Expense cannot be disallowed merely for non-production of vouchers by employees

Hero Motocorp Ltd Vs ACIT (ITAT Delhi)

FULL TEXT OF THE ORDER OF ITAT DELHI

Regarding Ground No. 16 relating to disallowance of reimbursement of foreign travelling expenses to directors/employees amounting to 7.38 crores, the Ld. AR submitted that the disallowance was made on the ground of non-submission of evidence/proof of actual expenses incurred by employees. It was submitted that in the course of discharge of official duties, the employees of the company are required to travel abroad and incur incidental expenses in foreign currency like local conveyance, boarding and lodging expenses, telephone expenses etc. The assessee had introduced a policy fixing per diem allowance payable to employees, depending upon the grade/category of the employees and the place/country of travel. The employees are not entitled to any extra allowance in the event the actual expenditure incurred by the employee is in excess of such per diem allowance. It was submitted that for payment of per diem allowance, as per policy, the assessee does not require the expenses to be necessarily supported /backed by bills considering the practical difficulties/impossibilities in producing invoices for petty expenses like local conveyance, telephone bills, etc. The employees are only required to submit details of expenditure incurred in specified form, on basis of which travel bill is settled. It was submitted that in the assessment order, the AO made disallowance of Rs.7,38,27,378/- (comprising of Rs. 2,28,58,951/- in respect of Dharuhera, Gurgaon, Haridwar and Neemrana plants and Rs. 5,09,68,426/- in respect of head office expenses) out of expenditure incurred towards re-imbursement of foreign travel expenses incurred by employees, on the ground that declaration furnished by the employees was not a sufficient evidence to establish the incurrence of actual expenses, which were required to be supported with bills/invoices of factual expenditure incurred by the employees.

The Ld. AR submitted that the aforesaid issue is squarely covered in favour of the assessee by the decision of Delhi Bench of the Tribunal in the assessee’s own case for the AYs 2007­08 and 2008-09, wherein the Tribunal held that disallowance cannot be made merely on the basis that vouchers were not produced by the employees, which has been reaffirmed by the Tribunal in the order dated 24.10.2016 passed for the assessment years 2010-11 and 2011-12. It was further pointed out by the Ld. AR that following the order of the Tribunal for AYs 2010-11 and 2011-12, the Tribunal has also decided the issue in favour of the assessee in appellate orders passed for AY 2009-10, 2012-13 and 2013-14.

We have heard both the parties and have perused the material available on record. The Tribunal, in assessee’s own case, has held in A.Ys. 2010-11 and 2011-12 as under:-

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