The Income Tax Appellate Tribunal (ITAT), Kolkata bench has allowed the assessee-Company deduction under section 37 of the Income Tax Act, 1961 in respect of foreign travel expenses of an employee, who is related to the Director.
A two-Member Tribunal comprising Shri Sanjay Garg, Judicial Member & Shri Rajesh Kumar, Accountant Member was hearing an appeal by Binayak Hi-Tech Engineering Ltd, engaged in the business of manufacturing and export of steel & alloy pipes and allied products.
The Assessing Officer during the course of assessment proceedings found that all three directors of the assessee company travelled abroad and incurred expenditure by way of air tickets, dollar purchases, hotel charges etc. Similarly, one relative of the director Priyanka Jhunjhunwala also visited Germany and Dubai and some expenditure was incurred. The Assessing Officer noted that Priyanka Jhunjhunwala, is a relative of the director of the assessee company and disallowed the entire amount of expenditure of Rs.6,41,980/- incurred on account of foreign travel. On appeal, the CIT(A) upheld the assessment order.
Deleting the order, the ITAT observed that “Ms. Priyanka Jhunjhunwala is an employee of the assessee company and the ld. Counsel for the assessee submitted before us that the expenditure was incurred to entertain and treat the customers, clients and staff, with a view to promote the sales of the assesse company. The ld. Counsel for the assessee submitted that keeping in view the nature of business of the assessee company, the sales promotion expenses are reasonable. Considering the facts on record as well as the submission of both the sides, we are convinced that the expenses incurred were for the purpose of promoting the sales of the assessee company.”
Shri Miraj D. Shah appeared for the assessee and Smt. Ranu Biswas, Addl. CIT appeared for the department.
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