WINDAMERE HOTEL PVT LTD.,KOLKATA vs. JCIT (OSD) CIR - 3,SILIGURI., SILIGURI

This appeal of the assessee arises out of the order of the Learned CIT(A), Siliguri in Appeal No. 147/CIT(A)/Slg/2011-12 dated 12.9.2012 against the order of assessment framed for the Asst Year 2009-10 u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).

1 A AM M/s. Windamere Hotel Pvt. Ltd

3.1. The brief facts of this issue is that the assessee is engaged in the hotel business and had claimed a sum of Rs. 15,33,146/- (which is under dispute before us) on account of travelling expenses of its Directors as deduction . The Learned AO called for the evidences to prove the business nexus of the incurrence of the said travelling expenses of directors. According to Learned AO, no details were filed in this regard by the assessee. Accordingly, the Learned AO disallowed the sum of Rs. 15,33,146/- as incurred towards personal expenditure of Directors. On first appeal, the assessee submitted tatht the total gross receipts from hotel business for the year ending 31.3.2009 was Rs. 3,06,33,381/- which are mostly from foreign tourists and assessee has incurred following travelling expenses :-

Travelling Expenses for Directors Rs. 29,19,592 Travelling Expenses for Others Rs. 4,59,715 The assessee argued that the Learned AO by disallowing Rs. 15,33,146/- had practically disallowed 45.36% of total travelling expenses incurred by the assessee ignoring the fact that its hotel business is fully dependent on foreign tourists, for which publicity is required by personal representation before the foreign people in foreign countries and naturally assessee has to spend foreign travel expenses for its directors. It was also submitted that the assessee had maintained proper vouchers and bills for the same. The Learned CITA not convinced with the arguments confirmed the order of the Learned AO and also held that the majority of the travelling expenses were subjected to fringe benefit tax by the assessee which goes to prove that the personal element of travelling expenses cannot be ruled out. Aggrieved, the assessee is in appeal before us on the following ground:- 2 A AM M/s. Windamere Hotel Pvt. Ltd

“2. Under the facts and circumstances of the case the ld. CIT(Appeal) was unjustified in confirming the disallowance of Rs.15,33,146/- on account of travelling expenses. “

3.2. The Learned AR reiterated the submissions made before the Learned CIT(A) and argued that just because an expenditure that has been subjected to fringe benefit tax on account of travelling expenses would not automatically lead to a conclusion that they are personal in nature. Infact the expenditure towards travelling were subjected to fringe benefit tax based on deeming provisions contemplated in the statute. Alternatively, he argued that , if the case of the revenue is to be accepted, then the disallowance on account of travelling expenses itself could not be made as the same has been subjected to Fringe benefit tax. He argued that the entire travel expenses have been incurred wholly and exclusively for the purpose of its hotel business only and hence allowable as deduction. In response to this, the Learned DR vehemently relied on the orders of the lower authorities.

3.3. We have heard the rival submissions and perused the materials available on record. We find from the paper book filed by the assessee, that there are certain evidences filed by the assessee in the form of RBI approvals for foreign visits of directors of assessee company which were relevant for the year 1991 & 1992. Similarly certain email correspondence is also dated in May 2014 wherein the assessee company has been nominated for the prestigious international “best enterprise’ award. Both these papers are not relevant for the assessment year under appeal. At best, it might only serve as an evidence that the assessee has indeed got certain international clients in its business. We agree with the Learned AR that the travelling expenses has been subjected to fringe benefit tax based on the deeming provisions of the Act only. We hold that just because a particular expenditure has been subjected to fringe benefit tax, that would not automatically be eligible for deduction as a genuine business expenditure. Accordingly the alternative plea of the learned AR in this regard is rejected. We find from the paper book, certain evidences in the form of details of 3 A AM M/s. Windamere Hotel Pvt. Ltd foreign travel expenses together with certain vouchers and bills are available. Since no details were produced before the lower authorities by the assessee, the expenses on account of travelling expenses of directors were disallowed. The evidences submitted in the paper book before us are admitted as additional evidence in the interest of justice and we deem it fit and appropriate to set aside this issue to the file of the Learned AO to decide this issue afresh, in accordance with law. Needless to mention that the assessee be given reasonable opportunity of being heard. The assessee is at liberty to produce further evidences in support of its claim of deduction to prove the business nexus of the visits of the directors. Accordingly, the ground no. 2 raised by the assessee is allowed for statistical purposes.

Order pronounced in the open court on 21 -03-2016.