Inder Mohan Thapar Vs ACIT (ITAT Delhi)
Employee Can’t Be Taxed for Employer’s Expenses: ITAT Delhi Deletes Credit Card Disallowances in Individual’s Hands
The Delhi ITAT “SMC” Bench, partly allowed the appeal of Inder Mohan Thapar for AY 2011-12, deleting multiple additions made on account of credit-card based expenditure in the hands of a salaried employee, while upholding the validity of reopening
The assessment was reopened to examine credit card payments of ₹37.62 lakh during FY 2010-11. However, while framing the reassessment, the AO made various additions including:
- disallowance of expenses of ₹16.37 lakh,
- ad-hoc disallowances of expenses on travel, utilities, mobile, vehicle, conveyance, business promotion, entertainment, LIC etc., and
- addition of ₹1.05 lakh for alleged mismatch in credit card payments.
On the jurisdictional issue, the Tribunal rejected the Assessee’s challenge to reopening, noting that the Assessee was holding two PANs, which itself is illegal. The ITAT held that the Assessee cannot take advantage of reopening having been initiated with reference to a different PAN when he failed to ensure timely cancellation of the duplicate PAN.
On merits, the Tribunal accepted the Assessee’s contention that he was only a salaried employee and that the credit card expenses were incurred on behalf of his employer company, M/s Capital Residency Pvt. Ltd., where he was CEO, and were recorded in the company’s books. Since the Assessee was not carrying on any business in his individual capacity, such expenditure could not be disallowed in his personal assessment.
The ITAT categorically held that business expenditure incurred for a company cannot be taxed or disallowed in the hands of an employee, merely because payments were routed through the employee’s credit card. Accordingly, all additions relating to credit card expenditure were deleted.
The appeal was thus partly allowed
FULL TEXT OF THE ORDER OF ITAT DELHI
