The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) deleted the 50% disallowance of foreign travel expenses, ruling that the disallowance was arbitrary due to a lack of evidence supporting claims of personal use.
Ambalal Sarabhai Enterprises Ltd.,appellant-assessee,was involved in manufacturing drugs and pharmaceuticals. It also offered marketing and consultancy services in areas like fine chemicals, industrial glass containers, packing materials, and electronic instruments. The company had 15 divisions, including service units that supported other units within the corporation.
The assessee claimed the foreign travel expenses were for business purposes, including conferences, client meetings, and exploring new opportunities.
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The assessee raised this issue in several appeals where part of the foreign travel expenses was disallowed. The Assessing Officer(AO) disallowed 50% of these expenses without specific evidence, suggesting some personal use.
The assessee argued the travel was for business, like exploring export markets. However, the Commissioner of Income Tax(Appeals)[CIT(A)] agreed with the AO, stating the assessee did not provide enough proof that the expenses were purely business-related.
The assessee appealed before the tribunal aggrieved by the decision of CIT(A).
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During the hearing, the assessee counsel cited a previous ruling in the assessee’s case (A.Y. 2001-02), and the revenue counsel failed to provide new evidence or distinguish the current case, leading to consistency with earlier decisions.
The two member bench comprising Suchitra Kamble (Judicial Member) and Makarand V.Mahadeokar(Accountant Member)found the AO’s disallowance of 50% of the expenses to be arbitrary, as no evidence was provided to support the claim of non-business use. The CIT(A) wrongly upheld the disallowance based on the lack of further evidence from the assessee, even though there was enough documentation showing the travel was for business.
Following the principle of consistency and a previous decision in ITA No. 1762/Ahd/2015, the tribunal deleted the disallowance.
In short,the appeal filed by the assessee was allowed.
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