2023 (10) TMI 310 - AT - Income Tax

Disallowance of Public Relation Expenses, travelling and conveyance expenses and interest on car loans - Addition on ground of personal use and not incidental to the business - HELD THAT - Assessee before the lower authorities has duly explained that the business of the assessee is of liaisoning and to procure, facilitate, provide logistics etc. to foreign manufacturer suppliers and to provide/facilitate the procuring of material for railways from the aforesaid foreign companies. Thus in can be gathered that the expenses incurred by the assessee on account of public relation expenses, travelling and conveyance expenses and motor car interest expenses owing to the nature of the business of the assessee, were business expenses only. We, therefore, do not find justification on the part of the lower authorities in making the impugned disallowance and the same is accordingly ordered to be deleted. Appeal of the assessee stands allowed.

Summary

Issues:
The appeal against the order of the National Faceless Appeal Centre u/s 250 of the Income Tax Act.

Disallowance of Public Relation Expenses:
The assessee contested the disallowance of a portion of public relation expenses by the ACIT, arguing that the expenses were related to the business of liaising with foreign manufacturers for procurement purposes. The Tribunal found that the nature of the business justified the expenses as legitimate business expenses. Therefore, the disallowance was deemed unjustified and ordered to be deleted.

Disallowance of Travelling and Conveyance Expenses:
Similarly, the ACIT disallowed a portion of travelling and conveyance expenses, alleging non-utilization for business purposes. The assessee explained that these expenses were incurred in facilitating global tenders with foreign manufacturers for the Ministry of Railways. The Tribunal agreed that these expenses were essential for the business operations and overturned the disallowance.

Disallowance of Interest on Car Loans:
The ACIT also disallowed a percentage of interest on car loans, claiming personal use. The assessee clarified that the car was used for business purposes related to the procurement and logistics support for global tenders. Considering the nature of the business and the necessity of the car for operations, the Tribunal ruled in favor of the assessee and deleted the disallowance.

Result:
The Tribunal allowed the appeal of the assessee, emphasizing that the expenses in question were integral to the business operations. The disallowances made by the lower authorities were deemed unjustified and were consequently deleted.