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TMI Blog2024 (3) TMI 534X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that it would not be proper to completely disallow the expenses and made ad-hoc disallowance. The assessee on 29/11/2018 provided detailed submission on the questionnaire raised along with all the invoices, vouchers and other documentary evidence supporting the expenses incurred by the assessee. Further, on 04/12/2018 once again provided detailed submission with respect to all travel made by the employees along with the agenda of the meetings and other relevant details corroborating the business purposes of the travelling and car hire charges. Hon ble Supreme Court in the case of CIT Vs. Delhi Safe Deposit Co. Ltd. [ 1982 (1) TMI 2 - SUPREME COURT] held that the true test of an expenditure laid out wholly and exclusively for the purposes of business is that it is incurred by the assessee as incidental to his trade for the purpose of keeping the trade going. The expenditure incurred must be for commercial expediency. In the circumstances, the Ld. A.O. has been totally wrong in considering the fact that the discharge of the burden has to be effective and meaningful and not to cover up merely by book entries and paper work. The present case, at no point of time, the Lower Aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Commissioner of Income Tax (Appeals) [hereinafter referred to as CIT(A) erred in upholding the ACITs Order arbitrarily disallowing 30% of expenses incurred by the Appellant on car hire, domestic and foreign travel without any evidence merely on the basis of certain incorrect assumptions, suspicion, surmise and conjecture. 7. That on the facts and in the circumstances of the case, the learned CIT(A) erred in ignoring the submissions made by the Appellant to prove genuineness of the expenses incurred. 8. That on the facts and in the circumstances of the case, the learned Commissioner of Income Tax (Appeals) erred in ignoring the fact that the subject year is the year of incorporation of the Appellant company, and it is only natural that substantial travelling expenses are to be incurred in the initial years to set up the business and establish connections with suppliers, agents and customers. 3. There is a delay of 279 days in filing the present Appeal. The assessee filed an application for condonation of the delay contending that the time limit for filing the Appeal before the Tribunal was up to 28/01/2023 and the assessee made payment of Court Fee on 20/01/2023 and filed Appeal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements with the directors, who are Japanese citizens, are entitled for journey only once a year. Further, the AO also observed that even if it is admitted that parent companies of these Indian companies may be located in Japan or any other foreign country, they are not supposed to take decision on behalf of the Indian subsidiaries whose registered office, manufacturing units, CPOs and other decision makers are here in Gurugram, Delhi and Manesar. Thus, the AO concluded that in the absence of information which could establish that the travels were actually made for business purpose, the appellant has failed to discharge its onus. Relying on the decision of the Hon'ble ITAT in the case of Kanu Kitchen Kulture (P) Ltd Vs. DCIT [2014] 49 taxmann.com 64 (Delhi-Trib), Hon'ble Supreme Court in the case of CIT Vs. Imperial Chemical Industries (India) P. Ltd. [1969] 74 ITR 17, the Hon'ble ITAT held that burden of proving that a particular expense has been laid out or incurred wholly and exclusively for the purpose of business is entirely on the assessee. The discharge of the burden has to be effective and meaningful and not to cover up merely book entries and paper work. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth the parties and perused the material available on record. The assessee Company is a Japanese Subsidiary Incorporated in India on 16/10/2015 which is mainly into trading of electrical materials, general electronic parts, semiconductors and electric and non-electronic auto components to/from Japan, India and internationally. It has been noticed by the A.O. that in the P L Account of the assessee, the assessee booked car charges of Rs. 15,10,854/-, foreign traveling of Rs. 8,43,895/- and domestic traveling of Rs. 23,31,777/-. The assessee was asked to give ledger copies of the expenses with name, employee number, date of travelling, name and business purpose of traveling and sought for names and address of the person with whom meeting was proposed, copies of correspondence regarding fixing of meetings, minutes of meetings, consequent effect on sale and further dealing if any. The assessee through his Representative provided certain details, and clarifications but the Ld. A.O. not satisfied with the explanation given by the Assessee's Representative. However, the A.O. has not disallowed the entire expenditure claimed by the assessee, but made ad-hoc disallowance of 30% of the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be gone into only for the purpose of determining whether, in fact the amount was spent. Once it is established that there was a nexus between the expenditure and the purpose of the business, the Revenue cannot justifiably claim to put itself in the armchair of the business man or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize his profits. 14. In the present case, at no point of time, the Lower Authorities have disputed the genuineness of the vouchers, payments, approvals, travel dates etc. but without their being any contrary evidence and without any material in hand erroneously made ad-hoc disallowance of Rs. 30% of the expenses claimed by the assessee. In our opinion, the Lower Authorities have committed error in making ad-hoc 30% disallowance of the expenses claimed by the assessee. Finding the merits in the Grounds of appeal of the Assessee, we allow the Grounds of Appeal of the Assessee and delete the disallowance made by the Lower Authorities. 15. In the result, the Appeal filed by the assessee is allowed. Order pronounced ..... X X X X Extracts X X X X X X X X Extracts X X X X
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