Luthra & Luthra Law Offices Vs JCIT (ITAT Delhi)
Conclusion: Foreign travelling expenditure incurred by law firm for the pleasure tour by the counsels and their family members was not in relation to any business activity of assessee-firm, therefore, the same was not allowable.
Held: Assessee-firm claimed foreign travelling expenses. AO disallowed 10% of the same on the ground that assessee failed to establish that travelling expenses were incurred exclusively for the purpose of business. CIT(A) after perusal of the detail of the expenses , observed that assessee claimed advance made to M/s T for travelling by the counsels of the firm and their family members to Beijing which was not for official purposes but for personal purposes, and thus not allowable. In the instant case nothing had been brought on record that the trip was in relation to any business activity of assessee firm, and thus, assessee had failed to establish that the expenses were incurred wholly and exclusively for the purpose of the business and therefore, the same was not allowable.
FULL TEXT OF THE ITAT JUDGMENT
This appeal by the assessee is directed against order dated 17/12/2014 passed by the Ld. Commissioner of Income-tax (Appeals)- XX, New Delhi [in short the Ld. CIT(A)] for assessment year 2010-11 raising following grounds:
“1. The order passed by the Learned Commissioner of Income Tax (Appeals) – XX (“CIT(A)”) under section 250 of the Income Tax Act, 1961 (“the Act”) is bad in law and on the facts and circumstances of the case.
2. The Ld. CIT(A) has erred in law and in the facts and circumstances of the case by upholding the disallowance of conference expenses (to the extent of Rs. 684,111/-) on an ad-hoc basis on the ground that the said expenses were not incurred for business purposes.
3. The Ld. CIT(A) has erred in law by upholding the disallowance of conference expenses (to the extent of Rs. 684,111/-) by placing reliance on irrelevant facts and considerations.
4. The Ld. CIT(A) has erred in law and in facts and circumstances of the case by enhancing the disallowance of travelling expenses from Rs. 19,91,803/- to Rs. 30,00,000/- on the ground that the said expenses were personal in
5. The Ld. CIT(A) has erred in law in enhancing the disallowance of travelling expenses from Rs. 19,91,803/- to 30,00,000/- without giving the assessee an opportunity of being heard and by placing reliance on irrelevant facts and considerations.
6. The above grounds of appeals are independent and without prejudice to one another.
7. The appellant craves leave to add /withdraw or amend any ground of appeal at the time of hearing.”
2. Briefly stated facts of the case are that the assessee is a Law Firm and earning income under the head profit and gains of business and profession, capital gain and income from other sources. The Ld. Counsel of the assessee submitted before us that the assessee followed cash method of accounting system. For the year under consideration, the assessee filed return of income on 01/10/2010 declaring total income of Rs. 22, 83,29,470/-. The case was selected for scrutiny and notice under section 143(2) of the Income Tax Act, 1961 (in short the Act) was issued and served. In the assessment completed under section 143(3) of the Act on 28/03/20 13 ,certain additions/disallowances were made and total income was assessed at 23,13,23,542/-. On further appeal, the Ld. CIT(A) partly allowed the appeal but enhanced the addition made on travelling expenses. Aggrieved with the addition sustained and enhancement, the assessee is in appeal before the Tribunal raising the grounds as reproduced above.
3. In the grounds raised in the appeal, two disallowances are The first disallowance is in respect of expenses of Rs. 6,84,111/- debited by the assessee under conference expenses. The second disallowance relates to expenses debited under the head travelling expenses.
4. First, we take up the issue of conference expenses. In the year under consideration the assessee claimed conference expenses of Rs. 43,36,066/-against gross receipt of Rs. 68,15,67,895/- as compared to conference expenses of Rs. 9,57,078/- against gross receipt of Rs. 71,51,32,149/-in the immediately preceding assessment year i.e. AY 2009-10. In view of the exceptional increase in expenses on conference, the Assessing Officer called for the detail of the expenses and noticed that expenses amounting to Rs. 13,68,222/-were incurred on party and dinner, and purchase of expensive watches, jackets, T-shirts’s etc. He listed detail of the expenses, which are reproduced on page-3 of the assessment order. For ready reference, said table of expenses is reproduced as under:
