Business Promotion Expenses – Assessee can not produce all persons with whom meetings held – ITAT

Business Promotion Expenses – It is impossible for assessee to produce all persons with whom company had meetings in hotels – ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the disallowance made by the Assessing Officer (AO) towards travelling and business promotion expenses.

ABCAUS Neutral Case Law Citation:
ABCAUS 3695 (2023) (04) ITAT

Important Case Laws relied upon by parties:
Kanu Kitchen Kuulture (P.) Ltd. vs DCIT [2014] 49 taxmann.com 64
Spica Finstock Ltd. vs ACIT [2010] 1 ITR (Trib.) 437
Technologies India (P.) Ltd. vs ACIT [2013] 33 taxmann.com

The appellant assessee company was engaged in the business of providing consultancy and financial consultancy. In the assessment completed u/s 153A of the Income Tax Act, 1961 (the Act), the AO made disallowances towards foreign travelling and business promotion.

Before the CIT(A), the assessee submitted that foreign travel expenses related to a Non-Resident Indian director who was required to frequently attend the business affairs of the company and therefore the expenditure were justified.

Towards expenses on business promotion, the assessee claimed that these expenses included expenses incurred in meetings organised in hotels.

However, the CIT(A) upheld the disallowance.

The Tribunal observed that in the return of income filed, the assessee had suo moto made 20 percent disallowance towards the travelling expenses. However, the AO observed that assessee failed to explain business expediency  on foreign travels and therefore disallowed the balance foreign travelling expenses.

The Tribunal opined that looking at the business operations of the assessee company and the suo moto disallowance made, further disallowance was not justified as the Revenue can not dictate the assessee on how to manage its affair.

Regarding the business promotion expenses, the Tribunal opined that looking at the quantum of expenses as compared to the business turnover of the company, the expenses were not excessive.

The Tribunal observed that the assessee had justified the business expediency of the expenses and the plea taken by the Revenue that the assessee should produce all those persons with whom the company had held meeting, is not possible for the assessee.  

Accordingly, the ITAT set aside the order passed by the CIT(A) and directed the deletion of the impugned additions made.

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