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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI G.S. PANNU & SHRI RAVISH SOOD
The captioned appeal by the assessee is directed against the order of CIT(A)-3, Mumbai dated 29.01.2016, pertaining to the Assessment Year 2010-11, which in turn has arisen from the order passed by the Assessing Officer, Mumbai dated 22.03.2013 under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).
In this appeal, the only dispute is with regard to the disallowance of foreign travel expenses of Rs.5,80,000/-.
2 Sarda Constructions Pvt. Ltd.
In brief, the relevant facts are that the appellant is a company incorporated under the provisions of the Companies Act, 1956 and is, inter-alia, engaged in diverse businesses comprising of construction and hoteling, running health club, restaurant and readymade garment shop. In the course of assessment proceedings, the Assessing Officer noted that foreign travel expenses of Rs.5,80,000/- were incurred for which there was no justification. The Assessing Officer noted that such expenditure did not relate to the business of the assessee inasmuch as the assessee does not have any export-oriented activity. He, therefore, disallowed the same, which has also been affirmed by the CIT(A).
Before us, the learned representative pointed out that the lower authorities have completely misdirected themselves in making the impugned disallowance inasmuch as the assessee was, inter-alia, engaged in the business of running a club and that it had reciprocal arrangements/agreements with foreign clubs, which required overseas travel by the Directors. In this context, our attention has been drawn to pages 27 to 64 of the Paper Book wherein is placed a list as well as copies of reciprocal arrangements with various other clubs existing during the year and on this basis it is sought to be submitted that the foreign travel expenses are incurred in the course of business activity.
On the other hand, the ld. DR has reiterated the stand of the lower authorities, so however, there is no negation to the assertions made by the assessee.
Having considered the rival stands, we find that the lower authorities have misdirected themselves in disallowing the foreign
3 Sarda Constructions Pvt. Ltd. travel expenses completely ignoring the explanation put forth by the assessee. In fact, the explanation furnished by the assessee has been reproduced by the CIT(A) in his order, but the same has been brushed aside only on the ground that the affiliation with a particular club was only acquired in the year 2012 and that there was no justification for the foreign travel expenses during the previous year 2010-11 corresponding to the assessment year under consideration. In our considered opinion, such an approach is quite unjustified; in any case, our attention has been drawn to page 27 of the Paper Book wherein is placed a list of foreign clubs with which assessee has reciprocal agreements and this tabulation also contains the dates of correspondence and affiliation with the respective clubs. The details clearly bring out that the affiliations are over a period of time starting from 1999 and also exist in the period under consideration and thus, the observation of the CIT(A) is completely off the mark. Considering the entirety of facts and circumstances of the case, in our view, there is no justification to uphold the disallowance of foreign travel expenses of Rs.5,80,000/-, which is hereby directed to be deleted.
In the result, appeal of the assessee is allowed, as above.
Order pronounced in the open court on 3rd October, 2017.