2019 (11) TMI 578 - AT - Income Tax

Addition of foreign travelling expenses - HELD THAT - AO while making addition in the case of the assessee had mentioned that some of the bills and vouchers are handmade and some of the expenses were paid in cash by the assessee. Apart from this, no other allegation has been raised by the AO. It is pertinent to mention here that the AO has nowhere pointed out during the course of investigation that expenses incurred by the assessee were in personal in nature and AO merely made the addition on the ground that the bills and vouchers are handmade and certain expenses are incurred in cash. At the same time, AO has not disputed with regard to incurring of expenses for business purposes. In the present facts and circumstances of the case, AO as well as CIT(A) were not right in making addition or restricting addition more particularly when the assessee had produced all the bills and vouchers regarding each expenses. Therefore, we are of the considered view that the orders passed by the Revenue authorities on this issue are not sustainable. Hence, the Ground No. 1 raised by the assessee is allowed. Addition for trade mark registration expenses - HELD THAT - As submitted at Bar by assessee that so far registration of trademark has not been done and these expenses were exclusively incurred by the assessee on account of consultancy charges to professionals towards fee for registering the trademark whereas on the contrary the Revenue authorities disallowed those expenses on account of failure on the part of the assessee to submit the document in support of his claim. It is pertinent to mention that the assessee has already placed on record the document before Revenue authorities which is at page 105 of the paper book. Thus under these facts and circumstances of the case, the Revenue authorities were not expected to wipe out said document without verifying the authenticity of the issue in question and thus disallowed the expenses without any basis or reasoning. Hence, in our considered view, the orders passed by the Revenue authorities on this issue are not sustainable and the addition so made is deleted. Ground No. 2 of the assessee is allowed.

Summary

Issues involved:
1. Disallowance of foreign traveling expenses
2. Disallowance of trade mark registration expenses

Issue 1: Disallowance of foreign traveling expenses

The appellant contested the addition of ?4,39,464 for foreign traveling expenses out of total expenses of ?8,78,928. The AO disallowed 10% of the expenses, which the CIT(A) reduced to 5%. The appellant argued that all expenses were supported by vouchers and bills, with only a small portion incurred in cash. The tribunal noted that the appellant, engaged in gold and silver jewelry export, participated in foreign exhibitions, incurring the expenses in question. The AO's disallowance was solely based on handmade vouchers and cash payments, without disputing the business nature of the expenses. The tribunal held that the Revenue's actions were unjustified as all expenses were adequately supported. Consequently, the tribunal allowed the appellant's appeal on this ground.

Issue 2: Disallowance of trade mark registration expenses

The AO disallowed ?36,750 out of ?49,000 trade mark registration expenses, treating it as capital expenditure. The CIT(A) upheld this decision, stating lack of evidence from the appellant. However, the appellant argued that the expenses were for consultancy charges, a revenue expenditure. The tribunal found evidence of consultancy charges in the documents submitted by the appellant. The Revenue's disallowance was based on the appellant's alleged failure to provide evidence, despite the document's presence in the record. The tribunal held that the disallowance lacked a basis and reasoning, leading to the deletion of the addition. Consequently, the tribunal allowed the appellant's appeal on this ground.

In conclusion, the tribunal partly allowed the appellant's appeal, overturning the disallowances of both foreign traveling expenses and trade mark registration expenses.