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2014 (4) TMI 344 - ITAT COCHINDeletion of disallowance – Foreign travel expenses – Whether there was business necessity or business connection in undertaking the foreign travels by the directors or relative of the directors of the assessee company - Held that:- The AO has disallowed 100% of claim and in some cases 50% of the case – the AO has changed his view on the claim of foreign travel expenses in assessment year 2009-10 - there is business connection in undertaking foreign travels – the AO has also expressed the view that the claim that the trips were undertaking solely for business purposes is not convincing - Since the tours have been undertaken with family members mostly to the places of tourist attractions and since the purpose of tour stated by the assessee was too general in nature, the AO has held that the personal element in these expenses cannot be ruled out. The AO has taken contradictory stand with regard to the quantum of disallowance - In assessment year 2008-09, the AO has disallowed 100% of expenditure relating to certain tours and 50% of the expenditure of other tours – but, in assessment year 2009-10, he has disallowed 20% of the total expenditure incurred on foreign tours - Since the AO, in assessment year 2009-10, has taken the view that the business purpose involved in foreign tours cannot be altogether ruled out, the same position should be extended to the assessment year 2008-09 also - the involvement of personal purpose and incurring of personal expenses during foreign travels undertaken by the key personnel cannot be altogether ruled out - The absence of details of expenses incurred out of foreign exchange coupled with the fact that the key personnels are covered by sec. 40A(2) of the Act - the disallowance of 20% of the foreign tour expenses made by the AO in assessment year 2009-10 is quiet reasonable – thus, the order of the CIT(A) set aside and the order of the AO restored – also, the disallowance of foreign travel expenses should be maintained at the same level in assessment year 2008-09 also – the AO is directed to restrict the disallowance to 20% of the claim – Decided partly in favour of Revenue.
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