The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has granted relief to Serum Institute of India by allowing the expense incurred on foreign travel of the director and his wife of the company for purpose of running the business as revenue expenditure.
During the course of assessment proceedings, the Assessing Officer found that the employees of the respondent-assessee company have travelled abroad for the acquisition of machinery incurring of expenditure of Rs.22,31,668/-. The Assessing Officer thought that the expenditure incurred on travelling by the employees of the respondent-assessee company should be treated as capital expenditure, as the same was incurred aboutthe acquisition of plant and machinery. He treated the travelling expenditure as capital expenditure and disallowed the same as revenue expenditure.
Secondly, the Assessing Officer also found that the respondent-assessee company incurred expenditure on foreign travelling Mrs B.Z Poonawalla is a director of the respondent-assessee company andhis wifeMrs Natasha Poonawalla who had been made director in later years. The Assessing Officer had disallowed the foreign travelling incurred by Mrs Natasha Poonawalla holding it to be personal expenditure.
On appeal, the CIT(A) deleted the addition made by the Assessing Officer on account of foreign travel expenses of Rs.24,45,047/- by holding it to be personal expenditure.
It was contended by Shri J. P. Chadraker appeared for the revenue that the foreign travel expenses of the wife of the director of the respondent-assessee company, he submitted that expenditure incurred by Mrs B.Z. Poonawalla is purely a personal expenditure and cannot be allowed for deduction.
Shri Percy Pardiwalla & Shri Sukh Sagar Syal Counsels appeared for the assessee and stated that the visit of employees is to runa business as some more plants and machinery were intended to be purchased. Further stated that the spouse of a director of the company, accompanies the director on a foreign trip, it cannot be said to be not for business.
A Coram of Shri Inturi Rama Rao, AM and Shri S SViswanethra Ravi, JM observed that the visit was undertaken by the employees of the assessee company to decideon whether machinery was suitable for his business or not.
In light of precedents, the Tribunal held that “it cannot be said that the expenditure incurred on foreign travel of the director of the respondent-assessee company and his wife cannot be said to be personal in nature. ”The bench upheld the findings of CIT(A) in allowing foreign travel expenses as revenue expenditure. The appeal filed by the Revenue got dismissed.
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