Income Tax Appellate Tribunal - Jodhpur
Acit, Udaipur vs M/S. Jyoti Minerals P. Ltd., Udaipur on 24 March, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
JODHPUR BENCH, JODHPUR
BEFORE DR. MITHA LAL MEENA, HON'BLE ACCOUNTANT MEMBER
AND SHRI SUDHIR PAREEK, HON'BLE JUDICIAL MEMBER
MA No. 57/Jodh/2013
(A/o ITA No. 638 and 653/JDPR/2007)
(Assessment Year - 2004-05)
ACIT, Circle-2, Udaipur M/S Jyoti Minerals P. Ltd.
8D New Fatehpura, Udaipur
PAN NO. AAACJ 7412 Q
Assessee by None
Revenue by Shri Karni Das, Addl. CIT (Physically)
Date of Hearing 17.02.2026.
Date of Pronouncement 24.03.2026.
ORDER
DR. MITHA LAL MEENA, A.M.:
This Misc. Application by the revenue is arising out of the Tribunal order dated 30.01.2009 passed in ITA No. 653/JDPR/2007 and 638/JDPR/2007 with respect to assessment year 2004-05.
2. The Ld. DR has submitted while deciding the appeal filed by the department the Hon'ble Bench has dismissed the department appeal vide its order dated 30.01.2009 and allowed the assessee's appeal deleting entire disallowance made by the AO relying on the decision of Hon'ble Apex Court in the case of Sasoon J. Davit and Company Ltd. Vs. CIT (1979)118 ITR 261 though on the same issue against decision of CIT(A) for the assessment year 2005-06, 2006-07 and 2007-08, 2 MA No. 57/Jodh/2007 (A/o ITA No. 638 and 653/Jodh/2007) Asst. Year: 2004-05 department appeals vide ITA No. 8,9 and 10/JU/2011 are pending before the Hon'ble Tribunal.
3. Grievance of the department has been that the Tribunal has upheld the order of the Learned CIT(A) in reducing the disallowance of Rs. 74,85,545/- and Rs. 23,06,288/- on account of expenses relating to London Office relying on the Hon'ble Apex Court Judgment. The relevant observation/findings recorded by the bench reproduce as under:-
Having heard the rival parties with reference to material on record as well as precedents cited at Bar, we find that essentially the branch office at London was set up for business purposes after obtaining permission of Central Bank and foreign currency used for incurring various expenses was also drawn after taking prior permission of the bank as such, which was duly considered and brought on record of the authorities below as well. The assessee's accounts are duly audited and stand accepted by the assessing authority. The assessee has thus adduced material evidence to show that the office was established for the business purposes and it was legitimate commercial undertaking of the assessee so established to facilitate the carrying on of its business. Having established the office for carrying on of its business, the assessee was required to maintain the office. That has been so done by using the services of relatives. The assessee did not incur any expenditure by employing foreign staff in its branch office at London but used services of his own 3 MA No. 57/Jodh/2007 (A/o ITA No. 638 and 653/Jodh/2007) Asst. Year: 2004-05 son as well as brother's son who also became director in the company in December 2003 but staying in the office-cum-residential premises just about 2 to 3 months before becoming its director. In fact, it is a case where the assessee can be said to have cut its cost by not taking services of foreign nationals or by not employing additional staff there and managed with the relatives who were available at London at a particular time. Under the peculiar facts and circumstances of the case, the assessee having opened the office for business purposes, was required to maintain the same and incur expenditure thereon. This is exactly what the assessee has done by taking services of relatives of the director. The expenditure incurred on such services is not shown to be high or excessive. Since the expenses are found to have been incurred wholly and exclusively for the purposes of business and the advantage has also gone to the relatives of the assessee, that would not call for any disallowance in the hands of the assessee company, more particularly when the law does not require that the whole expenditure should necessarily be laid out for the business of the company only. The Hon'ble Apex Court in the case of Sassoon J. David and Co. Pvt. Ltd Vs. CIT [1979] 118 ITR 261 at pages 275 and 276 has laid out the principle that in case somebody other than the assessee is also benefited by the expenditure that should not come in the way of an expenditure being allowed. The relevant passage is reproduced as under:
"It has to be observed here that the expression "wholly and exclusively" used in s. 10(2)(xv) of the Act does not mean " necessarily ".
Ordinarily, it is for the assessee to decide whether any expenditure should be incurred in the course of his or its business. Such expenditure may be 4 MA No. 57/Jodh/2007 (A/o ITA No. 638 and 653/Jodh/2007) Asst. Year: 2004-05 incurred voluntarily and without any necessity and if it is incurred for promoting the business and to earn profits, the assessee can claim deduction under s. 10(2)(xv) of the Act even though there was no compelling necessity to incur such expenditure. It is relevant to refer at this stage to the legislative history of s. 37 of the I.T. Act, 1961, which corresponds to s. 10(2)(xv) of the Act. An attempt was made in the I.T. Bill of 1961 to lay down the " necessity " of the expenditure as a condition for claiming deduction under s. 37. Section 37(1) in the Bill read" any expenditure laid out or expended wholly, necessarily and exclusively for the purposes of the business or profession shall be allowed The introduction of the word " necessarily " in the above section resulted in public protest. Consequently, when s. 37 was finally enacted into law, the word " necessarily " came to be dropped. The fact that somebody other than the assessee is also benefited by the expenditure should not come in the way of an expenditure being allowed by way of deduction under s. 10(2)(xv) of the Act if it satisfies otherwise the tests laid down by law. This view is in accord with the following observations made by this court in CIT v. Chandulal Keshavlal & Co. [1960] 3 SCR 38 at page 48; 38 ITR 601, 610 (SC).
4. The Ld. DR has contended that assessee had incurred whose expenditure in London Office as business expenditure for the year relevant to assessment year 2004-05 to 2007-08, however, it was noticed by the then AO that such expenditure was incurred by two sons namely Surabh Khetan and brother Manan Khetan for pursuing their education 5 MA No. 57/Jodh/2007 (A/o ITA No. 638 and 653/Jodh/2007) Asst. Year: 2004-05 in UK. The nature of the above expenses clearly indicates that same have been incurred for education for children and have nothing to do for the business expenditure of the assessee company. The Ld. DR contended that the assessee company has shown very normal income decreasing export turnover as well. He argued that assessment year 2004-05 the Hon'ble ITAT has allowed such expenses as business expenditure without appreciating the facts of the case and findings of the AO. He pleaded that the appeal on this issue may be recalled per contra. The ld. DR for the Assessee has supported the tribunal order and contended that tribunal has passed a detailed and well reasoned order after considering all the facts available on the record and the submissions made by both the parties on merits of the case.
5. The AR contended that there was no error apparent mistake in the tribunal order. The AR further argued that department contentions raised would amount to review of the Tribunal decision which is not permitted under the provisions of Section 254(2) of the Act. The learned Counsel for the assessee referred to the judgment of the Hon'ble Apex Court in the case of Reliance Telecom Ltd. VS. CIT (IT) 4, Mumbai (2021) 6 MA No. 57/Jodh/2007 (A/o ITA No. 638 and 653/Jodh/2007) Asst. Year: 2004-05 133 Taxman.com 41(SC) and requested that MA of the department may be dismissed.
6. The Ld. CIT(A), while considering the similar facts for the earlier year, i.e., assessment year 2003-04 in assessee's own case and held that the issue is squarely covered by the earlier decision to allow the deduction denied by the assessing authority.
7. Having heard both the sides, perusal of the material available on record, Misc. Application, the Tribunal order and the judgment of the Hon'ble Apex Court in the case of Reliance Telecom Ltd. (Supra). We find that department has been seeking relief on account of Tribunal observation on interpretation of facts relating to the relief granted with respect to business expenditure which has already been discussed by tribunal in detail by passing a well reasoned order after taking into consideration the factual matrix of the case and the judgment of the Hon'ble Apex Court.
8. From the record its evident that ITAT has passed the comprehensive order dated 30.01.2009 in ITA No. 638 and 653/Jodh/2007 with respect to the Assessment year 2004-05. The 7 MA No. 57/Jodh/2007 (A/o ITA No. 638 and 653/Jodh/2007) Asst. Year: 2004-05 Tribunal has limited powers under Section 254(2) of the Act as per the scope and ambit of powers of the Income Tax Appellate Tribunal confirmed under Section 254(2) of the Act. Meaning thereby merely because the revenue might have further arguments on the merits of the case before the ITAT and merely because the parties might have filed detailed submissions, it does not confer jurisdiction upon the ITAT to pass the order dehours under Section 254(2) of the Act. The law is settled by Hon'ble Apex Court in the case of Reliance Telecom (Supra), the powers of ITAT under Section 254(2) only to correct/or rectify the mistake apparent of the court.
9. The Hon'ble Apex Court's judgment in the case of Reliance Telecom (Supra) has categorically held that Tribunal has limited power to only rectify apparent mistake in its order.
10. In the above view we find no merits in the grounds of the department's misc. Application. Therefore, none of the arguments and contentions raised by the department in the Misc. Application are tenable in law.
11. In the result the misc. Application of the revenue is rejected. 8 MA No. 57/Jodh/2007
(A/o ITA No. 638 and 653/Jodh/2007) Asst. Year: 2004-05 Order pronounced in the open court on 24/03/2026.
SD/- SD/-
(SUDHIR PAREEK) (DR. MITHA LAL MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 24/03/2026.
Pritesh Vaishnav PS
TRUE COPY
Copies to :
(1) The appellant.
(2) The respondent.
(3) CIT
(4) CIT(A)
(5) Departmental Representative
(6) Guard File
BY ORDER,