Ad hoc disallowance of foreign tour expenditure not sustainable without questioning the business purpose of the trip

Amit Jain  Vs. Income Tax Officer

Decided by- ITAT Kolkatta

I.T.A Nos. 1673 & 1674/Kol/2010

Assessment Years: 2006- 07 & 2007- 08

Decided on – 30.06.2011

ORDER

Shri Mahavir Singh, Judicial Member :

These two appeals filed by assessee are arising out of separate orders of CIT(A)- XIX, Kolkata in Appeal Nos. 143&395/CIT(A)-XIX/ITO, Wd.32(1)/08-09 & 09-10 vide dated 09-02-2009 and 19-02-2010. Assessments were framed by I.T.O, Ward 32(1), Kolkata for assessment years 2006-07 and 2007-08 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his orders dated 31-12-2008 and 3 1-12-2009.

“1. That on the facts and in the circumstances of the case, the id. A.O. as well the Ld. CIT(A)-XIX, Kol were not justified in not allowing the Bad Debts of Rs.4,580/- on the alleged ground by ignoring the fact that said amount was actually irrecoverable. Even otherwise the same is allowable as “Discount Allowed”. Hence, the addition made by AO and sustained by the LD. CIT(A)- XIX, Kol as aforesaid is unjustified, arbitrary, excessive and based on surmises and guess and therefore liable to be deleted in full.”

3. We have heard rival submissions and gone through facts and circumstances of case. The AO during the course of assessment proceedings noted that assessee claimed discount/ bad debts at Rs. 4,580/-, but in the nomenclature of ‘bad debts’. The AO observed that assessee did some consultancy and supervision job for Oriental Apartment (P) Ltd and raised bill against the same at Rs. 1,10,200/-. The assessee received Rs. 1 lac as advance and balance amount of Rs. 10,200/- was claimed as bad debt. The assessee explained that he has not received balance amount and claimed the same as bad debt. The AO found from NSDL site that Oriental Apartment Pvt. Ltd. has deposited TDS on account of assessee at Rs. 5,620/-, hence balance claim of assessee of bad debt of Rs.4,580/- was disallowed. We find that assessee has written off this amount in its books of account, this can be treated as discount or bad debt, because the claim of the assessee will not be defeated by mentioning nomenclature. Accordingly, we allow this claim of assessee. This issue of assessee’s appeal is allowed.