2018 (4) TMI 246 - AT - Income Tax

Disallowance of foreign travelling expenses of Directors - Held that - Except for stating that assessee has met one doctor or may be a particular doctors, however the assessee has not brought forward any evidence as to what was the meeting about, or whether any kind of agreement or understanding was entered for getting a referral patient or there was some likelihood of business in future. Even if the new business venture has been failed later on but assessee should have brought some evidence on record to prima facie show that the foreign travelling undertaken by the directors were wholly and exclusively for the business purpose of the company. Here in this case preponderance of probability miserably fails as none of the factors or material indicates that such foreign travel was for the purpose of business. Assessee may have started a new line of business, but the particular visit of London does not appear to be for the purpose of business sans any supporting evidence like, any kind of correspondence, agreement, exchange of mails, etc. Mere stating that the directors have met one doctor and that to be one name has been given will not suffice. - Decided against assessee.

Summary

Issues:
Challenge of addition of foreign travelling expenses of Directors.

Analysis:
The appeal was filed against the order of Ld. CIT (Appeals) I, New Delhi regarding the disallowance of foreign travelling expenses of Directors amounting to ?9,45,841. The Assessing Officer disallowed the amount as the purpose of the foreign visit was not proven by the assessee. The assessee claimed the expenses were related to a new business venture called "The Global Patient" for medical tourism. However, both the AO and CIT (A) found the evidence provided insufficient to justify the expenses.

The assessee contended that the visit to London was for getting referral patients for medical treatment in India and presented agreements with medical establishments to support the claim. The Ld. Counsel argued that even if no immediate business was conducted during the trip, the expenses were incurred for commercial expediency. The Ld. Sr. DR countered that the purpose of the London visit was not adequately substantiated and questioned the feasibility of attracting patients from London to India for medical treatment.

The Tribunal upheld the AO's decision, emphasizing that the burden of proof lies on the assessee to demonstrate the commercial expediency of the expenses. Despite the new business venture, the lack of concrete evidence regarding the purpose of the London visit led to the dismissal of the appeal. The Tribunal highlighted the need for substantial evidence, such as agreements or correspondence, to establish the business purpose of the foreign travel. The failure to provide convincing proof resulted in the rejection of the appeal.

In conclusion, the Tribunal affirmed the decision to disallow the foreign travelling expenses of the Directors, emphasizing the requirement for substantial evidence to justify such expenses for business purposes. The lack of concrete evidence regarding the commercial expediency of the trip to London led to the dismissal of the appeal.