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2016 (8) TMI 470 - AT - Income TaxDeduction of traveling expenditure from Capital gains - whether travelling expenditure is an allowable deduction u/s 48(i) of the Act while computing capital gains in connection with transfer of property - assessee is a non-resident Indian and residing in Japan - Held that - The appellant is living in Japan and has filed her return of income in the status of an NRI disclosing the capital gains on sale of the property. She has travelled to India from Japan on number of occasions in connection with transfer of the subject property. The detail breakup of such visits in terms of travel dates, purpose and place of visits has been submitted during the course of assessment proceedings and is on record. Regarding travelling to Bombay and Jaipur is concerned, the appellant has submitted that she has to meet her advisors and prospective buyers from time to time requiring her to travel to these two places. Being the Co-owner and holding 1/3rd share in the property, she was present in India to execute various documents such as execution of MOU, conveyance deed sale deed etc. The necessity of her presence in India and execution of the various documents related to sale of the property have not been disputed by the lower authorities. It is thus seen that the appellant has proved the direct linkage/nexus between her travel to India and the corresponding travel expenditure with the transfer of the property, capital gains arising out of which has been duly offered to tax. We accordingly delete the disallowance of the travelling expenditure of ₹ 850,000 and hold the same as an allowable deduction under section 48(i) of the Act. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of traveling expenditure incurred by the assessee in connection with the transfer of property. 2. Determination of whether such expenditure qualifies as a permissible deduction under section 48(i) of the Income Tax Act, 1961. Detailed Analysis: 1. Disallowance of Traveling Expenditure: The assessee, a non-resident Indian residing in Japan, filed a return declaring an income of ?93,66,179 for the A.Y. 2009-10. The assessment was completed at an income of ?1,02,16,180. The assessee sold a property along with her siblings and claimed ?8,50,000 as traveling expenses under section 48(i) of the IT Act. The Assessing Officer (AO) disallowed this claim, referencing judicial decisions that travel expenditure is not allowable in connection with the transfer of property. The AO cited cases such as B.N. Pinto vs. CIT and Sah Roop Narain vs. CIT to support this disallowance. The CIT (A) upheld the AO's decision, questioning the necessity and justification of the travel expenses, and doubting the assessee's NRI status due to the lack of a passport copy. The CIT (A) also noted that the co-owners were residents, making it unlikely that the entire burden of meeting prospective buyers fell on the assessee. 2. Permissibility of Deduction under Section 48(i): The assessee argued that section 48(i) allows any expenditure incurred wholly and exclusively in connection with the transfer of a capital asset to be deducted. The assessee contended that the travel expenses were necessary to complete the transaction and were thus allowable. The assessee also argued that the CIT (A)'s observations were based on presumptions and that the travel was necessary for meeting advisors, prospective buyers, and executing documents. The Tribunal examined the issue, noting that section 48(i) does not specify the nature of allowable expenses but requires them to be incurred wholly and exclusively in connection with the transfer. The Tribunal referenced the High Court of Mysore's decision in B.N. Pinto vs. CIT, which disallowed expenses due to lack of evidence and specificity regarding their connection to the transfer. Similarly, the Rajasthan High Court in Shah Roop Narain vs. CIT disallowed travel expenses due to the absence of proof. The Tribunal concluded that there is no restriction on the nature of expenditure under section 48(i), provided it is intimately connected with the transfer. The assessee, living in Japan, provided detailed records of her travel dates, purposes, and places of visits, establishing a direct nexus between her travel and the property transfer. The necessity of her presence in India and execution of various documents were not disputed by the lower authorities. Conclusion: The Tribunal held that the traveling expenditure of ?8,50,000 was an allowable deduction under section 48(i) of the Act, as the assessee established a direct linkage between the travel and the transfer of the property. The appeal of the assessee was allowed, and the disallowance made by the AO and confirmed by the CIT (A) was quashed. Order Pronounced: The appeal of the assessee is allowed, as pronounced in the open court on 17/06/2016.
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