Foreign travel disallowance cut to 25% as business nexus accepted for director's CII Iran delegation visit

ITAT Ahmedabad held that only 25% of the assessee's foreign travel expenses were to be disallowed. The Director's visit to Iran, as part of a CII Business Delegation, was found to have a business nexus, though complete evidence of participation was not available. Relying on contemporaneous correspondence and invoices, and following the Tribunal's own earlier decision in the assessee's case in the interest of judicial discipline, the disallowance was restricted to 25%. The assessee's appeal was thus partly allowed.

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Issues: Whether the disallowance of 50% of travelling and boarding expenses (Rs. 11,10,110/-) incurred for foreign travel could be sustained where partial documentary evidence of participation in a CII Business Delegation was produced, and whether the disallowance should be reduced in view of a coordinate-bench decision in the assessee's own earlier year.

Analysis: The Assessing Officer disallowed 50% of the claimed travel expenses for lack of conclusive evidence establishing actual participation and business purpose. The lower appellate authority upheld that disallowance. The record shows contemporaneous correspondence and invoices partially substantiating the Director's travel in connection with a CII Business Delegation. The coordinate-bench decision in the assessee's immediately preceding assessment year restricted disallowance to 25% under similar facts. Applying the principles of benefit of doubt and adherence to a consistent coordinate-bench precedent, some part of the expenditure is allowable.

Conclusion: The disallowance is reduced and restricted to 25% of the total travelling and boarding expenses, i.e., disallowance limited to Rs. 5,55,055/- and the balance disallowance of Rs. 5,55,055/- is deleted. This conclusion is in favour of the assessee.

Final Conclusion: The appeal is partly allowed by reducing the disallowance of foreign travel expenses to 25% of the claim, affording partial relief to the assessee while sustaining a portion of the disallowance.

Ratio Decidendi: Where partial contemporaneous evidence substantiates business travel and a coordinate-bench precedent under similar facts limits disallowance, the disallowance may be restricted (here to 25%) applying benefit of doubt and judicial discipline.

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