Commissioner of Income Tax vs Ram Bahadur Thakur Ltd.

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 Assessing Officer 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 Income Tax Appellate Tribunal, Bombay Bench "A" (Special Bench) in the case of Glaxo Laboratories (India) Ltd. v. ITO (Second) [1986] 18 ITD 226, and also the decision of the Bombay Bench in the case of ITO v. E. F. Ferguson and Co. [1986] 19 ITD 620. The appellate authority allowed the claim.

Before the Tribunal, the state contended that the allowance was not correct. In paragraph 12 of the order of the Tribunal, it is stated thus : "We have heard the parties to the dispute. The Commissioner of Income Tax (Appeals) 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. v. ITO (Second) [1986] 18 ITD 226 and further the decision of the Cochin Bench of the Tribunal in the case of Apollo Tyres Ltd. (I. T. A. No. 301/Coch of 1991, dated July 29, 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 in Commissioner of Income Tax Vs. T.S. Hajee Moosa and Company, and Bombay Mineral Supply Co. P. Ltd. Vs. Commissioner of Income Tax, 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.

In Bombay Mineral Supply Co. P. Ltd. Vs. Commissioner of Income Tax, , the Gujarat High Court held as follows (page 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 Commissioner of Income Tax Vs. Aspinwall and Co. Ltd., , 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 own partner 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".

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 Income Tax reference is disposed of as above.