ITAT Delhi upholds disallowances on foreign travel & security expenses, deletes disallowance under section 40(a)(ia)

The ITAT Delhi upheld the disallowances of foreign traveling expenses and expenditure on security personnel while deleting the disallowance under section 40(a)(ia) of the Income Tax Act, 1961.

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Issues involved:
1. Disallowance of foreign traveling expenses
2. Disallowance of expenditure on hiring security personnel for director
3. Disallowance under section 40(a)(ia) of the Income Tax Act, 1961

Issue 1: Disallowance of foreign traveling expenses
The Assessing Officer disallowed a portion of foreign traveling expenses, stating that visits to Bangladesh were not directly related to the business. The assessee argued that the expenses were for providing services to a Singapore company contracted with a Bangladesh company. The CIT(A) upheld the disallowance, stating the expenses were not wholly for business purposes. The ITAT Delhi concurred, finding no direct business connection with the visits, upholding the CIT(A)'s decision.

Issue 2: Disallowance of expenditure on hiring security personnel for director
The Assessing Officer disallowed expenses on three drivers of the director, treating them as personal expenses. The assessee contended that the director, who did not draw a salary, extensively managed the business, justifying the expenses. The CIT(A) confirmed the disallowance, stating the drivers were not exclusively for business. The ITAT Delhi agreed, upholding the disallowance as personal expenses of the director, finding no business purpose in the expenditure.

Issue 3: Disallowance under section 40(a)(ia) of the Income Tax Act, 1961
The assessee disputed a disallowance under section 40(a)(ia) for technical retainership fee TDS. The Assessing Officer noted a retrospective amendment but still disallowed the amount. The CIT(A) upheld the addition. The ITAT Delhi, considering the retrospective amendment and timely TDS deposit, deleted the addition, allowing the appeal partly.

In conclusion, the ITAT Delhi upheld the disallowances of foreign traveling expenses and expenditure on security personnel while deleting the disallowance under section 40(a)(ia) of the Income Tax Act, 1961.

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