ARMS COMMUNICATIONS PVT. LTD.,GURGAON vs. ACIT, CIRCLE- 3(1), NEW DELHI

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ITA 3494/DEL/2019Status: DisposedITAT Delhi07 June 2023AY 2015-163 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the foreign visits undertaken by the directors were in furtherance of the business of advertising, aimed at augmenting business prospects. Therefore, the expenses should be treated as deductible.

What were the facts?

The assessee, Arms Communications Pvt. Ltd., claimed foreign travel expenses of Rs. 9,15,702/-. The Assessing Officer disallowed these expenses, considering them personal in nature as they were incurred by directors for visiting local places.

What were the issues?

Whether foreign travel expenses incurred by directors for visiting local places are deductible business expenses or personal in nature.

Which sections of the Income-tax Act were involved?

Section 37(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘A’, NEW DELHI

Before: Dr. B. R. R. KumarSh. Yogesh Kumar US

For Respondent: DR &
Hearing: 05.06.2023Pronounced: 07.06.2023

Per Dr. B. R. R. Kumar, Accountant Member:

1.

The present appeal has been filed by the assessee against the order of ld. CIT(A)-I, New Delhi dated 04.01.2019.

2.

The assessee has raised the following grounds of appeal:

“1. That in the facts and circumstances of the case, the ld. CIT(A) has erred in confirming the disallowance made by the AO out of travelling expenses on account of foreign travel of Rs.9,15,702/-.”

3.

The observation of the Assessing Officer on this issue is as under:

“During the examination of travelling expenses, it revealed that expenses debited under the said there are ‘Foreign Travel expenses to the tune of Rs.9,15,702.00. The said expenses appeared to be Arms Communications Pvt. Ltd. personal in nature and not incidental to business. The assessee vide order sheet entry dated 04.12.2017 was asked to justify the same. The bills and vouchers produced were put to test check.

It revealed that the bills and vouchers in respect of Foreign Travel are in the name of Ms. Devika Nayyer and Ms. Anisha Sigh. Both the said persons are Directors in the company. On confronting the AR contended that the travel had been undertaken to meet with client and study possible local places etc. for potential shoots/advertisements. These are important to provide alternative to clients while preparation of “Pitch”, as part of advertisement campaigns. The visits have been made only in furtherance of business and cannot be considered as excessive.

The above submission has been considered. It revealed that the assessee has not substantiated with material that how the Foreign visit was for business purposes. Therefore, it cannot be taken that the expenses debited Rs.9,15,702 are incidental to business.

Therefore, the same are disallowed and added to the total income taking as personal in nature.”

4.

We find from the Assessment Order itself that the assessee has explained the compulsion and utility of such tour for business purpose. The assessee is in the business of advertising with a returned income of Rs.48,97,260/- on 29.09.2015. It was the Directors of the company who have visited the local places which would augment and aid the business prospects. Hence, in the facts and circumstances of the instant case, we hold that the amount be treated as a deductible expenditure.

Arms Communications Pvt. Ltd. 5. In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 07/06/2023.

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