ITAT Upholds Additions for Unexplained Cash Credit and Delayed PF Payments, Grants Partial Relief on Foreign Travel Expenses [Read Order]

The Income Tax Appellate Tribunal, Ahmedabad Bench, had delivered a ruling allowing partial deductions for foreign travel expenses claimed by the appellant while disallowing a portion on the grounds of personal use.

Shridev Procon Limited, appellant-assessee had challenged the disallowance of travel expenses, an addition under Section 68 of the Income Tax Act, disallowance under Section 36(1)(va) related to provident fund (PF) contributions, and interest expense disallowances. A major point of contention in the appeal was the disallowance of Rs.35.60 lakh in foreign travel expenses incurred for business purposes.

The company claimed that these expenses were essential for expanding business opportunities overseas. However, the tax authorities disallowed the claim due to a lack of documentary evidence, including business agreements or communications. During the tribunal hearing, the company's representatives argued that the travel expenses were minimal compared to the company’s total turnover. They also admitted that the director’s spouse had accompanied him on these trips, introducing a personal component to the expenditure. After reviewing the case, ITAT ruled that 30% of the foreign travel expenses should be disallowed due to the personal element, allowing the remaining 70% as a legitimate business expense.

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Another key dispute was the addition of Rs.9.06 lakh under Section 68, related to an advance booking amount received for a real estate project. The tax authorities contended that the company failed to substantiate the identity, creditworthiness, and genuineness of the transaction.

The tribunal found that the company did not provide documentary proof such as bank statements or confirmation letters from the depositor. Consequently, the ITAT upheld the AO’s decision to treat the amount as unexplained cash credit. The company also contested a disallowance of Rs.1.03 lakh under Section 36(1)(va) for delayed deposits of employee provident fund (PF) contributions.

However, in light of the Supreme Court’s ruling in Checkmate Services (P.) Ltd. vs. CIT, which mandates strict adherence to statutory deadlines for PF deposits, the ITAT upheld the disallowance.

The ITAT Bench comprised of Waseem Ahmed(Vice President) and Annapurna Gupta(Accountant Member ) while granting partial relief on the foreign travel expenses, upheld the AO’s findings on the unexplained cash credit and delayed PF payments.

To Read the full text of the Order CLICK HERE

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