17. Apropos ground no.2, i.e provision for
warranty, Ld. Counsel has demonstrated that
effectively the expenditure subsequently incurred
on meeting out warranty claim was more than the
provision which is evident from the chart of 5
years. Respectfully following Hon'ble Delhi High
Court judgment in the case of Vintec Corporation
Pvt. Ltd. (supra), we hold that the assessee is
entitled to the claim of expenditure by way of
provision for warranty. Ground no. 2 of the
assessee is allowed."
6. We see no reason to interfere with the aforesaid finding either. In
any event, no question of law, what to speak of any substantial question of
law, arises for our consideration.
The appeal is dismissed.
BADAR DURREZ AHMED, J
V.K. JAIN, J
MAY 06, 2010
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