Kerala H.C : the expenditure incurred on the foreign travel of the wives of the directors is an allowable deduction

High Court Of Kerala

CIT vs. Ram Bahadur Thakur Ltd.

Section 37(1)

S. Sankarasubban & Kumari A. Lekshmikutty, JJ.

IT Ref. No. 197 of 1996

26th September, 2002

Counsel Appeared

P.K.R. Menon & George K. George, for the Revenue : Joseph Markose & Thomas Vellappally, for the Assessee

JUDGMENT

S. Sankarasubban, J. :

The questions of law referred to us are as follows :

“Whether, on the facts and in the circumstances of the case : (i) the expenditure incurred on the foreign travel of the wives of the directors is an allowable deduction ? (ii) should not the Tribunal have considered the claim independently and on merits ?” The assessee-claimed allowance of foreign travel expenses of the wives and directors. On scrutiny of the accounts the officer found that Mrs. A. Sharma, the wife of director Sri C.B. Sharma, and Mrs. M.M. Sharma, the wife of another director Sri M.M. Sharma accompanied their husbands abroad for which purpose the company incurred total expenditure of Rs. 62,302. The AO disallowed the claim on the ground that the expenditure was not incurred wholly and exclusively for the purpose of the business. Before the appellate authority, the assessee relied on the decision of the Tribunal, Bombay Bench “A” (Special Bench) in the case of Glaxo Laboratories (India) Ltd. vs. ITO (1986) 26 TTJ (Bom) 214 : (1986) 18 ITD 226 (Bom), and also the decision of the Bombay Bench in the case of ITO vs. E. F. Ferguson & Co. (1987) 27 TTJ (Bom) 90 : (1986) 19 ITD 620 (Bom). The appellate authority allowed the claim. Before the Tribunal, the state contended that the allowance was not correct. In para 12 of the order of the Tribunal, it is stated thus : “We have heard the parties to the dispute. The CIT(A) while allowing the impugned relief has, in fact, relied on the decision of the Special Bench of the Tribunal in the case of Glaxo Laboratories (India) Ltd. vs. ITO (supra) and further the decision of the Cochin Bench of the Tribunal in the case of Apollo Tyres Ltd. (ITA No. 301/Coch of 1991, dt. 29th July, 1992) wherein in similar circumstances travelling expenses incurred by the wife of the director were considered to be admissible expenses. It may further be stated in this connection that the two decisions CIT vs. T.S. Hajee Moosa & Co. (1986) 51 CTR (Mad) 200 : (1985) 153 ITR 422 (Mad) and Bombay Mineral Supply Co. (P) Ltd. vs. CIT (1985) 153 ITR 437 (Guj) (Appex.) were considered by the Special Bench while deciding the issue against the Revenue”. Learned counsel for the Revenue argued before us that no reasons are given as to why disallowance is made and no explanation is given that the travelling allowance can be included in the business.

4. In Bombay Mineral Supply Co. (P) Ltd. vs. CIT (supra), the Gujarat High Court held as follows (p. 439): “In our opinion, the need of the managing director of the assessee-company to have the services of his wife who was not a qualified or a trained nurse either to attend on him for his indifferent health or to prepare food for him since he happened to be a strict vegetarian would not entitle the assessee-company to claim the proportionate expenses as business expenses”. Similarly, a Division Bench of this Court in the decision reported in CIT vs. Aspinwall & Co. Ltd. (1998) 149 CTR (Ker) 601 : (1999) 235 ITR 106 (Ker), held (headnote) “that the travel was undertaken by the wife of the senior executive only for the purpose of business. This was a case where the assessee had incurred expenditure for the travel of its employee and the wife of the employee and not the wife of its ownpartner or director. It was under these circumstances that the Tribunal took the view that when the assessee permitted such travel, in the absence of contrary evidence, it had to be taken that the wife of the chief executive had to undertake the travel for business purposes. Therefore, the expenditure incurred on the foreign travel of the wife of the chief executive of the assessee-company was an allowable deduction”.

5. After hearing both sides, we are satisfied that the Tribunal has not given reasons with regard to the travelling expenses of the wives of the directors. Mere statement that the travelling expenses incurred by the wives of the directors were considered to be admissible expenses does not mean that this is not personal expenditure. The assessee has to prove that it is not to be treated as personal expenditure. Since, we do not find any reasons stated, according to us, the matter has to be considered by the Tribunal again. Hence, so far this aspect is concerned, the finding of the Tribunal is set aside and the case is remanded to the Tribunal to decide the question on the basis of the above. The IT reference is disposed of as above.

[Citation : 261 ITR 388]

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