Traveling Expenses on behalf of Associated Companies for which cost plus mark-up billing is done are allowable

DCIT Vs. M/s. Sherpalo India Advisors (P) Ltd. (ITAT Delhi)

AO disallowed an amount of Rs. 23,42,772/- out of traveling expenses of Rs. 89,15,775/- claimed by the assessee company on account of traveling expenses on the ground that no supporting document or any submission by the assessee company has been filed to substantiate the purpose of these visits, the events or meetings. The ld. CIT (A) deleted the addition of Rs.23,42,772/- keeping in view the fact that since the assessee company is providing services to the investing companies, interest in investment in various companies working in India and the assessee company has been arranging meetings of the investing companies that the prospective client-age of investing companies for which assessee company was charging 17% and 15% over and above the total expenditure incurred by it in respect of providing their services.

So when the assessee company is operating under cost plus mark up arrangement charging 15% and 17% over and above such expenses the amount has been incurred on behalf of the investor companies, the same are certainly business expenses. Assessee company produced vouchers as well as email communications qua the meetings organized by the assessee company qua expenditure in question.

Assessee company explained that Shri Ajit who has availed of the air travel services is the representative of Murugun Capital and Shri Ram is the representative of Sherpalo Mauritius LLC from whom the assessee company is charging cost plus 17% and 15% respectively for entire traveling expenses. So when the traveling expenses have been incurred by the assessee company on behalf of the associated company with 17% and 15% markup over and above the total expenditure, for which vouchers as well as email communications have been produced, the ld. CIT(A) has rightly and validly deleted the addition of Rs. 23,42,772/-. So ground no. 3 is determined against the Revenue.

FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-

Please become a Premium member. If you are already a Premium member, login here to access the full content.