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ITAT allowed the appeal of the Appellant and set aside the ad-hoc disallowance of travelling and conveyance expenditure imposed by the AO and sustained by the CIT(A), holding that ad-hoc disallowance is impermissible where business necessity and bona fide reimbursement practice are established. The Tribunal found the expenditure-largely employee reimbursements for medical-representative travel-was a legitimate business expense, supported by employee declarations, an approvals system and audited books with no adverse findings; even alleged excess reimbursements, if bona fide, remain deductible in the hands of the assessee. Grounds of the Appellant were sustained and Revenue's disallowance was rejected.
ITAT allowed the appeal of the Appellant and set aside the ad-hoc disallowance of travelling and conveyance expenditure imposed by the AO and sustained by the CIT(A), holding that ad-hoc disallowance is impermissible where business necessity and bona fide reimbursement practice are established. The Tribunal found the expenditure-largely employee reimbursements for medical-representative travel-was a legitimate business expense, supported by employee declarations, an approvals system and audited books with no adverse findings; even alleged excess reimbursements, if bona fide, remain deductible in the hands of the assessee. Grounds of the Appellant were sustained and Revenue's disallowance was rejected.
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