Allowability of expense

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sriram

sriram (Querist)
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21 January 2010 Whether trekking expenses be allowed under PGBP

CA Prashant Gupta

CA Prashant Gupta (Expert)
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21 January 2010 please provide more detail about company work and expense nature.

Asha Kanta Sharma

Asha Kanta Sharma

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14 July 2024 Trekking expenses generally refer to costs incurred for recreational or leisure activities involving hiking or trekking in natural environments. Under the provisions of the Income Tax Act in India, expenses can be allowed as a deduction under the head "Profits and Gains of Business or Profession" (PGBP) if they meet certain criteria. Here’s how trekking expenses would be assessed:

### Criteria for Allowability of Expenses under PGBP:

1. **Wholly and Exclusively for Business**: The fundamental requirement for any expense to be deductible under PGBP is that it must be incurred wholly and exclusively for the purposes of business or profession. This means that the primary purpose of the expense should be to earn income from the business or profession.

2. **Ordinary and Necessary**: The expense should also be of a revenue nature, incurred in the ordinary course of business, and should be necessary for carrying on the business or profession.

3. **Nature of Trekking Expenses**:
- **Business-Related Activities**: If trekking expenses are incurred as part of business-related activities, such as organizing team-building exercises or business retreats where discussions or training related to the business are conducted, they may potentially qualify as deductible business expenses.
- **Personal vs. Business Purpose**: However, if the trekking is purely for personal leisure or recreational purposes without any direct business purpose or benefit, then such expenses would not be allowed as a deduction under PGBP.

### Example Scenarios:

- **Corporate Retreat**: If a company organizes a trekking trip as part of a corporate retreat aimed at team-building and strategic planning sessions related to business goals, the expenses related to organizing the retreat (including trekking expenses) may be considered deductible.

- **Individual Business Activity**: If an individual professional (such as a tour operator or adventure sports instructor) incurs trekking expenses directly related to conducting business activities (e.g., scouting new trekking routes or conducting guided tours), these expenses may also qualify as deductible under PGBP.

### Conclusion:

Whether trekking expenses are allowed under PGBP depends on the specific circumstances and whether they can be clearly linked to the business or professional activities of the taxpayer. It’s important to maintain proper documentation and demonstrate how the expenses relate directly to the business or profession when claiming them as deductions.

As tax laws can be complex and interpretations may vary, it’s advisable to consult with a qualified tax advisor or chartered accountant who can provide guidance tailored to your specific situation and ensure compliance with applicable tax regulations.

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