2005 (9) TMI 512 - AT - Income Tax

Summary

Issues:
1. Deletion of disallowance of electric bill of residence of directors.
2. Deletion of disallowance of foreign travelling expenses.

Issue 1: Deletion of disallowance of electric bill of residence of directors

The appeal by the revenue challenged the CIT(A)'s order regarding the disallowance of the electric bill of the residence of directors for the assessment year 1994-95. The CIT(A) had deleted the disallowance made by the Assessing Officer, stating that the perquisite value of free supply of electricity to the director's residence was already included in the director's income tax return. The ITAT, after hearing both parties and reviewing the facts, agreed with the CIT(A)'s decision. They found that since the perquisite value was already considered in the director's hands, disallowance by the company (employer) was not justifiable. Consequently, the ITAT upheld the deletion of the disallowance amounting to Rs. 64,588.

Issue 2: Deletion of disallowance of foreign travelling expenses

The revenue's appeal also contested the deletion of disallowance of foreign travelling expenses claimed by the assessee. The Assessing Officer had disallowed Rs. 1,22,096 of the claimed expenditure, stating that the director's overseas visits were not for business purposes. The CIT(A) overturned this decision. The assessee argued that the director was qualified and contributed to the business, even though no orders resulted from her overseas meetings. The ITAT noted that the assessee failed to provide evidence supporting the necessity of the foreign visits for business purposes or that services were rendered during those visits. The ITAT emphasized the importance of expenditures being wholly and exclusively for business purposes. They highlighted the lack of documentary evidence or records supporting the necessity of the visits for business. The ITAT rejected the alternate argument citing a different judgment, stating that the facts were distinguishable. Consequently, the ITAT set aside the CIT(A)'s order, reinstating the Assessing Officer's addition of Rs. 1,22,096.

In conclusion, the ITAT partially allowed the revenue's appeal, upholding the disallowance of foreign travelling expenses while affirming the deletion of the disallowance of the electric bill of the residence of directors.