I am an individual fno trader and have been traveling a lot in last one year while actively trading remotely. Traveling in remote places helps me become mentally healthy to take better trades and become profitable. Travel has been within India and also abroad.
During my traveling i have incurred lodging, boarding and flight expenses for which i have retained the bills. My query is can i claim these expenses as deductions from my profits.
Looking for detailed reply. I have already gone through the website link you posted on other thread so appreciate specific reply this query.
According to section 37 of income tax act, any expenditures (not being in the nature of capital or personal expenses), incurred wholly and exclusively to carry out business or profession, shall be allowable while computing income taxes.
Generally, the section 37 is residuary section containing all expenses which are incurred for the purpose of business & profession other than expenses contained in sec.30 to 36, prohibited by law and CSR.
Fact of the case:
The travelling expenses should be incurred wholly and in connection with the trading business income only. Personal expenses can not be allowed as deduction while computing income from business or profession. The argument containing, āremote places keep mentally healthy and better for trades or profitā, is not prima facie valid in the eyes of law.
Moreover, the fact of the case are more similar with the case of Shanti Bhushan vs. CIT Delhi ITAT. In that ruling also tribunal rejected the assesseeās claim saying heart surgery expenses to improve professional receipts canāt have direct nexus with the business or profession and disallowed the same.
Hence, in this case, travelling expenses to improve trades or profits can not be valid argument and therefore, you should not claim such expenses as deduction. However, if itās your routine and integral activity of the business then you may claim proportional expenses which incurred to your business. (subject to proven ability to convince the income tax department)
For instance I give these reasons ā āI went to attend the traderās conference, Or a training program, or to meet a Trader/mentor for trade discussionā ( I will make Minutes of the meeting ) and be able to produce other necessary proofs of meeting/conference/training .
These are essential part of Business/ Profession,Can we claim these as business expenses ? . Even in regular business these comes under marketing expenses, Sales & admin overheads.
If expenses incurred are directly related to the business of trading then you can claim the expenses under profit and gain from business or profession.
Proper documentation should be maintain while applying deductions for the same.
@Quicko Can expenses incurred on account of itr filing/tax audit/ca assistance etc. be claimed as expenses under profit and gain from business or profession?
Will there be any scrutiny by IT dept if we claim such expenses (and are able to establish that it is directly related to Business) . Are there any case study / precedence or earlier orders ? That will really help.
Suppose i am running two businesses. First from trading in which i am making profits. Other from freelancing for letās say Nature photography. There is no income from photography business. Only traveling expenses.
Can the expenses from traveling for photography purpose be deducted from profits of trading?
Yes, you can file ITR-3 showing 2 separate businesses and profits/losses from the respective business. Income from 1 Business can be set off against the losses from the other business since both are taxable under the head Income from Business & Profession.
Thus, in your case losses from the Photography business can be set off against the profits from Trading (Non-Speculative Business Income )
Yes, any fee paid to a professional for their services is deductible as a valid expense. This includes tax return filing, tax audit, legal advice, consultancy services, etc.
) and be able to produce other necessary proofs of meeting/conference/training .