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2008 (10) TMI 662 - ITAT DELHIDisallowance of foreign travelling expenses and hotel expenses - expenses related to business activity or not? - HELD THAT:- The expenses on airfare is wholly and exclusively for the purpose of business. Therefore, such expenses could not have been disallowed even in part. As regards hotel expenses, when the assessee or its employees travelled abroad and stayed in the hotel, the expenses are wholly and exclusively for the purpose of business. From the details the AO has not found out as to which part is not towards travel abroad or for otherwise than for the purpose of business. Accordingly the sustenance of disallowance is not in accordance with law. We, therefore, delete the entire disallowance. Disallowance of the expenses on proportionate basis - AO invoking provision of section 14A - When the assessee specifically denied having incurred any expenditure and having also proved that the expenditure was incurred in the business of real estate agent, it was for the AO to prove that such expenditure was not incurred in the course of carrying on business but were incurred for earning exempt income. The AO having failed to do such exercise cannot presume and allocate the expenditure in the ratio of exempt income to total income. The finding has to be specific. The nexus has to be proved. In absence of such finding or nexus, provisions of section 14A cannot be invoked so as to disallow the expenses on proportionate basis. We, therefore, delete the disallowance Unexplained investment u/s 69B - construction of house property - difference in the cost of construction and cost of investment in the property - CIT deleted the addition made by AO - Assessee filed complete details in respect of investment made. Total investment by three co-owners - HELD THAT:- Considering the facts it cannot be said that there was any unexplained investment by the assessee in construction of house property, After all the report of DVO is only an opinion and not a conclusive proof that any unexplained investment has been made. Moreover, defects were also pointed out in the said report. Considering these facts, we find that the addition was rightly deleted by the ld CIT(A). Expenses claimed in excess of income from commission and after reducing the amount of house tax paid is disallowed - AO disallowed the expenses on the ground that the receipt is minuscule whereas the expenses are manifold. However, when the claim is made in respect of business expenses u/s 37(1) what is to be examined is whether the expenses are incurred wholly and exclusively for the purpose of business or not. Since there is no dispute about this fact, there cannot be ad hoc or artificial disallowance without giving a finding that particular expense was not incurred for the purpose of business. We, therefore, delete the disallowance. In the result, the appeal of the assessee is allowed and that of the revenue is dismissed.
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