TaxTMI 
TaxTMI 
2017 (9) TMI 1225
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.... note sheet entry dated 20.10.2015 the assessee was asked to explain as to why entire foreign travelling expenses of directors shall not be disallowed as there was no link between foreign travelling by the directors and business of the assessee. The assessee filed written submission stating therein that- "During the year under consideration the assessee incurred an amount of Rs. 13,29,639/- on account of Foreign Travel of its directors. The assessee is growing company and require latest techniques and methodologies to increase its turnover, efficiency and quality of product, the Directors of the company visit other countries to explore business opportunities and accordingly implement the same in the business line of the assessee. It cannot be said that there is no link between the foreign travel and the business of the assessee at the growth of business is a continuous process and though every transaction may not lead to any specific benefit to the assessee but it has a great impact in future. A business man works with a long term perspective and incurs expenditure accordingly. It is for the board of directors to decide what expenditure will best suit the business of an assessee ....
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....f any meeting abroad, any report submitted to company, further except tickets, no other expense details have been furnished by the asessee. 4.3 Therefore I hereby disallowed entire directors foreign travelling expenses of Rs. 20,14,362/-. Thus Rs. 20,14,362/- is added to the total income of assessee." 4. In respect of ground no. 4, the assessee has challenged the addition of Rs. 77,000/- made by the AO on account of advertisement and publication expenses and in ground No. 5, the assessee has challenged the addition of Rs. 3,07,887/- made by the AO on account of sale promotion expenses. In this regard, the facts, submissions of the assessee and the relevant findings of the AO are as under:- "Disallowance out of expenses (Advertisement and Sales Promotion): On verification the books of accounts of the assessee it is found that that the assessee has debited Rs. 8,85,073/- under the head business promotion & distribution expenses. Out of his, Rs. 2,69,298/- were incurred on advertisement & publishing expenses and remaining amount of Rs. 6,15,775/- were incurred on sales promotion expenses. Vide order sheet entry date 20.10.2015 the assessee was asked to explain as to why disallow....
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.... entity and no expenditure can be considered being personal in nature. Your honor in this regard your attention is drawn to the judgment delivered in the case of Sayaji Iron & Engg. Co. Ltd. vs. CIT 253 ITR 749 wherein it was held that for the purpose of a company no expenditure shall be deemed to be in the nature of personal expenditure as the company is a separate legal entity." 5.1 I have considered the reply of the assessee and not found fully convincing. The assessee contention that expenditure of Rs. 1,31,357/- and 60,941/- were incurred for advertisement in news paper is acceptable. But as far as remaining amount of Rs. 77,000/- is concerned, the contention is not acceptable as the remaining expenditure of Rs. 77,000/- has incurred for advertisement in souvenir and not allowable. Thus amount of Rs. 77,000/- is disallowed and added back to total back to total income of the assessee. 5.2 As far as sales promotion expenses are concerned the reply of the assessee is not fully convincing. Since the expenditure are mainly on account of Hotel & restaurant bills of directors and purchases from various stores, gifts & sweets then how the same are incidental to business. Ther....
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....,887, the AO has disallowed 50% of the total expenses holding that the assessee has not fully justified the incurrence of such expenditure as incidental to business going by the narration of the expenditure in terms of hotel bills, gifts and sweets. In our view, if the AO has any apprehension that the expenditure has not been incurred for the purposes of business, he should specify the particular transaction/expenditure and in case, there are repeat transaction/expenditure of similar nature, the AO has to give a specific finding as to why he feels that the expenditure has not been incurred for business purposes. Similarly, no basis has been given by the AO for disallowance of advertisement expenditure of Rs. 77,000 towards advertisement in souvenir. The matter is accordingly remitted back to the file of the Assessing officer to examine the same afresh as per law and give a specific finding after providing appropriate opportunity to the assessee. The ground no. 3, 4 & 5 are thus allowed for statistical purposes. 10. In ground No. 6, the assessee has challenged the addition of Rs. 4,42,192/- on account of interest income. In this regard, the ld AR submitted that the said income was ....