Kerala H.C : The expenditure incurred on the foreign tour of the wife of a Senior Executive of the company, in connection with the medical treatment of the said Executive is not an allowable deduction under the Income Tax Act, 1961, on the ground that she has no locus standi with the Company

High Court Of Kerala

Harrisons Malayalam Ltd. vs. CIT

K.Vinod Chandran & Ashok Menon, JJ.

ITR.No. 1 of 2003

6th December, 2018

Counsel appeared:

M. Gopikrishnan Nambiar, Joson Manavalan, K. John Mathai, Kuryan Thomas, Paulose C. Abraham, P. Gopinath for the Petitioner.: P.K. Ravindranatha Menon, SR.SC, GOI (Taxes), Jose Joseph, SC, for Income Tax

VINOD CHANDRAN, J.

1. The only question arising in the above Revision is as follows:

“Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the expenditure incurred on the foreign tour of the wife of a Senior Executive of the company, in connection with the medical treatment of the said Executive is not an allowable deduction under the Income Tax Act, 1961, on the ground that she has no locus standi with the Company ?”

The assessee had claimed the expenses incurred for the foreign ravel of the wife of the Senior Executive as business expenditure. We see from the order of the Tribunal that on a discussion of the facts it was found that the Senior Executive of the Company had to go abroad for heart surgery and considering his long service in the company, it was decided to meet his expenditu e, including the expense of his wife in connection with the medical treatment in the foreign Country. The expenditure on travel of the wife was disallowed by the Assessing Officer. The learned Counsel appearing for the assessee would rely on the decisions in C.I.T. v. Aspinwall & Co.Ltd.[1999] 235 ITR 106 (Ker) and C.I.T v Appollo Tyres Ltd., [1999] 237 ITR 706 (Ker).

A Full Bench in Ram Bahadur Thakur Ltd. v. C.I.T., [2003] 261 ITR 390 (Ram Bahadur Thakur Ltd.-II case) considered the issue on the basis of a reference made by the Division Bench finding a conflict between the aforesaid two decisions and Ram Bahadur Thakur Ltd. v. C.I.T., [2002] 257 ITR 289 (Ram Bahadur Thakur Ltd.-I case).

In all these cases, the dispute was as to the business expenditure claimed of the expenses incurred for the wife’s travel abroad. The wife’s travel was on account of the wife accompanying the husband, an employee or a Director of the company, who was traveling abroad for business purposes. In Ram Bahadur Thakur-I case, the Division Bench found that the concurrent findings of fact arrived at by the lower authorities was that there was no material to establish that the expenditure incurred on the foreign tour of the wife of the Director was for business purpose. However, in Aspinwall & Co. Ltd. and Appollo Tyres Ltd., the expenses were permitted to be claimed as business expenditure.

In Aspinwall & Co. Ltd., a Chief Executive of the Company was traveling abroad, who was accompanied by his wife. There, it was found that since the person traveling abroad on business tour, was an employee and not a Director, the expenditure was allowable. In Appollo Tyres Ltd., the Division Bench noticed that the accompaniment of the wife of the Chairman is for the purpose of fulfilling social obligations and hence it is allowable. The Full Bench in Ram Bahadur Thakur-II did not find any conflict with the above cited decisions. However, it was held that the allowance of business expenditure in each instance would depend on the facts of that case. It was categorically held that there must be nexus found between the expenditure and the business purpose.

6. In the present case, there was no business purpose at all and the Senior Executive was traveling abroad for the purpose of a heart surgery. We are not sure as to whether the expenditure incurred by the Senior Executive was reimbursed and claimed as a deduction. That would definitely be permissible as a medical reimbursement. The dispute, as of now, is only the disallowance of the expenditure incurred for the wife’s travel. The wife had accompanied the Senior Executive, when such Senior Executive had traveled abroad for a heart surgery. The wife’s presence though imperative, we are unable to find it to be a business expenditure. We do not think that the same can be called a business expenditure and the travel itself is not for a business purpose. In such circumstances, we answer the question in favour of the Revenue and against the assessee. The I.T. Revision is dismissed. No costs.

A copy of this order under the seal of this Court and the signature of the Registrar shall be forwarded to the Income Tax Appellate Tribunal, Cochin Bench.

[Citation : 409 ITR 621]