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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
ORDER Per Anikesh Banerjee, JM:
The instant appeal was filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-5, Ludhiana [in brevity the CIT(A)], bearing Appeal No. 229/IT/CIT(A)-5/LDH/2018-19 dated 05.07.2019 u/s 250(6) of the Income Tax Act, 1961 [in brevity the Act], in respect of Assessment Year 2016-17. The impugned order was generated against the order of the ld. DCIT, Central Circle-1, Jalandhar was passed u/s 143(3) of the Act dated 26.12.2018.
The assessee took the grounds which are as follows:
“1. That on facts and circumstances of the case, the ld. CIT(A) as well as ld. AO has erred in making addition of Rs.6,50,052/- out of Foreign Travel Expenses.
GNA Axles Ltd. v. DCIT 2. That order is against Law and facts of the case. 3. That Interest u/s 234A, 234B and 234C has wrongly been charged. 4. That proper opportunity should have been allowed. 5. Any other ground pressed with the permission of the chair.”
Brief fact is that the ld. AO disallowed Foreign Travel Expenses of the Director and his family member an amount of Rs.6,50,052/- u/s 37 of the Act. Total disallowance was made Rs.6,50,052/- for this assessment year out of the total foreign travel expenses amount to Rs. 87,81,783/-. Further verification, it is revealed that on some of the occasion spouses or family members of the Directors also travel with him and this expense were also claimed in the total expenses. When the issue was confronted, the assessee filed a submission before the ld. AO and accordingly, the break up was submitted. The out of total expenses only amount of Rs. 6,50,052/- related to this family members and relative of the Directors are added back with the total income of the assessee.
Aggrieved, the assessee filed an appeal before the ld. CIT(A) and the ld. CIT(A) upheld the addition of the ld. AO.
Being aggrieved, the assessee filed an appeal before us.
The counsel of the assessee vehemently argued and took our attention in the assessment order for assessment year 2014-15 where the assessee added back 1/5th of the total of the tour and travel with the total income of the assessee. His contention was that the ld. Assessing Officer took the different view in the year of the appeal. Also the additional evidence which was filed before the ld. CIT(A) was not considered properly.
GNA Axles Ltd. v. DCIT 7. The ld. DR vehemently argued and relied on the order ld. CIT(A). Here we are reproducing the observation of the ld. CIT(A) is as follows:
“The facts of the case, the basis of disallowance/addition made by the AO and the arguments of the AR have been considered. The AO has duly brought out the facts that the foreign visit of the family members were their private affairs and the expenses on the same cannot be held to be genuine business expenses of the company. Even during the appellate proceedings the AR has not been able to show that these expenses were wholly and exclusively for the purpose of the business of the assessee company as nothing has been filed to show that the spouse or the family members took part in business meetings also or helped in any manner in procuring business during their foreign tours. It has been submitted that after the business meetings, family members joined the gathering. It has also been argued that customers come to India with families and in the same manner hospitality is reciprocated. However, the AR has not been able to show the benefit derived by the assessee company (or its business activities) from the visits of the family members. No details of the business meetings and participation by the family members have been filed even during the appellate proceedings. The reciprocation of hospitality is not found a good argument for allowing the expenses as deduction out of the business income as these can at the most said to be personal obligation of the Directors and their family members. The AO has rightly observed that the expenses disallowed were not incurred wholly & exclusively for the purpose of the business of the assessee company. Under the facts and the circumstances of the case the arguments of the AR on this point are not found acceptable and disallowance made by the AO is upheld.”
We have heard the rival submissions and the considered the documents available on the record. The main point of argument the ld. counsel was that the expenses are related to fully on business purpose and the expenses incurred for upgrading the business and for business expediency. Ld. Counsel further argued that after the business meet, family members joined in the gathering. Accordingly, he relied on the documents which are filed during the time of appeal proceedings and the whole process is related to procure of business from foreign parties and the personal relation related to the family members with the parties are very much required for furtherance of the business. The issue was not properly dealt by the ld. CIT(A). Accordingly, the matter is setting aside only to consider the expenses
GNA Axles Ltd. v. DCIT related to foreign tour amount of Rs.6,50,052/- for further adjudication. Also the assessee should get proper opportunity for establishing the issue before the learned CIT(A).
In the result, the appeal of the assessee is allowed for statistical purposes.