M/S. AREX INDUSTRIES LTD.,GANDHINAGAR vs. THE DCIT, MEHSANA CIRCLE, MEHSANA

None has come present on behalf of the assessee. With the assistance of the ld.DR, we have gone through the record carefully and proceeded to dispose of the appeal ex parte qua the assessee.

Solitary grievance of the assessee is that the ld.CIT(A) has erred in confirming the addition of Rs.5,43,337/- which was added by making a disallowance out of foreign travel expenditure.

Brief facts of the case are that the assessee has filed its return of income on 15.11.2014 declaring total income at Rs.5,32,57,031/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. The assessee at the relevant time was engaged in the business of manufacturing of woven labels and trading in woven labels. It is also in generation and consumption /sales of electric power through windmills. On scrutiny of the accounts, it revealed to the AO that the assessee has debited a sum of Rs.29,38,919/- on account of travelling expenditure. Out of the total traveling expenditure a sum of Rs.21,73,351/- was debited towards foreign travelling. In order to verify genuineness of such expenditure, the assessee was directed to submit details showing purpose and source of such visit. The ld.AO thereafter observed that the assessee has produced only bills for flight booking and hotel booking in respect of visit of directors. The ld.AO observed that personal element of expenditure could not be ruled out. Hence, he disallowed 25% of total foreign travelling expenditure, and made addition of Rs.5,41,337/-, Appeal to the CIT(A) did not bring any relief to the assessee.

With the assistance of the ld.DR, we have gone through the record. A perusal of the record would indicate that there were four

With the assistance of the ld.DR, we have gone through the record carefully. It is pertinent to observe that in order to claim expenditure under section 37(1) of the Income Tax Act, the assessee requires to fulfill certain conditions viz. (a) there must be expenditure, (b) such expenditure must not be of the nature described in section 30 to 36, (c) expenditure must not be in the nature of capital expenditure, or personal expenditure of the assessee, and (d)expenditure must be laid out or expended wholly and exclusively for the purpose of the business. The expression “wholly” employed in section 37 refers to quantification of expenditure, while expression “exclusively” refers to motive, objects and purpose of the expenditure.

In the light of the above, let us examine the facts on hand. In order to claim the expenditure laid out for the purpose of the business, the assessee should have demonstrated motive of these visits. It should have filed some material demonstrating nexus between incurrence of expenditure and achievement of business purpose. It has only produced evidence showing incurrence of expenditure, but failed to produce object and purpose for incurring such expenditure. Therefore, in our opinion, the ld.Revenue

In the result, appeal of the assessee is dismissed. Order pronounced in the Court on 18th June, 2019.