Tribunal upholds CIT(A) decision on entertainment & travel expenses disallowance, commercial expediency considered.

The Tribunal upheld the CIT(A)'s decision to restrict the disallowance of entertainment and travelling expenses to 20% of the expenses incurred, resulting in a sustained disallowance of Rs. 1,60,378 for entertainment expenses and Rs. 8,44,432 for travelling expenses. The Tribunal found the CIT(A)'s consideration of commercial expediency and proportionality reasonable, dismissing the department's appeal.

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Issues:
1. Disallowance of entertainment expenses by AO and relief allowed by CIT(A).
2. Disallowance of travelling expenses by AO and relief allowed by CIT(A).

Analysis:
1. The department appealed against the CIT(A)'s order restricting the addition made by the AO on account of entertainment expenses. The AO disallowed the entertainment expenses as the assessee failed to prove their genuineness and provide necessary documentary evidence. The CIT(A) observed that the expenses were incurred for professional purposes and allowed a partial relief, considering the commercial expediency and the proportion of expenses to total fees earned. The disallowance was restricted to 20% of the expenses incurred, sustaining a disallowance of Rs. 1,60,378.

2. The department also challenged the CIT(A)'s decision regarding the disallowance of travelling expenses. Similar to the entertainment expenses issue, the CIT(A) considered the commercial expediency and the proportion of expenses to total fees earned. The disallowance was restricted to 20% of the travelling expenses, sustaining a disallowance of Rs. 8,44,432. The Tribunal noted that the involvement of personal elements in such expenses could not be ruled out and found the CIT(A)'s decision justified. The Tribunal concluded that the disallowance was reasonable and upheld the CIT(A)'s order, dismissing the department's appeal.

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