Staff Recruitment Expenses incurred by Hotel allowable as Business Expenditure: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Kolkata Bench ruled that the Staff Recruitment Expenses incurred by Hotel allowable as Business Expenditure.

The assessee has debited Rs. 63,01,109 under the head ‘Staff Welfare Expenses’. From the details furnished in this respect, the AO noted that substantial part of the expenses were booked by different units of the assessee-company relates to ‘Employees’ meals on duty, medical expenses, medi-claim insurance, uniform expenses, recruitment expenses, employees’ relation expenses.

According to AO, recruitment expenses at Trident, Jaipur was claimed at Rs. 2,42,245 and employees’ relation expenses at Trident, Jaipur at Rs. 1,85,650 and Rs. 1,92,592 at Trident, Udaipur have been included under this head. The aforesaid expenses according to AO do not relate to Staff Welfare.

According to AO, in the earlier assessment years, expenses on account of festival gift, Diwali sweets, etc. had been shown by the assessee as incurred on Staff Welfare which had been disallowed as not being related to Staff welfare of the assessee-company. For this assessment year also, the assessee had claimed such expenses which are again disallowable. Therefore, Rs. 6,20,487 was disallowed out of the purported staff welfare expenses and added back to the total income of the year.

However, the assessee preferred an appeal before the CIT(A) who deleted the addition on account of staff welfare expenses.

The issue raised was in regard to the deletion of the addition made by the AO amounting to Rs. 6,20,487 on account of staff welfare expenses.

The coram of J.S. Reddy and A. T. Varkey noted that the staff recruitment expenses were incurred only exclusive for the purpose of business and hence allowable expenditure. The expenses on account of employees’ relation expenses to the tune of Rs. 3,78,242/- was incurred for efficient functioning of the business which pertains to employees meals on duties, medical expenses, medical insurance, uniform expenses etc. and these expenses are incidental to carrying on the business which is crucial in the hotel industry.

Therefore, the ITAT while dismissing the appeal of the Revenue held that it satisfies the condition that it was expended wholly and exclusively for the purpose of business and thus allowable under section 37(1) of the Act. Therefore, confirmed the order of CIT(A).

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