DCIT Vs Lakshmi Metal Udyog Limited (ITAT Delhi)
ITAT Delhi: Dealer Foreign Tour & Shared Expenses Found Genuine – Disallowances of ₹2.21 Cr & ₹2.53 Cr Deleted
Tribunal upheld CIT(A)’s order deleting two disallowances—₹2.21 crore towards dealer foreign tour expenses & ₹2.53 crore of shared operational costs.
AO had disallowed the foreign travel expenses for lack of agreements & proof of dealer eligibility under a reward scheme. Assessee produced the Dealer Tour Scheme 2016-17, board resolution, & supporting evidence showing the expenditure was for incentivizing dealers, similar to schemes earlier accepted in its holding company, APL Apollo Tubes Ltd. ITAT held the expenses were genuine business promotion outlays allowable u/s 37(1).
On the shared cost allocation, Assessee established that employee & administrative costs were shared on actual basis, duly certified by its auditor & taxed under service tax. CIT(A)’s factual verification was not rebutted by Revenue.
Held: Both disallowances were rightly deleted; all expenses were bona fide, commercially expedient, & allowable under section 37(1).
Key Takeaway
When dealer incentive tours & inter-company cost sharing are properly documented, commercially justified, & not shown to be bogus, they qualify as business expenditure under Section 37(1); absence of minor procedural details cannot justify disallowance.
