1989 (4) TMI 128 - AT - Income Tax

Summary

Issues: Disallowance of travelling expenses claimed by the assessee for trips to Hong Kong.

Analysis:
1. The assessee, engaged in the purchase and sale of ball bearings, claimed travelling expenses of Rs. 23,385, out of which Rs. 20,815 was disallowed by the Income Tax Officer (ITO) as not related to business.

2. The ITO disallowed the claim stating the expenses were of a personal nature, without providing any detailed reasoning for the disallowance.

3. The assessee appealed to the Appellate Authority Commissioner (AAC), presenting evidence of purchases made in Hong Kong amounting to Rs. 2.5 lakhs. However, the AAC upheld the disallowance, questioning the necessity of the trips and the business connection.

4. In the further appeal before the ITAT Delhi, the counsel for the assessee argued that the trips were essential to acquire technical knowledge for trading in ball bearings effectively. The Departmental Representative contended that the volume of purchases did not justify the trips.

5. The ITAT Delhi held that the disallowance was unjustified, emphasizing that business expenses need not yield immediate results and the connection between expenses and business need not be based on a fixed turnover. The tribunal accepted the assessee's explanation that the trips were for acquiring technical knowledge essential for the trade, overturning the lower authorities' decision.

6. The ITAT Delhi concluded that the trips to Hong Kong were indeed for business purposes, as evidenced by the purchases made, and allowed the appeal, stating that the authorities were wrong in disallowing the claim.