Tribunal allows appeal on directors' remuneration and travel expenses, denies depreciation and repairs claims.

The Tribunal partially allowed the appeal, confirming the disallowances of depreciation and repairs on buildings while allowing the claims regarding the increase in directors' remuneration and foreign travel expenditure. The Tribunal upheld the disallowances related to depreciation and repairs for portions not used for business purposes but ruled in favor of the assessee concerning the increase in directors' remuneration and foreign travel expenditure, considering them justified and genuine for business purposes.

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Issues Involved:
1. Disallowance of depreciation on building.
2. Disallowance of repairs to building.
3. Disallowance of increase in directors' remuneration.
4. Disallowance of foreign travel expenditure of directors.

Summary:

Issue 1: Disallowance of depreciation on building
The assessee claimed depreciation on buildings let out on rent, which was disallowed by the Assessing Officer (AO) amounting to Rs. 4,45,045/- on the grounds that no depreciation is allowable while computing income under the head "Income from house property." The CIT(A) allowed depreciation only on the area used for business purposes (5640 sq. ft.) and disallowed the rest. The Tribunal confirmed the CIT(A)'s order, rejecting the assessee's contention that depreciation should be allowed on the entire area of the buildings.

Issue 2: Disallowance of repairs to building
The AO disallowed the claim for repairs amounting to Rs. 97,762/-. The CIT(A) allowed repairs only for the portion of the building used for business purposes and disallowed the rest. The Tribunal upheld the CIT(A)'s decision, confirming the disallowance of repairs for the portions not used for business purposes.

Issue 3: Disallowance of increase in directors' remuneration
The AO disallowed the increase in directors' remuneration from Rs. 3 lacs to Rs. 6 lacs, deeming it unreasonable and excessive u/s 40A(2)(a). The CIT(A) confirmed the disallowance, noting the lack of significant business activity to justify the increase. The Tribunal, however, found the increase justified, considering the directors were running the business and the same increase was accepted in the subsequent assessment year. The Tribunal deleted the disallowance, allowing the ground in favor of the assessee.

Issue 4: Disallowance of foreign travel expenditure of directors
The AO disallowed the foreign travel expenditure of Rs. 7,56,168/-, claiming it was not related to the business. The CIT(A) upheld the disallowance, stating the expenditure was not for the current business. The Tribunal found the expenditure genuine and for business purposes, noting similar expenses were allowed in the subsequent year. The Tribunal set aside the CIT(A)'s findings and allowed the expenditure, ruling in favor of the assessee.

Conclusion:
The appeal was partly allowed, with the Tribunal confirming the disallowances related to depreciation and repairs but allowing the claims related to directors' remuneration and foreign travel expenditure.

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