07 February 2012
Dear Experts, One of our client, a Pvt. Ltd. Co., has made payment to a travel agency for its directors personal foreign tour through its bank a/c.
On the other hand the directors also attended a seminar abroad for Co.'s sales promotion for which also the co. has made payment to travel agency.
Now pls advice whether there is any violation of any law and also the taxability with relevant sections, if possible.
In first case it will be treated as advance in the company paid remuneration to such director.
In second case, the expenses are related with the promotion of business of the company and not a personal interest of the director so it can be treated as business expenses.
Should the company make payment for Directors personal travel, then the same shall be disallowed under Income tax act as personal expenses debited to profit and loss account. Other wise as Mr.Ajay has suggested the amount of payment made on behalf of director can be recovered or shown as a advance.
Should the travel be for the purpose of business, the shall qualify as business expenses and allowed.
CAclubindia
