2020 (4) TMI 166 - AT - Income Tax

Disallowance on account of driver s salary and fuel and lubricant expense - Addition on the ground that there was no car owned by the assessee and no satisfactory explanation in this regard was offered by the assessee to justify his claim that driver s salary and fuel and lubricant expenses - HELD THAT - At the time of hearing before the Tribunal nothing has been brought on record by the ld. counsel for the assessee to establish that these expenses were wholly and exclusively incurred for the purpose of his business. Keeping in view the same as well as for the specific reasons given by the AO it is of the view that the disallowance made by the AO on account of driver s salary and fuel and lubricant expense was fully justified and the Ld. CIT(A) has rightly confirmed by the same. Business conference expense - HELD THAT - As observed that organising the business conference was accepted by the AO as incidental to the business of the assessee in the field of direct selling. However keeping in view the failure of the assessee to produce the relevant documentary evidence in the form of bills and vouchers to support and substantiate the same he disallowed the claim of the assessee for business conference expense to the extent of 50%. Keeping as the nature of assessee s business as find merit in the contention of the learned counsel for the assessee that the disallowance of 50% made by the AO is on the higher side and it would be fair and reasonable to restrict the same to 20%. Flight booking expenses - HELD THAT - Details given in assessment order were in respect of the employee s of the assessee and since the same were incurred wholly and exclusively for the purpose of the assessee s business the disallowance made by the AO to that extent is not sustainable I find merit in this contention of the learned counsel for the assessee. Keeping all including especially the nature of assessee s business flight booking expenses are necessary for the purpose of the assessee s business and since the relevant amount of Rs. 1, 37, 058/- was incurred by the assessee on the travelling of his employees there is no justifiable reason to disallow the same. Accordingly direct the deletion of disallowance made on account of flight booking expenses to the extent of Rs. 1, 37, 058/-.

Issues involved:
1. Disallowance of driver's salary and fuel and lubricant expenses.
2. Disallowance of business conference expense.
3. Disallowance of flight booking expenses.

Detailed Analysis:
1. The Assessing Officer (AO) disallowed the driver's salary and fuel and lubricant expenses as there was no car owned by the assessee, and no satisfactory explanation was provided to justify these expenses. The Appellate Tribunal observed that the disallowance was justified as no evidence was presented to show these expenses were incurred for the business purpose. The Tribunal upheld the decision of the Lower Commissioner (CIT(A)) in confirming these disallowances.

2. Regarding the business conference expense, the AO disallowed 50% of the claimed amount due to the lack of documentary evidence like bills and vouchers. The Tribunal acknowledged that organizing business conferences was essential for the direct selling business. However, considering the failure to produce supporting documents, the Tribunal reduced the disallowance from 50% to 20%, finding it more reasonable based on the nature of the business.

3. The AO disallowed a portion of flight booking expenses, stating that certain expenses were not adequately supported by evidence. The Tribunal noted that these expenses were for the employees of the assessee and were incurred for business purposes. Therefore, the Tribunal found the disallowance unjustified and directed the deletion of the disallowed amount related to flight booking expenses. The Tribunal partially allowed the appeal, overturning the disallowance on flight booking expenses and reducing the disallowance on business conference expenses.

In conclusion, the Appellate Tribunal partially allowed the appeal, overturning the disallowance on flight booking expenses and reducing the disallowance on business conference expenses, while upholding the disallowance of driver's salary and fuel and lubricant expenses.

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