Gaurav Seksaria Vs. ITO (ITAT Kolkata)
Reimbursement of expense incurred during foreign visit to Director by Company is not taxable as Perquisite
It is not in dispute that the assessee employee had not claimed any expenditure as deduction which were incurred by him through credit card during his foreign travel. He incurred expenses through credit cards and the same were reimbursed to him by the company M/s Govind Steel Co. Ltd. Moreover, the said expenses were included in the FBT return and hence by placing reliance on the Circular No. 8/2005 dated 29.8.2005, there cannot be any element of perquisite to be taxed in the hands of the assessee employee. In any case, if at all, there is no doubt in the mind of the revenue with regard to the subject mentioned expenses, the revenue could examine the same only in the hands of the company M/s Govind Steel Co. Ltd and not in the hands of the assessee employee. We find that both the authorities below had grossly erred in making some addition towards the same on an estimated basis. Hence we have no hesitation in directing the ld AO to delete the entire addition made in this regard. Accordingly the Grounds raised by the assessee are allowed.
Full Text of the ITAT Order is as follows:-
1. This appeal by the assessee arises out of the order of the Learned Commissioner of Income Tax (Appeals)-23, Kolkata [in short the ld CIT(A)] in Appeal No.130/CIT(A)- 23/Ward-3(4)/20 14-15/Kol dated 11.12.2015 against the order passed by the ITO, Ward-3(4), Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 24.12.2010 for the Assessment Year 2008-09.
2. The only issue to be decided in this appeal is as to whether the ld CITA was justified in confirming the addition of Rs 1,24,574/- being 10% of overall expenses incurred by the assessee through credit card on behalf of the employer, in the facts and circumstances of the case.
3. The brief facts of this issue is that the assessee is an individual and a whole time director of M/s Govind Steel Co. Ltd and is mainly looking after the matters relating to production, import of raw materials and export sales of finished goods of the company . In this process, he had to travel abroad for the export business of the company. The company had authorized the assessee to incur expenditure for and on behalf of the company through credit cards and otherwise. During the previous year, the assessee traveled to different countries like USA, South Africa, Germany etc where M/s Govind Steel Co. ltd exports heavily. During the visits to these countries, the assessee incurred several expenditures for the purposes of the business of the said company. During these visits, the assessee also purchased some electronic items like music systems etc of very insignificant amounts and had gifted the same to foreign buyers to promote the sales of the said company. M/s Govind Steel Co. Ltd paid all these amounts (by way of reimbursement) directly to credit card bankers. These items were not brought to India as would be evident from the assessee’s passport. However, the ld AO alleged that these expenditures were of personal nature and requires to be added as perquisite in the hands of the assessee employee as the employer had met the personal obligation of the employee assessee and accordingly added 50% of the total expenditure on estimate The dis allowance made by the ld AO in this regard was Rs 6,70,436/-.
4. The assessee filed a detailed written submissions before the ld CITA and submitted the details relating to the credit card expenses as under:-
5. The ld CITA on going through the submissions of the assessee restricted the addition to 10% of expenses as against 50% made by the ld AO, by observing as under:-
Decision
1. I have examined the assessment order of the AO, and the matters agitated in appeal. In effect there is only one matter to adjudicate, being that whether in the facts and circumstances of the case, the AO was correct in holding that the expenditures/ payments made through the credit card by the employee on behalf of the employer were of personal nature and whether the Employer-Company had met the assessee ’s obligation requiring certain payments to be made, and therefore, the same was taxable as perquisites in the hands of the assessee- appellant.
2. The AO has observed that the payments were made by the Company on behalf of the appellant, and this is not a matter of dispute. The AO has also not questioned the sources of the fund, and the assessee ’s explanation that the sources were from the Company M/s Govind Steel Co. Ltd. has also not been disputed. The AO has noticed that the assessee had paid bills worth Rs. 13,40,817/- from the credit card and has, on the basis of the nature of bills made a dis allowance of 50%.
3. It is also seen that there AO has treated 50% of the expenses as personal in nature. This has been done in an ad hoc fashion, and the rationale leading to this certain percentage does not emanate from the findings of the order of the AO.
4. It has been pleaded during the course of the appellate proceedings that the Company in which the assessee- individual is the full-time director has paid the necessary FBT for the Assessment year 2008-09, and therefore the same ought not to be treated as perquisites in the hands of the appellant. Accordingly, the FBT return of the Company was also submitted during the course of appellate From the same the following points relating to FBT payments emanate.
