Expences on foreign tours u/s.37(3) of Income tax .Act,1961. - Income Tax - 192/CBDT

INSTRUCTION NO 192/CBDT, Dated: July 13, 1970 Section(s) Referred: 37(1) ,37(3) Statute: Income - Tax Act, 1961 The Board have observed that the question of admissibility of expenses on foreign tour incurred by the director of a company or partner of a firm or an employee is not being treated uniformly. Hence the legal position relating to the subject is being restated as under: 2. Ordinarily, the objects for which the director, partner, proprietor or an employee undertakes a tour of foreign countries as under:- i) To study the latest developments in the particular industry associated with the business of the assessee(on behalf of the assessee or as a participant in a delegation of the industry concerned) and to explore the possibilities of exports of company's products. ii) To purchase new machinery or enter into collaboration agreements to start a new industry or to manufacture a new product, iii) To attend a conference of the industry with which the assessee is associated as a representative of the assessee or as a delegate of the local association of the industry but bearing the whole expenditure. 3. In all these cases, the test to be applied is whether the expenditure incurred brought into existence any new assets or whether the expenditure was merely calculated to increase the profits of the company. If it is the former, the expenditure cannot be allowed. Hence the expenditure of the type mentioned in item (2) above would not qualify for deduction. 4. When the foreign tour is undertaken to study the new techniques or developments of the industry abroad or to participate in a seminar conference either on behalf of the assessee or the local association, there is no asset as such brought into existence; on the other hand, the knowledge gained by the foreign tour can be fruitfully utilised in the business whereby the profitability thereof is enhanced. Such expenditure can qualify deduction u/s. 37(1) of the I.T.Act,1961. 5. However, in allowing expenditure on account of foreign tours u/s.37(3) of the I.T.Act,1961, the limits laid down under rule 6D of the I.T.Rules, 1961 should be carefully observed. 6. These instructions may please be brought to the notice of all the officers working in your charge.