ITAT, DELHI BENCH ‘E’

Mahesh Chand Jain

v.

Assistant Commissioner of Income-tax

R.V. Easwar, Vice President

and Deepak R. Shah, Accountant Member

IT Appeal No. 5070 (Delhi) of 2004

[Assessment year 2001-02]

November 30, 2006

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 2001-02 - Assessee, a proprietorship concern, was engaged in manufacturing and sale of travel bags, etc. for which raw material was being imported from foreign countries -Assessee claimed deduction of certain expenditure incurred on account of foreign tour of two employees, who were his son and daughter-in-law - Lower authorities denied deduction on ground that said foreign tour was purely a pleasure trip - Whether since negotiations and discussions with foreign suppliers which were corroborated by hotel bills as well as details of purchases from new foreign suppliers clearly revealed that expenses were incurred by assessee for business purposes, lower authorities were not justified in disallowing claim of assessee by considering same to be a pleasure trip - Held, yes

FACTS

The assessee, a proprietorship concern, was engaged in manufacturing and sale of travel bags, etc., for which raw material was being imported from foreign countries. For the relevant assessment year, the assessee claimed deduction of certain expenditure incurred on account of foreign tour of two employees, who were son and daughter-in-law of assessee. The Assessing Officer, denied deduction on ground that said foreign tour was purely a pleasure trip, and that assessee had not given details of expenditure incurred on such tour.

On appeal, the Commissioner (Appeals) upheld the order of the Assessing Officer.

On second appeal:

HELD

The details of foreign traveling expenses filed by the assessee clearly showed that the expenses were incurred for the purpose of business which was evidenced by various vouchers and purchases from new foreign suppliers. It is an accepted fact that when there is a visit abroad, incidental expenses like lodging, boarding, local transport, telephone etc., are bound to happen. These were also supported by bills. Further, the negotiations or discussions with foreign suppliers were also corroborated by hotel bills as well as by details of purchases. Therefore, the expenditure incurred, by the assessee on foreign visit of employees was allowable as business expenditure. Hence, the impugned disallowance made by the lower authorities was to be deleted.