ITAT Appeal Result: License Fee Disallowance Deleted, Travel Expenses Limited, Grounds 3 & 4 Unaddressed

The ITAT partially allowed the appeal, directing the deletion of the license fee disallowance as it was considered part of the purchase cost and not subject to TDS. Additionally, the disallowance of travelling expenses was restricted to 25% of the total amount due to lack of evidence, despite the business purpose claim. Grounds 3 and 4 were not addressed in the decision.

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Issues: Disallowance of license fee under section 40(a)(ia) and disallowance of travelling expenses.

License Fee Disallowance: The assessee, engaged in trading petroleum products, was required to deduct tax at source on license fees paid to BPCL. The AO disallowed the entire amount of license fee, but the assessee argued that it was part of purchase cost and not covered under section 40(a)(ia). The ITAT held that the license fee formed part of the purchase cost, not attracting TDS under section 194H, and directed the AO to delete the addition.

Travelling Expenses Disallowance: The AO disallowed the entire amount of travelling expenses due to lack of evidence. The assessee claimed the travel was for business purposes, but failed to provide bills. The ITAT found that while no bills were produced, the books were audited, and restricted the disallowance to 25% of the total expenses, considering the failure to provide evidence. The ITAT partially allowed the appeal on this ground.

Conclusion: The ITAT allowed the appeal partly, directing the deletion of the license fee disallowance and restricting the travelling expenses disallowance to 25% of the total amount. Grounds 3 and 4 were not adjudicated upon.

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