ITAT Delhi provides a deduction for directors’ international travel expenses

Fact and issue of the case

The present appeal has been filed by the assessee against the order of ld. CIT(A)-I, New Delhi dated 04.01.2019.

The assessee has raised the following grounds of appeal:

That in the facts and circumstances of the case, the ld. CIT(A) has erred in confirming the disallowance made by the AO out of travelling expenses on account of foreign travel of Rs.9,15,702/-.

The observation of the Assessing Officer on this issue is as under:

During the examination of travelling expenses, it revealed that expenses debited under the said there are ‘Foreign Travel expenses to the tune of Rs.9,15,702.00. The said expenses appeared to be personal in nature and not incidental to business. The assessee vide order sheet entry dated 04.12.2017 was asked to justify the same. The bills and vouchers produced were put to test check.

It revealed that the bills and vouchers in respect of Foreign Travel are in the name of Ms. Devika Nayyer and Ms. Anisha Sigh. Both the said persons are Directors in the company. On confronting the AR contended that the travel had been undertaken to meet with client and study possible local places etc. for potential shoots/advertisements. These are important to provide alternative to clients while preparation of “Pitch”, as part of advertisement campaigns. The visits have been made only in furtherance of business and cannot be considered as excessive.

The above submission has been considered. It revealed that the assessee has not substantiated with material that how the Foreign visit was for business purposes. Therefore, it cannot be taken that the expenses debited Rs.9,15,702 are incidental to business.

Therefore, the same are disallowed and added to the total income taking as personal in nature.

Observation of the court

We find from the Assessment Order itself that the assessee has explained the compulsion and utility of such tour for business purpose. The assessee is in the business of advertising with a returned income of Rs.48,97,260/- on 29.09.2015. It was the Directors of the company who have visited the local places which would augment and aid the business prospects. Hence, in the facts and circumstances of the instant case, we hold that the amount be treated as a deductible expenditure.

In the result, the appeal of the assessee is allowed.