2014 (6) TMI 9 - AT - Income Tax

Entitlement for deduction of foreign traveling expenses Held that - The assessee has contended that the amount pertained to local taxi hiring charges, snacks, newspapers and magazines and other miscellaneous expenses which assessee accepts is not in a position to support by vouchers - In the peculiar facts and circumstances considering where the business purpose has been accepted by the Revenue in the assessment order itself the AO is directed to allow necessary relief to the assessee by way of estimation after the assessee provides some breakup of the expenses claimed - this is a fit case where estimation has to be resorted to thus, the matter is remitted back to the AO for adjudication Decided in favour of Assessee. Entitlement for deduction of professional fees Held that - The claim of payments to Mr. Sagnik Goswami is a recurring issue and in the circumstances it is considered appropriate to restore the issue back to the file of the AO to take into consideration the contract and agreement, copy placed, showing that Mr. Sagnik Goswami has been offered the appointment as a consultant to the assessee - The document is relevant and crucial and since this is a recurring issue, it should be taken into consideration before a view is taken thus, the matter is remitted back to the AO for adjudication Decided in favour of Assessee.

Summary

Issues:
1. Disallowance of foreign travel expenses.
2. Disallowance of professional fees paid.

Analysis:

Issue 1 - Disallowance of Foreign Travel Expenses:
The assessee, a management consultancy company, filed an appeal against the disallowance of foreign travel expenses amounting to Rs. 1,93,000 for the assessment year 2007-08. The CIT(A) partly allowed the appeal but confirmed the disallowance. The Tribunal referred to a similar case for A.Y. 2009-10 where the business purpose of the foreign trip was accepted, and expenses were allowed to an extent after estimation. Following this precedent, the Tribunal restored the issue to the AO for estimation after the assessee provides a breakdown of the expenses claimed. The Tribunal emphasized that in the absence of details, estimation is necessary, and directed the AO to allow necessary relief based on the business purpose accepted by the Revenue.

Issue 2 - Disallowance of Professional Fees Paid:
Regarding the disallowance of professional fees paid to Mr. Sagnik Goswami, the brother of the Director of the assessee company, the Tribunal noted a similar issue in A.Y. 2009-10. In that case, an agreement with Mr. Sagnik Goswami was considered crucial, and the issue was restored to the AO for a decision considering the agreement. In the current case, as the assessee had not filed the agreement before lower revenue authorities, a new agreement dated 17th October, 2006 was admitted. Following the precedent, the Tribunal restored this issue to the AO for consideration of the contract and agreement, directing a decision in accordance with the law after providing the assessee with a reasonable opportunity to be heard.

In conclusion, the appeal was allowed for statistical purposes in both issues, and the order was pronounced on 16/05/2014 by the Appellate Tribunal ITAT Delhi.