It is not necessary that for claiming deduction on account of foreign travel expenses, there has to be some business activity of assessee in foreign countries

ORDER PER P.M. JAGTAP, A.M.

This appeal by the assessee is directed against the order of Id. CIT-VII, Mumbai dated 19.12.2008 passed u/s 263.

2. The assessee in the present case is an investment company which filed its return of income for the year under consideration on 29.10.04 declaring total income of Rs. 5,03,38,480/-. The said return filed by the assessee was selected for scrutiny assessment and in the assessment completed vide an order dated 29.9.2006 passed u/s 143(3), the total income of the assessee was computed by the A.O. at the same amount of Rs. 5,03,38,480/- as declared by the assessee in the return of income. Subsequently, record of the said assessment was examined by the Id. CIT and on such examination he formed a prima facie opinion that the assessment made by the A.O. u/s 143(3) was erroneous and prejudicial to the interest of the Revenue. He, therefore, issued notice u/s. 263 to the assessee pointing out such error and calling for its explanation in the matter. The relevant portion of the said notice as reproduced in the impugned order of the Id. CIT(A) is extracted below:

“The income of the assessee company is from investments in shares and house property. It is seen from the P&L Account that the assessee claimed deduction of Rs. 20,21,509/- as deduction in value of investments. A loss, which is neither suffered nor incurred in the accounting year, is not deductible against the actual receipt. Only exception to this, is that stock-in-trade may be valued at cost or market value whichever is lower, as stated in the case of Edwards & Sons Ltd. Vs. IRC (1924) 12 TC 773. The deduction of Rs. 20,21,509/- allowed as reduction in value of investments is irregular.

(ii) It is further seen that an amount of Rs. 315290/- is shown as expenditure in foreign currency on account of traveling expenses (Notes forming part of Accounts II (10). As there are no business activities in foreign countries as amount of Rs. 315290/- is not allowable as deduction.

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