M/S. POLYBOND INDIA PVT. LTD.,,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX,,

Shri Kishore Phadke appearing on behalf of the assessee submitted that the assessee is a private limited company and is engaged in manufacturing and trading of rubber moulded parts, metal bounded rubber parts. During the course of scrutiny assessment proceedings, the Assessing Officer inter-alia made ad-hoc disallowance of 5% on entire traveling expenses. The ld. AR pointed that in the past and in the subsequent years, ad-hoc disallowance of travelling expenditure was made only in respect of Directors. However, in the assessment year under appeal, Assessing Officer made ad-hoc disallowance on entire travelling expenditure including that of the employees of the company on the presumption that traveling expenditure has been incurred by employees for non business purpose. The ld. AR submitted that traveling expenditure has been incurred by employees as well as Directors only and exclusively for the purpose of business. The assessee is engaged in export of its products to European countries. The Directors foreign travel expenditure is in connection with the export. The ld. AR submitted that in the past no such ad-hoc disallowance was made in respect of employees of the company. The ld. A.R. submitted that if any disallowance has to be made, it should be restricted to travel expenditure of Directors only.

On the other hand, Shri Sudhendu Das representing the Department vehemently supported the order of Commissioner of Income Tax (Appeals) and prayed for dismissing the appeal of assessee. The ld. DR contended that before Authorities below, the assessee has failed to furnish all invoices or bills relating to traveling expenses of its Managing Director and other employees.

We have heard the submissions made by representative of rival sides and have perused the orders of Authorities below. The solitary issue raised by the assessee in appeal is against ad-hoc disallowance of traveling expenditure amounting to Rs.7,92,350/-. The assessee claimed traveling expenditure to the tune of Rs.1.58 Crore. The traveling expenditure includes various tours of the Directors to USA, Europe etc. The Assessing Officer made ad-hoc disallowance of 5% on the entire traveling expenditure including those of the employees and Directors as the assessee failed to furnish some bills/invoices to support the claim. In First Appellate Proceedings, the Commissioner of Income Tax (Appeals) confirmed the addition. The ld. AR pointed that in the past and the subsequent assessment year, ad-hoc disallowance has been made in respect of traveling expenditure of the Directors only. Taking into consideration entirety of facts, we are of considered view that in line with disallowance made in the preceding and subsequent assessment years, disallowance be restricted only to travel expenditure of Directors. We hold and direct accordingly. Thus, grounds raised by the assessee in appeal are partly allowed in the terms aforesaid.

In the result, appeal of the assessee is partly allowed.