MEDIA AGILITY INDIA PVT. LTD.,GURGAON vs. ITO, WARD- 2(5), GURGAON

The dispute in the present appeal is confined to disallowance of travelling expenses.

Briefly, the facts are, assessee is a corporate entity stated to be engaged in the business of providing information technology enabled services, software development and incidental support services to the customers. For the assessment year under dispute, assessee filed its return of income on 25.11.2014 declaring loss, both, under the normal provisions as well as under Section 115JB of the Income-Tax Act,1961.

In course of assessment proceedings, while examining profit and loss account of the assessee, the assessing officer noticed that in the year under consideration, assessee had claimed deduction for an amount of Rs.22,38,441 towards international travelling expenses.

The assessee contested the aforesaid disallowance before learned Commissioner (Appeals). After examining the details, learned Commissioner (Appeals) noticed that some amount of international travel expenses were claimed in respect of Shri Atul Gupta who was an employee of the assessee till 30th September 2013 and thereafter he was appointed as promoter director in a UK based company. Whereas, the travel expenses related to period post is leaving the employment of the assessee. When this fact was confronted to the assessee, it was submitted that since in the year under consideration, Shri Atul Gupta did not introduce any new client, only travelling expenses were reimbursed. Being of the view that expenses incurred on international travel of Shri Atul Gupta is not for assessee’s business, learned Commissioner (Appeals) disallowed the entire expenses relating to Shri Atul Gupta amounting to Rs.9.28,543.

Before me, learned counsel appearing for the assessee submitted that after Shri Atul Gupta left, his employment with the assessee, he became director of Media Agility UK. Since, the clients of the assessee are located not only in India but abroad as well, to maintain its brand royalty, retained existing client and acquiring new client, the assessee utilized the services of Shri Atul Gupta. He submitted, Shri Atul Gupta was working as Senior Sales Executive with the assessee having the role of developing new business for the company. He submitted, though, after he became director of Media Agility UK, he was not paid salary w.e.f. 01.10.2013, however, he continued to work for the benefit of the assessee. Therefore, the management decided to reimburse the travelling expenses of Shri Atul Gupta. He submitted, through the efforts of Shri Atul Gupta, the assessee had been able to generate business in subsequent assessment years. Thus, he submitted, since, the travelling expenses relating to Shri Atul Gupta is wholly and exclusively for the purpose of assessee’s business, it has to be allowed.

In support of such contention, learned counsel relied upon the following decisions:

Learned Departmental Representative strongly relied upon the observations of the assessing officer and learned Commissioner (Appeals).

I have considered rival submissions and perused the material available on record. The decisions relied upon by the learned counsel appearing for the assessee were also examined.

Undisputedly, when the assessing officer called upon the assessee to justify the claim of international travelling expenses, the assessee took a stand that such expenses in relation to international travel of employees and directors are for the purpose of business.

In view of the aforesaid, I do not find any valid reason to interfere with the decision of learned Commissioner (Appeals) on the issue. Accordingly, the disallowance made is upheld.