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2013 (3) TMI 653 - AT - Income Tax


Issues:
1. Disallowance of entertainment expenses
2. Disallowance of car maintenance expenses
3. Disallowance of tour and traveling expenses

Analysis:

Issue 1: Disallowance of Entertainment Expenses
The Revenue challenged the deletion of &8377; 19,79,713 disallowed by the Assessing Officer on account of entertainment expenses. The ITAT upheld the CIT(A)'s decision based on a previous ruling in the assessee's case for AY 2005-06. The ITAT emphasized that expenses incurred by directors for business purposes should not be disallowed without proper justification. Since the facts were identical to the previous year, the ITAT upheld the CIT(A)'s decision, rejecting the Revenue's appeal on this ground.

Issue 2: Disallowance of Car Maintenance Expenses
The Revenue contested the deletion of &8377; 4,07,302 disallowed by the AO for car maintenance expenses. The ITAT noted a typographical error in the Revenue's ground and corrected the amount. Referring to a similar decision in AY 2005-06, where the disallowance was deleted by the CIT(A), the ITAT upheld the CIT(A)'s order. The ITAT found that most of the expenses were related to conveyance reimbursements for employees and were incurred for business purposes. Therefore, the ITAT rejected the Revenue's appeal on this issue.

Issue 3: Disallowance of Tour and Traveling Expenses
The Revenue challenged the deletion of &8377; 39,57,448 disallowed by the AO for tour and traveling expenses. The ITAT reviewed the AO's reasoning for disallowance and the CIT(A)'s decision to delete it. The ITAT agreed with the CIT(A) that the expenses were legitimate business expenditures and were supported by vouchers and details. The ITAT emphasized that mere suspicion of excessive expenses cannot warrant a blanket disallowance. As the expenses were found to be incurred for business purposes and adequately documented, the ITAT rejected the Revenue's appeal on this ground.

In conclusion, the ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all grounds, emphasizing the necessity for expenses to be incurred for business purposes and adequately supported by evidence to avoid disallowance.

 

 

 

 

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