Expenses incurred for Business Promotion and  Tour & Travels of Firm for Discharging Professional Duties as Partner shall not be disallowed: ITAT [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has recently ruled that the expenses incurred for business promotion and tour & travel of firms for discharging professional duties as partners should not be disallowed.

Bharat Anand is a whole-time practising lawyer. He joined the Firm Khaitan & Co. Advocates & Solicitors, at their office in New Delhi as a Partner. The Firm was later converted into an LLP and named changed to Khaitan & Co. LLP. Any professional work the assessee undertakes is for the said Firm.

KCO being an associate entity of the firm Khaitan & Co LLP, he is engaged in professional assignments for them but this flows as part of his activity being a partner of the Firm and there exists no relationship in the nature of employer and employee between him and KCO.

During the assessment proceedings, the AO disallowed the business promotion expenses and tour & travel expenses claimed by the assessee.

Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals)[CIT(A)] who dismissed the appeal of the assessee. Therefore, the assessee filed a second appeal before the tribunal.

B. K. Anand, the counsel for the assessee submitted that these business expenses and tour and travel expenses are incurred for the promotion of the firm for discharging the professional duties as a partner.

Kanv Bali, the counsel for the revenue submitted that the assessee is a partner in Khaitan & Co, LLP and contractual arrangement with KCO, hence, there is no justification to claim expenses in the nature of 'business & promotion' and 'Tour & travel'.

Further, any 'business and promotion expenditure' is required to be incurred either by KCO or KHAITAN & Co., LLP because the business is run by the aforementioned entities.

The assessee has claimed the expenditure against the receipt from KCO where the relationship is of only contractual in nature, if any and in such a situation, there is no binding on the assessee to incur expenditure either on 'business & promotion' or 'on Tour & travel'.

The tribunal after considering the submissions observed that the income earned from the assessee is part of his total professional income whether as partner’s salary, interest on capital balance in the firm, share in profit or amount remitted as professional remuneration.

Further, it was observed that the amount of remuneration received by the assessee from KCO is in the course of his discharge o f his professional duties as a partner of Khaitan & Co . LLP and is not arising out of any independent agreement or employment between him and the said entity.

Hence, a bench consisting of two members, Dr. B. R. R. Kumar, (Accountant Member) and Yogesh Kumar US, (Judicial Member) allowed the appeals filed by the assessee.

To Read the full text of the Order CLICK HERE

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