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2017 (10) TMI 233 - AT - Income TaxDisallowance of foreign travel expenses - AO has disallowed foreign travel expenses on the ground that the assessee has not furnished any evidence in support of foreign travel of its employees and business connection with its clients - Held that:- We find force in the arguments of the assessee for the reason that merely because no evidence has been filed to establish foreign travel undertaken by its executives to attend meetings with its clients, foreign travel expenses incurred by the assessee cannot be disallowed on adhoc basis despite furnishing of evidences. The AO has not pointed out any incorrect claim made by the assessee. The AO has accepted the fact that the assessee has filed all documents to justify its expenses. The AO is only on the point that no evidence has been filed to prove foreign travel and business connection with its clients. We are of the view that the AO was incorrect in observing that the assessee has not filed any details to justify its foreign travel expenses, despite the assessee has filed its vouchers which clearly indicates the purpose of visits by its employees. The issue requires re-verification by the AO in the light of our above discussion. Hence, we set aside the issue to the file of the AO and direct him to re-consider the issue afresh and decide the same in accordance with law. Allocation of headquarter expenses to units claiming exemption u/s 10A / 10B - AO has allocated head office expenses proportionately for units claiming exemption u/s 10A / 10B, on the basis of the turnover of the units - Held that:- No merit in the arguments of the assessee for the reason that on perusal of the details of expenditure incurred by the assessee it is difficult to accept explanation of the assessee that head office expenditure has no relevance to the units claiming exemption u/s 10A / 10B. The assessee is having four units based at various locations which were controlled through its headquarter. The expenditure incurred by head office like travel and conveyance, communication expenses, legal and professional charges and rates and taxes definitely is having relevance to its total business. Therefore AO was right in allocating head office expenses to the units eligible for claiming exemption u/s 10A / 10B of the Act. We further observe that there is merit in the argument of the assessee that only net expenses of head office should be allocated to the units claiming exemption u/s 10A / 10B, because the assessee is generating other income like interest on fixed deposit and rent which may have some bearing on the functioning of its units claiming exemption u/s 10A / 10B. Therefore, we are of the view that the issue needs to be re-examined by the AO in the light of the submissions of the assessee. Appeal filed by the assessee is treated as partly allowed, for statistical purpose.
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