Delhi High Court
The Commissioner Of Income Tax vs Yamaha Motor India P. Ltd. on 14 September, 2010
Author: A.K.Sikri
* IN THE HIGH COURT OF DELHI AT NEW DELHI
ITA 460 OF 2008
% Judgment delivered on: 14.09.2010
THE COMMISSIONER OF INCOME TAX . . . APPLICANT
Through : Ms. Rashmi Chopra,
Advocate
VERSUS
YAMAHA MOTOR INDIA P. LTD. . . .RESPONDENT
Through: Mr. Vijay Nair, Advocate
CORAM :-
HON'BLE MR. JUSTICE A.K. SIKRI
HON'BLE MS. JUSTICE REVA KHETRAPAL
1. Whether Reporters of Local newspapers may be allowed
to see the Judgment?
2. To be referred to the Reporter or not?
3. Whether the Judgment should be reported in the Digest?
A.K. SIKRI, J. (oral)
1. The only issue involved in this appeal relates to disallowing the
amount of ` 22,47,565/- out of total expenditure claimed by the
assessee on account of travel and conveyance. During the
assessment year in question i.e. 1999-2000, the assessee had
claimed travel and conveyance expenses. The Assessing Officer
found that a sum of ` 22,47,565/- was spent for visits by Sh. Nikhil
Nanda, K.Minami and Sh. Vimal Langer to Malasiya and U.K. The
Assessing Officer in the assessment year observed that the assessee
could not establish that these expenses were incurred for business
purposes. He was of the opinion that the aforesaid visits were
personal travel of these persons and, therefore, disallowed the
expenditure. We reproduce the order of the Assessing Officer to this
effect which reads as under:-
"During the course of assessment proceedings, it
was observed that the assessee had debited the
P& L account with ` 6.346 crores on account of
Traveling and conveyance expenses. The AR was
asked to file the details of the foreign traveling
which were duly furnished. From the detail
furnished, it was observed that while the Company
has a tie up with Japan and has markets in Nepal
and Bangladesh, a substantial part of the traveling
expenses was on account of personal travel
expenditure of Shri Nikhil Nanda to Malaysia and
U.K. Since the company has no business link up
with the two countries, the A.R. was given a show
cause as to why the visits of Shri Nanda may not
be treated as being for purposes other than
business. The AR could only reply that it was for
Official purpose. Since no other evidence was
furnished to substantiate the claim despite giving
ample opportunity to the AR, it is being held that
these visits were held primarily for personal
purpose and had no bearing with the business of
the assessee company. Thus an addition of `
19,52,891/- is made to the income of this assessee
on this account.
In the line with the above, I also disallow the travel
expenses of Shri K. Minami to U.K. of ` 1,91,907/-
and that of Shri Vimal Langer to Philippines `
1,02,767/-. Hence an addition of ` 2,94,674/- is
made to the income of the assessee o this
account."
2. The CIT (Appeal) concurred with the aforesaid view of the
Assessing Officer. We may note that the assessee had submitted
that these trips to Malaysia and U.K. were undertaken for meeting
with the representative of Yamaha Motor Co. Ltd. Japan and its
affiliated companies. The purpose of the meetings were to
understand the various standards 9in respect of quality
development, product development, indigenization of parts, pricing,
market understanding etc) which are required to be followed by all
group companies of Yamaha Motor Co. Ltd. Japan. The CIT (Appeal),
however, was not convinced with the explanation of the assessee
for want of any proof in support of the assertion and recorded as
under while rejecting the contention of the assessee:-
"It is mentioned in the assessment order that
during the course of assessment proceedings, the
Assessing Officer has observed that the Assessing
Officer has observed that the assessee had
debited the P&L account with ` 6,346 crores on
account of Traveling and Conveyance expenses.
From the details filed the AO also observed that
while the company has a tie up with Japan and has
markets in Nepal and Bangladesh, a substantial
part of the traveling expenses was on account of
personal travel expenditure of Shri Nikhil Nanda to
Malaysia and UK. Since the company has no
business link with the two countries, the AR was
given a show cause as to why the visits of Shri
Nanda may not be treated as being for the
purposes other than business. The AR could only
reply that it was for official purpose and no other
evidence was furnished to substantiate the claim.
The AO also disallowed the travel expenses of Shri
K. Minami to UK of ` 19,1907/- and that of Shri
Vimal Langer to Philippines of ` 102767/- and
made a total addition of ` 294674/-."
3. Identical contention was raised by the assessee before the
Income Tax Appellate Tribunal as well. The Tribunal has accepted
the version of the assessee as is clear from the following discussion:-
"We have heard the rival submissions and also
perused the material available on record.
Admittedly traveling was done by the directors
who were employees of the company and no
element of personal nature could be attributed in
case of expenses incurred by the employees of the
company. The assessee's case is covered by the
decision relied upon above. We, therefore, delete
the disallowance made on this account."
4. However, the portion extracted above is the only discussion on
this aspect. It is clear from the above that no reasons are given by
the Tribunal in support of its opinion. The findings arrived at by the
Assessing Officer as well as CIT (Appeal) are not even discussed and
no reasons are given to discard those findings. The impression
which is given is that explanation of the assessee was treated as
gospel truth. This approach of the Tribunal is erroneous. The
Tribunal should have discussed the matter at length if it was
accepting the version of the assessee by stating the reasons and on
what basis it held the aforesaid view, more particularly, when the
orders of the Assessing Officer as well as CIT (A) disclosed detailed
reasons rejecting same very version .
5. We, thus, set aside the order of the Tribunal and remit the
case back to the Tribunal for hearing the matter afresh on this
aspect and take decision on merits by giving cogent and sufficient
reasons.
(A.K. SIKRI)
JUDGE
(REVA KHETRAPAL)
JUDGE
SEPTEMBER 14, 2010.
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