Monika Gems and Others vs Asstt. Commissioner of Income Tax

All these appeals are being disposed of by this common order.

These appeals are filed by the assessees on the following questions of law:

(1) Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in upholding the ad hoc 1/3 disallowance out of the foreign travel expenses incurred by the appellant ?

(2) Whether on the facts and in the circumstances of the case and in law the order of the Tribunal confirming the ad hoc disallowance of 1/3 of foreign travel expenses made by the assessing officer is perverse and/or contrary to material on record inasmuch as it overlooked the evidence filed by the appellant in support of the impugned expenses and the Tribunal itself having come to the conclusion that it is not possible to make any ad hoc disallowance in expenses of this nature ?

It is not necessary to set out the facts in detail in view of the order to be passed.

The assessing officer proceeded on the footing that the persons in respect of whom the allowance was sought, are not the employees of the assessees. After so holding, the assessing officer has disallowed 1/3rd of the expenses incurred. The order of the assessing officer was upheld by the Commissioner (Appeals). The matter thereafter went in appeal. The Tribunal, in the impugned order, insofar as the issue is concerned, in para 29, proceeded on the footing that the expenses of this nature can either be allowed or disallowed. After having so sought, the Tribunal thereafter proceeded to uphold the disallowance of 1/3rd of the expenses. In our opinion, this was a total misdirection in law. The expenses incurred can either be in the course of the business or not related to the assessees business. To that extent the findings are totally erroneous and consequently the order will have to be set aside.

The submission made on behalf of the appellant is that these are expenses incurred on what are known as foreign travel expenses. In the industry, there are free lancers who are known as assessees (sic-assessors), who normally, as per the practice, go to the foreign country .for and on behalf of the assessees to assess the diamonds. In these facts and circumstances the expenditure is allowable.

We do not want to record any findings on that issue, but to that extent set aside the orders and remand the matter to the assessing officer for deciding the issue afresh. It will be open to the assessees to lead additional evidence to which they are entitled to.

In the light of that, the issues framed will not be answered.

All questions are left open for consideration before the assessing officer.