UDAY MANAGEMENT SERVICES PVT. LTD.,NEW DELHI vs. ACIT, CIRCLE- 27(1), NEW DELHI

The learned assessee representative (AR) submitted that the AO as well as Ld. CIT(A) has erred in law and facts by Uday Management Services Private Limited Page 2 of 5 confirming the disallowance made u/s. 37(1) of the Act on account of foreign travelling merely on the basis of surmises and conjectures. The Ld. AR also submitted that the copies of the assessment orders for immediately preceding years for A.Y. 2013-14 & 2014-15 clearly reveals that the Assessing Officer has made a disallowance of 30% and 20% respectively on same account and foreign travelling expenses. Therefore the Ld. AR submitted that even if the personal element in the trip is considered then also entire claim of foreign travelling expenses cannot be disallowed.

Replying to the above the Ld. Senior DR strongly opposed to the contention of the Ld. AR of the assessee and submitted that the assessee is consistently incurring expenditure on foreign travel and claiming the same for the purpose business of assessee of the authorities below may kindly be upheld.

On careful consideration of above submissions first of all I note that undisputedly rather admittedly the disallowance on similar expenditure for A.Y. 2013-14 & 2014-15 was made by the AO to the tune of 30% & 20% respectively by taking into consideration element of personal benefit. In the present case also Uday Management Services Private Limited Page 3 of 5 the basis taken by the AO and Ld. CIT(A) for making impugned disallowance is that the Director is making trip to USA for the purpose of visiting his family members which has no relation with the furtherance of business. The Ld. CIT(A) confirming the disallowance by relying the order of his predecessor for A.Y. 2011- 12. It is a well accepted proposition that the principle of res judicata is not applicable to the tax cases but the rule of consistency is always respected by the tax authorities. In the present case as I have noted above the Assessing Officer made disallowance of 30% for A.Y. 2013-14 and 20% for A.Y. 2014-15. The present assessment year is 2015-16 which is immediately succeeding year to A.Y. 2014-15. In the above back drop of facts and circumstances I am of the considered opinion that since the assessee is a company engaged in the providing full facility plans to it clients including fully furnished and air conditioned offices, power back up electricity & maintenance, housekeeping, security and many other facilities. Looking into the nature of business of assessee company, though I am not in complete agreement with the contention of assessee company on this issue that the company is not paying any Uday Management Services Private Limited Page 4 of 5 remuneration for the above services being rendered by Mr. Anand S. Gupta and the amount reimbursed is much lesser then the remuneration generally payable to someone with similar back ground, experience, track record and commitment. At the same time the claim of assessee Company cannot be dismissed at the threshold on account of personal element in the foreign travel. Therefore keeping in view rule of consistency I hold that the instead of disallowance of entire claim the 30% of total foreign travel expenses is sufficient to cover all possible leakage of revenue. Therefore the grounds of assessee are partly allowed and disallowance is restricted to 30% of total claim.

In the result appeal of the assessee is partly allowed.