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2024 (3) TMI 534 - ITAT DELHI30% ad-hoc disallowance of travelling expenses being car charges, foreign travelling expenses and domestic travelling expenses - assessee submitted that the expenses claimed by the assessee are bound to be more in the initial year of set up, as it involves extra travelling setting up of new business unit which does not correlate to transaction and business of the company - HELD THAT:- It is not in dispute that the assessment was pertaining to first year of incorporation/business establishment of the assessee. It is the case of the assessee that the expenses on car charges, foreign traveling and domestic traveling are bound to be more in the initial year of set up, as it involves much extra travelling in setting up a new business unit and does not correlate to transaction and business of the Company. The said fact has been not considered by the Lower Authorities. It is not the case of the Revenue that the assessee has not incurred any expenditure, on the contrary, the A.O. himself observed that ‘it would not be proper to completely disallow the expenses’ and made ad-hoc disallowance. The assessee on 29/11/2018 provided detailed submission on the questionnaire raised along with all the invoices, vouchers and other documentary evidence supporting the expenses incurred by the assessee. Further, on 04/12/2018 once again provided detailed submission with respect to all travel made by the employees along with the agenda of the meetings and other relevant details corroborating the business purposes of the travelling and car hire charges. Hon’ble Supreme Court in the case of CIT Vs. Delhi Safe Deposit Co. Ltd. [1982 (1) TMI 2 - SUPREME COURT] held that the true test of an expenditure laid out wholly and exclusively for the purposes of business is that it is incurred by the assessee as incidental to his trade for the purpose of keeping the trade going. The expenditure incurred must be for commercial expediency. In the circumstances, the Ld. A.O. has been totally wrong in considering the fact that the discharge of the burden has to be effective and meaningful and not to cover up merely by book entries and paper work. The present case, at no point of time, the Lower Authorities have disputed the genuineness of the vouchers, payments, approvals, travel dates etc. but without their being any contrary evidence and without any material in hand erroneously made ad-hoc disallowance of Rs. 30% of the expenses claimed by the assessee. In our opinion, the Lower Authorities have committed error in making ad-hoc 30% disallowance - Appeal of assessee allowed.
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