Garware Finance Corporation Limited Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that based on suo motu disallowance, additional disallowance on travel expenses and foreign travel expenses unjustified.
Facts- The assessee company was engaged in the business of providing consultancy and financial services, trading in shares etc. For the year under consideration, the assessee filed return of income u/s 139(1) of the Income-tax Act, 1961 declaring total income at Rs.1,00,18,070/-. A search action u/s 132 of the Act was carried out in the case of the assessee on 09.03.2021 along with other cases on “Nihal Garware” and consequently notice u/s 153A of the Act was issued. In the assessment completed u/s 153A of the Act dated 28.03.2022, AO made disallowance of travelling expense amounting to Rs.5,41,634/ – and business promotion expenses of amounting to Rs.1,81,075/ -.
On further appeal, the Ld. CIT(A) upheld the disallowance. Aggrieved, the assessee is in appeal before the Tribunal.
Conclusion- In our opinion looking to the business operations of the assessee company and suo motu disallowance made by the assessee, additional disallowance on foreign travel expenses by the Assessing Officer is not justified being a non-resident director ,it was necessary for him to travel to India for looking after affairs of the assessee company. The Assessing Officer cannot dictate to the assesseeas how to manage affairs of the assessee.
In the present case we have already held that disallowance of travel expenses is not justified in view of suo -moto disallowance, quantum of travel expenses amount in proportion of business turnover and business expediency etc. In view of the facts and circumstances of the case, we set aside the finding of ld CIT(A) and delete the addition made by the Assessing Officer.
In our opinion, the assessee has justified the business expediency of the expenses. The Ld DR submitted that the assessee should produce the persons with whom he held meeting to support his contention of business expediency. We are of the view that it may not be possible for the assessee to produce all those persons with whom the director of the company had meeting in hotels. Looking to the quantum of expenses, as compared to the business turnover, we do not find the expense as excessive and hence, we set-aside the finding of Ld CIT(A) and delete the addition made by the AO.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These two appeals by the assessee are directed against two separate orders, both dated 15.12.2022, passed by the Ld. Commissioner of Income-tax (Appeals)-54, Mumbai [in short ‘the Ld. CIT(A)’] for assessment years 2017-18 and 2018-19 respectively.
Being identical grounds raised in both these appeals, same were heard together and disposed off by way this consolidated order for convenience and avoid repetition of facts. The grounds of appeal for assessment year 2017 -18 are reproduced as under:
1. The Id CIT(A) erred in upholding the disallowance of foreign travelling expenses of Rs.5,41,634/- made by the AO without appreciating the fact that:
