1983 (2) TMI 112 - AT - Income Tax

Partners' Travel Expenses Disallowed as Business Deduction; Lack of Nexus to Business Duties

Central Wines. Versus Income-Tax Officer.

The Tribunal upheld the disallowance of partners' travelling expenses as a business deduction, citing that the expenses were not inherently linked to the ... Business Expenditure, Expenditure Incurred Issues:- Disallowance of partners' travelling expenses as business deductionAnalysis:The judgment involves an appeal filed by an assessee against the Commissioner (Appeals) order confirming the disallowance of Rs. 10,000 towards partners' travelling expenses. The assessee, a wholesale dealer in wines, claimed the deduction as part of its business expenses. The Commissioner held that the expenses were incurred to enable the partners to travel from their residences to the business place in Hyderabad. The Commissioner relied on the decision in Revell v. Directors of Elworthy Bros. & Co. Ltd., where it was held that such travelling expenses were not allowable deductions as they were not laid out for the purpose of carrying on business. The Tribunal heard arguments from both parties, where the assessee contended that the expenses were solely for business purposes, while the departmental representative argued against the deduction.The Tribunal examined the particulars of the travelling expenses, which included air fare and stay in Hyderabad for the partners. The assessee argued that the partners traveled to Hyderabad only for business purposes and had no other interests in the city. The Tribunal noted the expenses for previous years and the absence of evidence regarding the partners' roles in the firm or the business compulsions necessitating their travels. The Tribunal also considered legal precedents cited by both parties, including Owen v. Pook, CIT v. D.R. Phatak, and others, to determine the deductibility of the expenses. The Tribunal emphasized the necessity for expenses to be inherently linked to the duties of the office or business to be deductible. In this case, the Tribunal concluded that the partners were not obliged to incur the travelling expenses solely by being partners of the firm in Hyderabad, thus upholding the disallowance. The Tribunal dismissed the appeal based on the lack of evidence supporting the expenses as necessary for the partners' duties as partners of the firm.