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2013 (9) TMI 794 - AT - Income TaxExpenditure on spouse/ relatives of Director of the company is disallowed u/s 37 of the Income Tax Act - Sanctioning of foreign exchange by the Reserve Bank authorities does not conclude that the expenses on foreign tours with relatives is wholly and exclusively for the purpose of business – Held that:- Expenses incurred by the assessee on the foreign tour of spouses of the directors were wholly gratuitous and for a purpose outside the course of its business - As the incurred expenditure was for extra-commercial reasons, so, same is not deductible under section 37(1) of the Act - Secondly sanction of foreign exchange by the Reserve Bank authorities is of no help to decide the question of foreign tours undertaken by the spouses of the directors of a appellant-company. At best the fact of sanction of foreign exchange by the Reserve Bank authorities may indicate that the assessee has made out a case before them for sanctioning the requisite exchange for the foreign tour of spouses of the directors. However, that would not indicate that the Reserve Bank authorities had, in any manner, decided the question as to whether the visit of spouses is wholly and exclusively for the purposes of business of the assessee - To look in to the issue of incurring of an expenditure "wholly and exclusively for the purposes of business" is outside the purview and powers of the RBI. Taxability or otherwise of an item of expenditure is the sole domain of the Assessing Officer. Assessing Officer and the first appellate authority were right in not allowing the claim advanced by the assessee under section 37 of the Act. On the facts and in the circumstances of the case, a sum of Rs. 13.38 lakhs incurred by the appellant-company on the foreign tours of spouses of the directors has rightly been disallowed – Decided against the Assessee.
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