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2017 (6) TMI 453 - ITAT DELHI

2017 (6) TMI 453 - ITAT DELHI - TMI - Addition on account unexplained perks u/s 17(2)(iii) - employee v/s directorship - unexplained expenditure incurred on foreign travels - as per AO assessee had undertaken foreign travel tour to UAE, Singapore etc. but could not furnish the reasons/ purpose - Held that:- Since the authorities below simply noted that assessee was a director in the aforesaid company therefore conditions of section 17 (2)(iii) would not apply in the case of assessee. Therefore, .....

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nsideration. These evidences on record clearly prove that assessee undertaken foreign visits for the purpose of business of company and is not a perquisite within the meaning of section 17(2)(iii) of the I.T. Act. Further the authorities below made addition of ₹ 3 lacs in respect of foreign visit undertaken by assessee on 1st July, 2011. Ld. Counsel for assessee referred to PB 62 which is certificate of foreign visit issued by the company to show that assessee has visited foreign country f .....

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he order of Ld. CIT(A) -35, New Delhi dated 30th January, 2017 for assessment year 2012-13 on the following grounds :- 1. That the Ld. CIT(A) had erred on facts and under the law in confirming the addition of ₹ 5,00,000/- on account unexplained perks u/s 17(2)(iii) of I.T. Act as made by the AO. 2. That the Ld. CIT(A) had erred on facts and under the law in confirming the addition of ₹ 3,00,000/- on account of unexplained expenditure incurred on foreign travels as made by the AO. 3. .....

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which could justify her claim that these visits were undertaken for the purpose of business and hence should be allowed as a business expense. The AO also found that the expenditure for the foreign visits was borne by M/s. Design & Development India (Pvt.) Ltd., a company where assessee was a director. The AO thus disallowed the expense claimed of ₹ 5 lacs u/s 17(2)(iii) on account of unexplained perks. Similarly AO noted that assessee has also undertaken foreign visit on 1st July, 20 .....

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made for foreign visit to UAE and Singapore because the purpose of visits remained unverified and assessee also stated that expenses are borne by her husband. It was also stated that assessee has not produced any evidence of purpose of visiting foreign country and failed to explain any official purpose. It was also submitted that with regard to addition of ₹ 3 lacs u/s 69C, the passport shows that assessee has undertaken foreign visits on 1st July, 2011 instead of 1st July, 2012 mentioned .....

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Pvt. Ltd. in which assessee is a share holder / Director. The assessee continued to be involved in the business activities as were doing earlier. No travel expenses have been disallowed earlier. The foreign trip travel expenditure of the assessee were borne by M/s. Design & Development India Pvt. Ltd. and such expenditure have been accepted by the AO u/s 153A dated 29th February, 2016. Therefore, no part of such expenditure can be considered to be a perk in the hands of assessee. Section 17 .....

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refore, confirmed. As regards addition of ₹ 3 lacs it was confirmed because no evidence has been filed. 6. I have heard Ld. Representatives of both the parties and perused the material on record. Ld. Counsel for assessee reiterated the submissions made before authorities below and referred to certificate of the company, and details of travelling expenses borne by the company, Board Resolution and it was submitted that provisions of section 17(2)(iii) of the I.T. Act does not apply to the a .....

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e case of the assessee. Ld. Counsel for assessee further submitted that the AO accepted in the remand report that travelling of 1st July, 2012 is actually 1st July, 2011 which is part of the entire foreign travel undertaken by the assessee. Therefore, no separate addition of ₹ 3 lacs should have been made. On the other hand, Ld. DR relied upon orders of the authorities below and submitted that in the order of the company the facts have not been discussed and that travel of 1st July, 2011 d .....

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ntial interest in the company ; (c) by any employer (including a company) to an employee to whom the provisions of paragraphs (a) and (b) of this sub-clause do not apply and whose income [ under the head salaries (whether due from, or paid or allowed by, one or more employers), exclusive of the value of all benefits or amenities not provided for by way of monetary payment, exceeds [fifty] thousand rupees:] [Explanation - For the removal of doubts, it is hereby declared that the use of any vehicl .....

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onal tours undertaken of foreign countries, source of such expenditure is the company in which she has been director. Section 17(2(iii) of the I.T. Act does not apply to the assessee as assessee was not an employee of M/s. Design & Development (P) Ltd.. The assessee claimed that she was only director and share holder whereas this section applies to an employee director. Ld. Counsel for assessee also explained that assessee has only 14% of the share holding in the aforesaid company which was .....

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the assessee. A perquisite u/s 17(2)/17(3) can be added in the hands of the assessee only if the employer employee relationship is established. In the absence thereof, the addition in the hands of assessee u/s 17(2)/17(3) cannot be made. In view thereof, we allow this ground of appeal taken by the assessee. 9. Since the authorities below simply noted that assessee was a director in the aforesaid company therefore conditions of section 17 (2)(iii) would not apply in the case of assessee. Therefor .....

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