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Foreing tour exp. to partner

Manoj Punjabi (Accountant) (274 Points)

26 December 2012

Dear Sir

Foreign travelling tour expenses incurred by partner with family.

1. Are they allowable as expense in firm.

2. Can partner claim this as expense in his personal returns.

Manoj Punjabi

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5 Replies

vittakaushik (articles) (71 Points)
Replied 26 December 2012

As per Sec 37 of IT Act,1961 only business expenditure not being in the nature of capital expenditure is allowed as dedution.Personal expenses having no nexus with the firms business cannot be claimed as deduction or expenditure.

In his personal return also it cannot be claimed as deduction or expenditure

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praveen (Chartered Accountant) (6971 Points)
Replied 26 December 2012

See there are a number of case laws on this issue.

But the general settled rule is if you can prove that there is some increase in revenue because of that foreign travel then one can cliam expenditure as well.

For Eg in case of builder if he is able to prove that because of the trip he was able to get some buyers from the other country then his claim can will be viable otherwise no.

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vittakaushik (articles) (71 Points)
Replied 27 December 2012

In the query it was stated that the partner has gone abroad with family which means the travel expenditure is of personal nature.

If the purpose of visit is for the purpose of business then expenditure can be allowed under income tax act.

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Manoj Punjabi (Accountant) (274 Points)
Replied 27 December 2012

Thanks to Mr. Praveen for clear reply, Also thanks to Mr Vittakaushik for pointing out that if it is family expendutre is not allowed.

It is family, but both husband and wife are partners in firm.

Business is trading in healthcare products, purchases/sales are all in India, nothing abroad.

But if visit is to acquire some knowledge about business trend in such field in other countires, then would it be allowable. there will be no purchases/sales from abroad.

And how to prove that intention was for business. It is out of curiousity to find how people trade in foreign countires, and what other products could be added in our trading line to increase customer base.

praveen (Chartered Accountant) (6971 Points)
Replied 27 December 2012

See if someone is going to foreign to learn there trade, then you would probably have to visit some company's office. You can have appointment letters or you could be attending some kind of conference there you will have fees paid receipt for the same. If it is really for business you will definitely be able to find some proof.

My suggestion is take benefit of the expenditure. In case the ITO does not allow then try fighting it out there. Sometimes you may get away with a small disallowance.