2011 (5) TMI 1155 - AT - Income Tax

Summary

Issues involved:
1. Addition on account of managerial services
2. Deletion of addition of travelling expenses for personal use
3. Disallowance of vehicle maintenance expenses

Addition on account of managerial services:
The appeal by the Revenue for assessment year 2006-07 arises from the order of the ld. CIT (Appeals)-I, New Delhi. The assessing officer disallowed an amount paid by the Assessee company for freight forwarding functions done by UTI Network Inc. outside India, considering them as managerial services covered under Section 9(1)(vii) of the Income-tax Act, 1961. On appeal, it was argued that these services were commercial in nature and not managerial. The ld. CIT (Appeals) agreed, stating that the services were not taxable in India under Section 195 of the Act. Therefore, the addition was deleted.

Deletion of addition of travelling expenses for personal use:
The assessing officer disallowed a portion of travelling expenses for personal use of vehicles by Directors and employees. The ld. CIT (A) observed that the disallowance was made due to non-maintenance of log books, but since the Assessee had paid Fringe Benefit Tax on the total expenditure, no further disallowance was warranted. The deletion of the addition was upheld as the expenses were incurred for business purposes.

Disallowance of vehicle maintenance expenses:
The assessing officer disallowed a portion of vehicle maintenance expenses twice, once as part of total expenses and then separately. The ld. CIT (A) deleted the disallowance, noting that the Assessee had already paid Fringe Benefit Tax on the expenses. As the expenses were incurred for business purposes and FBT was paid, no further disallowance was justified. The addition made by the assessing officer was accordingly deleted.

The appeal filed by the Revenue was dismissed, and the order was pronounced on 13th May, 2011.