2015 (6) TMI 1124 - AT - Income Tax

Disallowance of Travelling Expenditure - Held that - The assessee has submitted the details, according to which foreign travel expenses were subjected to FBT and since foreign travel expenses have already been subjected to FBT, the same could not be disallowed under section 37 of the Income Tax Act, 1961. See Om Intercontinental vs. ACIT 2013 (4) TMI 793 - ITAT MUMBAI . Therefore we delete the addition and appeal filed by the assessee is allowed.

Summary

Issues:
1. Disallowance of Traveling Expenditure under section 37 of the Income Tax Act, 1961.

Analysis:
The appeal was filed against the order passed by Ld. CIT(A)-31 Mumbai for the assessment year 2009-10, challenging the disallowance of Traveling Expenditure amounting to Rs. 6,60,131. The appellant contended that since the foreign travel expenses were already subjected to Fringe Benefit Tax (FBT), they could not be disallowed under section 37 of the Income Tax Act. The appellant relied on a previous Tribunal decision in the case of Om Intercontinental vs. ACIT, where a similar proposition was accepted. The Mumbai Tribunal in the case of Hansraj Mathuradas v. ITO also held that expenses subjected to FBT cannot be disallowed under section 37(1) of the Act if they are for business purposes.

The Tribunal carefully considered the contentions of both parties and referred to the CBDT Circular No.8/2005, which stated that expenses subjected to FBT are treated as fringe benefits provided by the employer to its employees and should be allowed as expenditure incurred wholly and exclusively for the business purpose. The Tribunal found no contrary decision in this regard and held that if the expenditure was subjected to FBT, no disallowance could be made. Therefore, the Tribunal directed the Assessing Officer to verify whether the impugned expenditure was subjected to FBT. If so, the disallowance could not be made, and the appellant's claim should be accepted in its entirety.

Ultimately, the Tribunal allowed the appeal filed by the assessee, stating that the foreign travel expenses were indeed subjected to FBT, in line with the previous decisions and observations. As a result, the addition was deleted, and the appeal was allowed in favor of the appellant.