The Income Tax Appellate Tribunal ( ITAT ), Chandigarh has held that the foreign traveling expenses incurred by the Company for its Managing Director can be allowed as Deduction under the Income Tax Act, 1961.
The sole grievance of the assessee was that the Assessing Officer had disallowed the claim of foreign traveling expenses incurred on the trips undertaken to the UK by its Director for the reason that the assessee has failed to prove that the trip was undertaken for the purpose of business of the assessee.
The Tribunal noted that the only evidence filed in support of the claim was the details of the trip and proof of expenses incurred by way of bills of travel agent and bills of foreign exchange purchased.
“No evidence to prove the visit of the MD to breweries in Edinburgh had been filed, nor any other evidence to prove that the trips were undertaken for a business purpose. Therefore, we uphold the order of the Ld.CIT(A) in disallowing the claim of foreign traveling expenses incurred on the trip undertaken by the MD of the assessee company to the UK.”
With regard to the claim for deduction of the expenses for the trip undertaken by the MD of the assessee company to Germany, the Tribunal found merit in the contention of the assessee.
“Admittedly, the business purpose of the trip to Germany stands established and accepted by the A.O. while allowing expenses incurred on other employees of the assessee company who had accompanied the MD on the said trip. Having accepted the same, he has allowed the expenses incurred on the MD but has restricted it to the extent of Rs.2,17,195/- disallowing expenditure to the extent of Rs.3,27,030/- for the reason that he found the same to be excessive as compared to other employees and personal use could not be ruled out for the same. We cannot agree with this contention of the Revenue. There is no justification for holding the expenses incurred on the MD as excessive,” the Tribunal said.
“Surely the stature of an MD if far above that of the other employees of the company and therefore the expenses cannot be said to be excessive by comparing with the quantum incurred on other employees. Even while disallowing expenses for personal usage, only general statements have been made that some personal element must be involved in the trip to Germany. There is, therefore, we find no basis either for holding the expenses incurred on the MD’s trip to Germany excessive or personal. The Revenue cannot deny the claim of expenditure on whims and fancies. The same is, therefore, not acceptable. In view of the same, we hold that the denial of the claim of expenditure incurred on the trip of the MD of the assessee company to Germany was unwarranted and uncalled for and the same is directed to b allowed to the assessee. The disallowance of the claim of expenditure, therefore, to the extent of Rs.3,27,030/- is deleted,” the Tribunal added.
