2017 (2) TMI 584 - AT - Income Tax

Disallowance of foreign travel expenses - Held that - CIT(A) has considered the details furnished by the assessee with regard to foreign travel expenses and after considering each and every expenditure, he arrived at the conclusion that the expenditure of ₹ 5,45,375/- was not for the purpose of business and accordingly, has disallowed the same. After considering the facts, we do not find any infirmity in the order of learned CIT(A). The same is upheld.

Summary

Issues Involved:
1. Disallowance of foreign travel expenses in assessment year 2005-06.

Analysis:
In this case, the Revenue appealed against the reduction in the disallowance of foreign travel expenses, while the assessee cross-objected against the addition sustained. The assessee claimed an expenditure of ?39,57,985 on foreign travel, which was initially disallowed in full by the Assessing Officer. However, the learned CIT(A) reduced the disallowance to ?5,45,375. The Revenue contended that the assessee failed to provide sufficient evidence to establish that the foreign travel expenses were incurred for business purposes. On the other hand, the assessee argued that all necessary details were submitted, and the relief granted by the CIT(A) should be further modified. The key issue revolved around proving that the expenditure was incurred wholly and exclusively for the purpose of business.

The learned CIT(A) considered the details filed by the assessee and found that most expenses were related to the business activities of the appellant, except for a few instances where the nexus could not be established. Specifically, expenses related to journalists' foreign visits were deemed not allowable as per the Press Council Act, 1978, and the guidelines on undue favors to journalists. Consequently, the disallowance of ?39,57,985 was reduced to ?5,45,375, with the balance amount treated as explained and deleted. The Tribunal upheld the CIT(A)'s decision, stating that the disallowed amount was not for the purpose of business. Therefore, both the Revenue's appeal and the assessee's cross-objection were dismissed, affirming the disallowance of foreign travel expenses.

In conclusion, the Tribunal's decision emphasized the importance of establishing a clear nexus between expenses and business activities to claim deductions. The case highlighted the significance of complying with legal provisions and guidelines, especially concerning expenses related to journalists, to determine the allowability of expenditures for tax purposes.