TaxTMI 
TaxTMI 
2012 (10) TMI 1128
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....ght to be deleted. 2. On the facts and in the circumstances of the case, the learned Commissioner of Income tax (Appeals) erred in con firming disallowance of foreign travel expenses to the tune of Rs. 2,55, 716/- out of foreign travelling expenses of Rs. 3,83,574/- made by the Assessing Officer. The appellant submits that the entire foreign travelling expenses were incurred for the purpose of business and hence foreign travelling expenses of Rs. 2,55, 716/- ought to be allowed. 3. On the facts and in the circumstances of the case, the learned Commissioner of Income tax (Appeals) erred in restricting the disallowance of motor car expenses to 10% of the total motor car expenses. The appellant submits that motor car expenses were incurred for the purpose of business and on this expense Fringe Benefit Tax has been paid and hence the expenses claimed ought to be allowed fully. 4. On the facts and in the circumstances of the case, the learned Commissioner of Income tax (Appeals) erred in upholding the disallowance of deduction of Rs. 3,250 u/s.80G on the donation of Rs. 6,500/-". 2. Ground No.1 regarding disallowance interest payment to the related parties under section 40A(2)(b)....
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....ted in [2011] 196 TAXMAN 193 and submitted that the Hon'ble High Court has held that when the assessee as well as its subsidiaries were in the same tax bracket and paid the same rate of tax, there was no question of diversion of funds by paying higher rate to subsidiary companies and, therefore, no disallowance could be made under Section 40A(2)(b). Thus, the learned AR has submitted that there was no question to evade tax by paying interest at the rate of 18% to the related party. 2.2 On the other hand, learned DR has submitted that the assessee has taken loan for keeping the same in the fixed deposit with the bank, therefore, the same is not used for the business of the assessee. He has relied upon the orders of the authorities below and submitted that the contention of no evasion of tax has not been examined by the lower authorities; therefore, the same is liable to be verified. 2.3 We have considered the rival submissions of the parties as well as relevant material on record. The assessee has paid interest of Rs. 6,13,576/- to six related parties at the rate of 18%. The Assessing Officer noted that in case of non-related party, the assessee had paid the interest @12%, acc....
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....Ltd. (supra), wherein the Hon'ble High Court has observed in para 5 as under :- "5. In view of the aforesaid admitted facts we are of the view that the Tribunal was correct in coming to the conclusion that the Commissioner of Income-tax (Appeals) was wrong in disallowing half per cent commission to the sister concern of the assessee during the assessment years 1991-92 and 1992-93. The learned advocate appearing for the appellant is also not in a position to point out how the assessee evaded payment of tax by the alleged payment of higher commission to its sister concern since the sister concern was also paying tax at higher rate and copies of the payment orders of the sister concern were taken on record by the Tribunal." 2.5 Similarly, in the case of CIT Vs. V.S. Dempo & Co. (P.) Ltd.(supra), the Hon'ble High Court has held in para 4 as under :- "4. Clause (a) of sub-s. (2) of s. 40A of the income-tax provides that where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in cI. (b) of the sub- section and the A 0 is of the opinion that such expenditure is excessive or unreasonable having regard to the fai....
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.... of interest received, then no disallowance is called for under Section 40A(2) for want of motive of evasion of tax. Accordingly, on principle, we accept the contention of the learned AR, however, the Assessing Officer is directed to verify the rate of tax at which the recipient of interest have paid tax and if the rate of tax paid by the recipient is equivalent to the rate of tax paid by the assessee, the assessee's claim should be allowed. 3. Ground No.2 raised by the assessee is with regard to disallowance of foreign travel expenses. The Assessing Officer noted that the assessee incurred expenses for travel and stay in Singapore of Rs. 3,83,574/-. On verification of details filed it was found that the expenses debited pertain to travel of Shri B. Tahiliani and Mrs. Padma Tahiliani and Mr. Ashish Tahiliani, Mrs. Divya A. Tahiliani and two children. On the query the assessee submitted that the expenses are incurred for attending business discussion organized S.K.F. South East Asia & Pacific PTE Ltd., Singapore. The Assessing Officer noted that the wife and children have not been invited for discussion by S.K.F. and only two partners have been officially invited for business d....
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....ure. Though, the assessee has contended that due to the ailment of the senior partner, the wife's company was required, however, nothing has been brought before us to substantiate this contention. Moreover, when the other partners are family members then in the absence of any material in support of the contention, we do not find any substance in the contention of the assessee. The Assessing Officer has disallowed the expenditure for proportionate to the numbers of person visited without considering the actual expenditure incurred on each and every member. Accordingly, we direct the Assessing Officer to disallow the actual expenditure incurred on the foreign travel with respect to the non-partner. 4. Ground No.3 is with regard to disallowance of motor car expenses. The Assessing Officer has disallowed 20% of expenditure of motor car being attributable to the personal use by the partners observing that the assessee itself disallowed the depreciation and acknowledged personal use. 4.1 On appeal, the CIT(A) has restricted the disallowance of 10% by taking into account the FBT paid for the same. 4.2 Before us, learned AR of the assessee has submitted that the assessee has paid FB....
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....ular while answering frequently asked question No.15, fringe benefit is deemed to have been provided if the employer has incurred expenses for any of the purposes referred to in the relevant provisions and there is no requirement to segregate such expenses between those incurred for official purposes and personal purposes. It was further clarified while answering question No.81 that when expenditure on running and maintenance of motor cars is liable to fringe benefit tax, the employees will not be liable to income tax on the perquisite value of motor car provided by the employer. As rightly contended by the learned counsel for the assessee, circular No.8/2005 dated 29-08-2005 issued by the Board explaining the provisions relating to fringe benefit tax thus makes it clear that fringe benefit tax is levied on the expenses incurred by the employer irrespective of whether the same are incurred for official or personal purposes. In our opinion, once fringe benefit tax is levied on such expenses as has been done in the present case, it follows that the same are treated as fringe benefits provided by the assessee as employer to its employees and the same have to be appropriately allowed a....