2018 (4) TMI 260 - AT - Income Tax

Disallowance of foreign traveling expenses - Held that - We require the assessee s Counsel to explain what type of business conducted by assessee in relation to the visits of Shri Shiv Hari Agarwal to Singapore and Siddarth and Sandhini to Singapore but he could not explain. He only stated that just to explore the market. He could not submit any evidence of the same. In such circumstances, we are of the view that these foreign travelling expenses to Singapore by Shri Shiv Hari Agarwal and Siddarth and Sandhini is not in connection with the business of the assessee and assessee has no business connection with these countries at all. We confirm the order of CIT(A) confirming the disallowance of foreign travelling expenses. Issue of assessee s appeal is dismissed. Disallowance of telephone expenses and motor car expenses at the rate of 10% on adhoc basis - Held that - Estimation of the AO for 10% use of such communication devices for personal & non-use purposes, cannot be termed as excessive. Apart-from that from the details of the vehicles. We find that there are a no. of luxury vehicles which are used by the partners of the firm. The appellant has not brought on record details of personal vehicles in the names of the partners whose expenses are not debited by the firm during the year under consideration. Such details, the act of the AO to estimate personal use of the vehicle @ 10% cannot be treated as excessive. - Decided against assessee.

Summary

Issues:
1. Disallowance of foreign traveling expenses
2. Disallowance of telephone expenses and motor car expenses

Issue 1: Disallowance of foreign traveling expenses
The appeal by the assessee challenges the disallowance of foreign traveling expenses amounting to ?6,10,422 by the CIT(A). The AO disallowed these expenses as the assessee failed to provide evidence of business purposes for trips to Malaysia, Singapore, and Sri Lanka. The CIT(A) upheld the disallowance, emphasizing the lack of business connections with these countries and the failure to justify the expenses. The Tribunal confirmed the disallowance, noting the absence of evidence linking the trips to the assessee's business activities. The appeal was dismissed as the expenses were deemed non-business related.

Issue 2: Disallowance of telephone expenses and motor car expenses
The assessee contested the ad-hoc disallowance of telephone expenses and motor car expenses at a rate of 10% by the CIT(A). The CIT(A) confirmed the disallowance, citing the lack of details to establish business use and the presence of personal elements in the expenses. The Tribunal upheld the CIT(A)'s decision, as the assessee failed to challenge the findings effectively. The appeal was dismissed, affirming the CIT(A)'s ruling on the ad-hoc disallowance of telephone and motor car expenses.