2017 (9) TMI 1870 - AT - Income Tax

Travelling expenses incurred on behalf of family members of players - Disallowance of expenses holding that these persons have not rendered any service to the appellant and the expenses are private expenses of individuals unrelated to the business - HELD THAT - We find that no evidence has been led by the assessee to substantiate the claim that the presence of spouse/family members attracts sponsors or how it is related to business of the assessee. Even in the agreement it is no where provided that it will be the liability of the assessee to incur travelling or other expenses for the spouse or family members of the players. Thus assessee was not contractually obliged to incur any expenditure for spouses or family members of the players. CIT(A) has dealt with the above grounds after considering the facts of the present case. No new facts have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore there are no reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). Hence we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly this ground raised by the assessee stands dismissed. Addition of 10% of hospitality expenses on adhoc basis by holding that the same is not related to assessee s business - HELD THAT - As decided in own case 2017 (8) TMI 1596 - ITAT MUMBAI we do not find any merit for the disallowance of 10% of the hospitality expenses on adhoc basis in the hands of the assessee being a corporate entity/artificial person.

Summary

Issues Involved:
1. Disallowance of Rs. 62,935/- being travelling expenses incurred on behalf of family members of players.
2. Disallowance of Rs. 60,87,867/- being 10% of hospitality expenses on an adhoc basis.

Issue-wise Detailed Analysis:

Ground No. 1: Disallowance of Rs. 62,935/- for Travelling Expenses of Family Members of Players

The assessee challenged the order of the CIT(A) confirming the disallowance of Rs. 62,935/- incurred on travelling expenses for family members of players, arguing these expenses were for business purposes. The CIT(A) held that these expenses were private and unrelated to the business, as no evidence was provided to substantiate the claim that the presence of family members attracted sponsors or was related to the business. The appellate authority examined the model agreements with players, which did not obligate the assessee to cover such expenses. The Tribunal found no new evidence to counter the CIT(A)'s findings and upheld the disallowance, concluding that the expenses were not incurred for business purposes.

Ground No. 2: Disallowance of Rs. 60,87,867/- being 10% of Hospitality Expenses on Adhoc Basis

The assessee contested the CIT(A)'s decision confirming the AO's disallowance of 10% of hospitality expenses, amounting to Rs. 60,87,867/-, on an adhoc basis. The CIT(A) referenced a similar disallowance upheld in the assessee's case for AY 2010-11, where discrepancies in the quantity of meals/snacks served were noted, suggesting personal expenses were included. The CIT(A) found the AO's estimate reasonable and confirmed the disallowance. However, the Tribunal noted that in the assessee's own case for AY 2010-11, the ITAT had ruled that a corporate entity could not have personal expenses, and such disallowances should be made in the hands of individuals receiving the benefits. Following this precedent, the Tribunal found no merit in the adhoc disallowance and allowed the ground in favor of the assessee.

Ground No. 3: General Nature

This ground was deemed general and required no specific adjudication.

Conclusion:

The appeal was partly allowed. The Tribunal upheld the disallowance of Rs. 62,935/- for travelling expenses of family members of players but allowed the appeal regarding the disallowance of Rs. 60,87,867/- for hospitality expenses on an adhoc basis, following the precedent set in the assessee's own case for AY 2010-11. The order was pronounced in the open court on 20th Sept., 2017.