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2016 (12) TMI 1545 - ITAT MUMBAIDisallowance of hotel expenses as being not incurred for purpose of business - "wholly and exclusively" - company has incurred hotel expenses for stay of Shri Samyak Veera,NRI, who stayed in India as a strategic investor for monitoring project in India - Held that:- The expenditure incurred being “wholly and exclusively does not mean that it has to be incurred necessarily. The expression "wholly and exclusively" used in section 37 of the IT. Act does not mean necessarily and the payments made voluntarily are not to be disallowed only on account of their voluntary character. So long as there is a reasonable nexus between the expenses incurred and the business of the assessee, the expenses will be regarded as having been incurred for the purposes of business. Thus, the test to find out whether a particular expenditure is wholly or partly justified or exclusively incurred for the purpose of business is not to see whether it is necessary, but to be considered as commercial expediency and has to be judged from a prudent businessman's point of view. The true test is to find out whether the business man, when he expends the money is acting reasonably in the interest of his own business. Every businessman knows his interest best and it is for assessee to decide how to promote his business interest. Therefore, the disallowance made by the AO on the ground that the hotel expenses was not incurred "exclusively" for the business purpose is not justified. In view of above discussion, we do not find any merit in the action of lower authorities disallowing the expenditure incurred by assessee for the purpose of its business. - Decided in favour of assessee
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