2018 (10) TMI 1306 - HC - Income Tax

Disallowance of expenses incurred for foreign travel of the staff of the assessee company claimed under Section 37 - Held that - FAA had allowed the claim in toto. Tribunal while considering the appeal of the revenue confined the dis-allowance to 20% as has been done in the year 2009-10. The Revenue has filed the appeal contending that 100% dis-allowance has to be made in all instances. We do not think that the appeal can be sustained especially since the Assessing Officer himself had in certain instances granted 50% dis-allowance. The Tribunal also noticed the fact that, for the next year, the AO had disallowed only 20% of the expenses claimed. The very same procedure was adopted for the year 2008-09 also.

Summary

Issues: Disallowance of expenses for foreign travel under Section 37 of the Income Tax Act for assessment years 2008-09 and 2009-2010.

In this judgment by the Kerala High Court, the appeals were filed by both the assessee and the revenue against the common order of the Tribunal for the assessment years 2008-09 and 2009-2010. The primary issue revolved around the disallowance of expenses incurred for foreign travel of the staff of the assessee company under Section 37 of the Income Tax Act, 1956. The Assessing Officer had disallowed varying percentages of the expenses in different instances, ranging from 20% to 100%, based on the personal element perceived in the foreign travels. The First Appellate Authority had allowed full allowance of expenses, following a decision in the case of the assessee for previous years. The Tribunal, however, refused to follow the earlier judgment of equal strength, citing differing facts each year. The High Court noted that the Assessing Officer had provided reasons for the disallowance in the present years and had granted 1/5th of the expenses as disallowances for the year 2009-10, which was upheld by the Tribunal. For the year 2008-09, where the Assessing Officer had made varying disallowances, the Tribunal limited the disallowance to 20%, aligning with the approach taken for the subsequent year. The Revenue's appeal for 100% disallowance in all instances was dismissed by the High Court, emphasizing that the Tribunal's decision was based on factual analysis and did not raise any legal questions. Therefore, the appeals were rejected, and no costs were awarded.