ITA No. 387 of 2009 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 387 of 2009 Date of Decision: 25.1.2011 Commissioner of Income Tax, Faridabad ....Appellant. Versus M/s G.E. Motors (I) Pvt. Ltd. (Now GEMI Motors (I) Pvt. Ltd.) ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Advocate for the appellant. AJAY KUMAR MITTAL, J. 1. This order shall dispose of ITA Nos. 288, 387 and 439 of 2009 as according to learned counsel for the revenue, in these appeals common questions of law are involved. For brevity, the facts are being extracted from ITA No. 387 of 2009. 2. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 21.11.2008 passed by the Income Tax Appellate Tribunal, Delhi Bench 'C', Delhi (hereinafter referred to as “the Tribunal”) in ITA No. 869(Del)/2007 relating to the assessment year 1996-97, claiming following substantial questions of law:- “I. Whether on the facts and in the circumstances of the case, the Ld. ITAT was right in law in upholding the ITA No. 387 of 2009 -2- order of the Ld. CIT(A) in deleting the addition of Rs.12,27,611/- made by the Assessing Officer on account of repair and maintenance expenses even though it involved setting up of a new facility called bearing brushing of motor assembly area and installation of base frame of charge carriers which is capital expenditure? II. Whether on the facts and in the circumstances of the case, the Ld. ITAT was right in law in confirming the order of the Ld. CIT(A) in deleting the addition of Rs.5,54,868/- made by the Assessing Officer on account of staff welfare expenses disregarding the fact that the expenditure was not incurred wholly and exclusively for the business purposes? III. Whether on the facts and in the circumstances of the case, the Ld. ITAT was right in law in conforming the order of the Ld. CIT(A) in deleting the addition of Rs.1,46,024/- and Rs.34,824/- made by the Assessing Officer on account of personal use of car and telephone expenses respectively even though the assessee had failed to establish that these expenses were incurred wholly and exclusively for the business purposes and the possibility of personal use cannot be ruled out and in contravention of the decision of Hon'ble Madras High Court in the case of CIT Vs. Chitram and Co. (P) Ltd. 191 ITR 96 and CIT ITA No. 387 of 2009 -3- Vs. Madura Coats Ltd. 263 ITR 241? IV. Whether on the facts and in the circumstances of the case, the Ld. ITAT was right in law in confirming the order of the Ld. CIT(A) in deleting the addition of Rs.25,73,283/- made by the Assessing Officer on account of foreign traveling expenses disregarding the fact that the foreign traveling expenses incurred by the assessee in relation to training of its employees are of capital nature and the benefit available to the assessee from training of its employees would be available for a long period of time?” 3. The facts necessary for adjudication as narrated in the appeal are that the assessee filed return of income on 17.12.1996 declaring loss of Rs.3,67,63,750/-. The assessment in this case was completed on 9.3.1999 at a loss of Rs.2,31,14,700/-. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [in short “the CIT(A)”] who vide order dated 5.12.2006 partly allowed the appeal giving a relief of Rs.1,42,21,775/-. Against the order of the CIT(A), the revenue approached the Tribunal by way of appeal who vide order dated 21.11.2008 partly allowed the appeal. Hence, the present appeal by the revenue. 4. We have heard learned counsel for the revenue. 5. The appeal requires adjudication regarding deletion of following expenses by the CIT(A) and upheld by the Tribunal:- (i) expenses on account of repair and maintenance of ITA No. 387 of 2009 -4- building; (ii) expenses incurred on account of staff welfare; (iii) expenditure on account of personal use of car and telephone; and (iv) expenses on account of foreign travelling which were incurred by the employees of the assessee. 6. Learned counsel for the revenue submitted that the said expenses were not allowable under Sections 38(2) and 40A of the Act as the same are excessive and unreasonable. The Assessing Officer had rightly disallowed the said expenses. However, the CIT(A) and the Tribunal without appreciating the material on record had allowed the expenses as noticed aforesaid. Learned counsel relied upon the judgments in Commissioner of Income Tax Vs. Chitram and Co. (P) Ltd. [1991] 191 ITR 96 and Commissioner of Income Tax Vs. Madura Coasts Ltd. [2003] 263 ITR 241 in support of her submissions. 7. We proceed to discuss the findings recorded by the Tribunal in respect of each expenditure. The Tribunal while upholding the order of the CIT(A) held that:- Addition of Rs.12,27,611/- on account of repair and maintenance expenses: On this account, the Assessing Officer made a disallowance of Rs.12,27,611/- and held that the expenditure to be capital in nature. On appeal, the CIT (A) deleted the said addition observing that no new asset has been created and the expenditure had been incurred on improvement of the existing assets and the same was an allowable expenditure. The Tribunal upheld the view of the CIT(A) while observing that the said expenditure was in the nature of current ITA No. 387 of 2009 -5- repairs, deductible under Section 30 of the Act. Addition of Rs.5,54,868/- on account of Staff Welfare Expenses: Finding recorded by the Tribunal in para 4 of its order reads as under:- “4. Ground no.3 is against disallowance of Rs.5,54,868/- made by the AO in respect of staff welfare expenses. The learned counsel pointed out that this issue stands covered by the order of the Tribunal in the case of the assessee for assessment year 1997-98 in ITA No. 671(Del)/2006 dated 12.9.2008. Paragraph 13 of that order deals with staff welfare expenses and it was pointed out that the assessee distributed VIP bags, mixer, blenders, watches etc. to staff. It also purchased dry fruits during Christmas period. The assessee also purchased 264 pairs of shoes for its staff members. These expenses were for the welfare of employees and, therefore, the expenses were deductible as such. The learned DR was not able to distinguish the facts of this year vis-a-vis the facts of that year. Therefore, relying on the order of the Tribunal, it is held that the impugned expenditure was deductible in computing the income. Thus, this ground is also dismissed.” Addition of Rs.1,46,024/- on account of personal use of the car and Rs.34,824/- on account of telephone expenses: Under this head, the Assessing Officer made the additions ITA No. 387 of 2009 -6- of Rs.1,46,024/- and Rs.34,824/- on account of personal use of car and telephone on the ground that the same were not incurred wholly and exclusively for the business purposes and the possibility of personal use could not be ruled out. The CIT (A) deleted both the additions observing that the disallowance had been made purely on adhoc basis as no specific instances were brought on record by the Assessing Officer. The Tribunal upheld the view of the CIT(A) by holding that the said expenditure was relatable to be taken as business expenditure in view of the decision of Gujarat High Court reported in Sauyaji Iron & Engineering Company v. Commissioner of Income Tax, 253 ITR 749. Addition of Rs.25,73,283/- on account of foreign travelling expenses: The Assessing Officer made an addition of Rs.25,73,283/- under this account treating it to be capital in nature. The CIT(A) deleted the said addition holding that the expenditure incurred was not in relation to any capital asset and such expenditure was allowable as revenue expenditure. The Tribunal while upholding the view of the CIT (A) observed that the continuous training was essential for the functioning of the company and such expenditure was deductible in computing the income. 8. Learned counsel for the revenue was not able to point out any illegality or perversity in the findings recorded by the CIT(A) and upheld by the Tribunal. In view of the finding recording by the CIT (A) and the Tribunal which has not been shown to be perverse, it could not be said that the expenses allowed were either excessive or unreasonable. Accordingly, the provisions of Section 38(2) and 40A of ITA No. 387 of 2009 -7- the Act do not help the appellant and the reliance on the judgments in Chitram and Co. (P) Ltd. and Madura Coats Ltd. cases (supra) do not advance the case of the revenue as they were on the individual fact situation. 9. In view of the above, no substantial question of law as claimed arises in these appeals and the same are hereby dismissed. (AJAY KUMAR MITTAL) JUDGE January 25, 2011 (ADARSH KUMAR GOEL) gbs JUDGE ITA No. 387 of 2009 -8- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 288 of 2009 Date of Decision: 25.1.2011 Commissioner of Income Tax, Faridabad ....Appellant. Versus M/s G.E. Motors India Pvt. Ltd. ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Advocate for the appellant. AJAY KUMAR MITTAL, J. The appeal is dismissed. For reasons, see order of even date passed in ITA No. 387 of 2009 [Commissioner of Income Tax, Faridabad v. M/s G.E. Motors (I) Pvt. Ltd. (Now GEMI Motors (I) Pvt. Ltd.)]. (AJAY KUMAR MITTAL) JUDGE January 25, 2011 (ADARSH KUMAR GOEL) gbs JUDGE ITA No. 387 of 2009 -9- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 439 of 2009 Date of Decision: 25.1.2011 Commissioner of Income Tax, Faridabad ....Appellant. Versus M/s G.E. Motors Limited ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Advocate for the appellant. AJAY KUMAR MITTAL, J. The appeal is dismissed. For reasons, see order of even date passed in ITA No. 387 of 2009 [Commissioner of Income Tax, Faridabad v. M/s G.E. Motors (I) Pvt. Ltd. (Now GEMI Motors (I) Pvt. Ltd.)]. (AJAY KUMAR MITTAL) JUDGE January 25, 2011 (ADARSH KUMAR GOEL) gbs JUDGE