2006 (6) TMI 264 - AT - Income Tax

Tribunal remands deduction issues, confirms car expense decision, emphasizes proving business purpose for foreign travel.

The Tribunal remanded the issues of deduction under section 80HHC and disallowance of foreign travel expenses to the Assessing Officer for reevaluation, ... Business expenditure Issues:1. Deduction under section 80HHC2. Disallowance of foreign travel expenses3. Disallowance of car expensesDeduction under section 80HHC:The appeal by the Revenue challenged the Order of the CIT(A) regarding the deduction under section 80HHC. The CIT(A) directed the Assessing Officer to allow the deduction based on specific cases decided by ITAT Mumbai 'B' Bench and 'D' Bench. The Revenue argued that the CIT(A) erred by not considering higher court decisions like CIT v. Sterling Foods Ltd. and IPCA Laboratories v. DCIT, which emphasized the computation of deductions as per section 80AB. The Tribunal set aside the CIT(A) order and remanded the issue to the Assessing Officer for re-adjudication in light of the amended provisions of section 80HHC.Disallowance of foreign travel expenses:The Revenue contested the CIT(A)'s decision to restrict the disallowance of foreign travel expenses to Rs. 25,000 instead of Rs. 9,29,064. The Assessing Officer had disallowed the claim as the assessee failed to provide evidence that the trips were for business purposes. The CIT(A) allowed the claim after considering the nature of the business, stating that the visits were for maintaining business relations, exploring new markets, and developing new relations. The Tribunal, however, found that the CIT(A) did not provide specific findings on the business exigencies of the trips and remanded the issue to the Assessing Officer for reevaluation, emphasizing the need for the assessee to prove the business purposes of the foreign travel.Disallowance of car expenses:Regarding the disallowance of car expenses, the CIT(A) reduced the disallowance from 20% to 10%, which the Tribunal deemed reasonable. The Tribunal confirmed the CIT(A)'s decision on this issue, stating that the higher disallowance made by the Assessing Officer was on the higher side. Therefore, the appeal of the Revenue was allowed for statistical purposes, confirming the CIT(A)'s order on car expenses.In conclusion, the Tribunal addressed the issues of deduction under section 80HHC, disallowance of foreign travel expenses, and disallowance of car expenses by remanding the first two issues to the Assessing Officer for reevaluation and confirming the CIT(A)'s decision on car expenses.