927529 SIP myths you must know!

Fancy number plates for CXOs cannot be classified as a business expense, the Income Tax Appellate Tribunal (ITAT) has ruled. The tribunal’s ruling comes on the back of a plea from Mumbai based Sopariwala Exports and Sopariwala Exports Pvt Ltd, The Economic Times reported on Thursday. The Mumbai bench of ITAT held that the expense for obtaining a special number is not a business expense and hence there is no questioning of allowing it as a revenue expenditure or capitalising it and providing depreciation.

Expense had no benefits to the business

The verdict will set a precedence for assessing officers to decide what expense can be incurred by a company and what cannot, according to tax experts.

On the other hand, some tax experts concurred. According to the publication, there is only a thin line between expenses that are incurred for commercial expediency and those incurred for personal prestige sometimes. It added that the expenses incurred for commercial expediency cannot be questioned as they have been left in the hands of the businessmen, to decide whether to incur such expenses or not.

The assessing officer had opined in the Sopariwala case that there was no benefit to the business in anyway and disallowed the expenditure. The assessee had pleaded before the Commissioner Income Tax that the special number has been beneficial as the company had customers coming from abroad.