2016 (11) TMI 1033 - AT - Income Tax

Tribunal upholds disallowance of trip expenses citing lack of business connection

Sewasons Enterprises Ltd. Versus Income-Tax Officer

The Tribunal affirmed the disallowance of trip and traveling expenditures made by the Revenue authorities and upheld by the Commissioner of Income-tax ... Disallowance of trip expenditure - quantification of expenses - Held that:- Quantification of disallowance does not involve any question of law. It is dependent upon the facts and circumstances in a particular year. The Revenue authorities have quantified the disallowance at ₹ 3,48,870 on an analysis of the details of the expenditure produced by the assessee. Once an estimated opinion is being taken by an authority, then, that opinion ought not to be intervened by the higher appellate authority unless it is demonstrated that such opinion is based on consideration of irrelevant material. No such facts have been brought to my notice. Therefore, do not see any justification for interfering in the order of the learned Commissioner of Income-tax (Appeals) as far as confirmation of disallowance of ₹ 3,48,870 is concerned. - Decided against assessee Disallowance of traveling expenditure - Held that:- In the case of Sayaji Iron and Engg. Co. v. CIT [2001 (7) TMI 70 - GUJARAT High Court] disallowance was made out of the telephone expenditure under the belief that such facility might have been used by the employees of the company for personal purpose. Here in the present case, the learned Assessing Officer has brought on record that no business visit was required to be undertaken at Goa, and therefore, the expenditure cannot be debited in the accounts of the assessee. - Decided against assessee Issues:- Disallowance of trip expenditure and travelling expenditure by the Assessing Officer.- Confirmation of disallowance by the Commissioner of Income-tax (Appeals).- Justification of disallowance and rejection of the appeal.Analysis:1. The assessee appealed against the Commissioner of Income-tax (Appeals) order for the assessment year 2009-10, contesting the rejection of books of account and disallowance of specific expenditures.2. The Assessing Officer disallowed a significant amount from the trip expenditure due to unsupported expenses, resulting in a 10% disallowance confirmed by the Commissioner of Income-tax (Appeals).3. The disallowance of Rs. 3,48,870 from trip expenditure was challenged by the assessee, arguing that maintaining complete records for certain expenses was challenging, and the quantum of disallowance was high compared to previous years.4. Regarding the disallowance of Rs. 48,858 under travelling expenses for a Goa trip without business connection, the Commissioner upheld the disallowance, citing lack of supporting evidence.5. The assessee contended that no personal element should exist in company expenditures based on a court decision, but the Assessing Officer argued the expenditure was not for business purposes, leading to disallowance.6. The Tribunal upheld the disallowance decisions, stating that the Assessing Officer correctly rejected the books of account and quantified disallowances based on specific defects in expenditure details, without any legal errors.7. The Tribunal emphasized that the quantification of disallowances is factual and not a legal question, supporting the Revenue authorities' decision unless proven based on irrelevant material, which was not the case here.8. The argument that no personal element should exist in company expenditures was rejected, as the expenditure must be for business purposes to be allowed, which was not the case for the Goa trip expenditure.9. Ultimately, the Tribunal dismissed the appeal, affirming the disallowances made by the Revenue authorities and the Commissioner of Income-tax (Appeals) for the specified expenditures.This detailed analysis covers the issues raised in the legal judgment, outlining the arguments presented by the parties and the Tribunal's reasoning for upholding the disallowances.