Travelling Expenses Incurred By Directors For Business Purposes And Not Personal, Delhi High Court Allows Travel Expenses

The Delhi High Court has held that the travelling expenses were incurred by the directors for business purposes of the company.

The bench of Justice Rajiv Shakdher and Justice Girish Kathpalia noted that there was no information brought on record by the AO that could prove that these expenses were of a personal nature; therefore, the assessing officer was not justified in disallowing the travel expenses.

The AO, while framing the assessment order under Section 143(3) read with Sections 153 and 153B of the Income Tax Act, 1961, had made the disallowances. The AO disallowed the travel expense claimed by the respondent or assessee to the extent of Rs. 8,30,748. The amount constituted 70% of the travel expenses claimed by the respondent or assessee.

The respondent or assessee, being aggrieved, preferred an appeal with the Commissioner of Income Tax (Appeals). The CIT (A) allowed the appeal and deleted the additions made by the AO.

The appeal preferred by the appellant/revenue against the CIT(A) decision before the Income Tax Appellate Tribunal failed. The department has preferred the appeal under Section 260A against the order passed by the Tribunal.

The department relied upon the assessment order and stated that the AO was justified in disallowing the travel expense claimed by the respondent or assessee.

The court noted the disallowance of 70% of the expenses incurred by the respondent or assessee for arranging hotel accommodation, air passage, and vehicles for its directors.

The court found that the directors of the respondent/assessee had travelled to Goa, Mumbai, Bangalore, Zurich, and Kuala Lumpur. As noted by the CIT(A), the AO, without examining the material, concluded that the expenses incurred were personal in nature and thus proceeded to disallow 70% of Rs. 11,86,783, which was a figure amounting to Rs. 8,30,748.

The court held that CIT(A) and the Tribunal came to the correct conclusion that the expenses incurred had a nexus with the business interests of the assessee.

Counsel For Petitioner: Sanjeev Menon

Counsel For Respondent: Sachit Jolly

Case Title: PCIT Versus M/S. Azure Retreat Pvt Ltd

Citation: 2023 LiveLaw (Del) 962

Case No.: ITA 503/2023

Click Here To Read The Order