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Issues involved: Disallowance of foreign tour expenses of the wife of the managing director of the assessee-company as business expenditure.
Summary: The High Court of Gujarat delivered a judgment regarding the disallowance of foreign tour expenses of the wife of the managing director of a private limited company as business expenditure for the assessment years 1960-61 to 1964-65. The managing director and his wife undertook a tour of Japan, claiming it was for business purposes due to his indifferent health. The company sought to deduct the expenses incurred for the wife's tour, which was disallowed by the Income Tax Officer (ITO). The matter was appealed to the Appellate Assistant Commissioner (AAC) who initially agreed with the company but was later reversed by the Tribunal. The main question referred to the court was whether the disallowed expenditure for the wife's tour was admissible as business expenditure. The court considered the arguments presented by the advocate for the company, emphasizing the necessity of the wife's presence due to the managing director's health condition. However, the court held that such expenses were personal in nature, citing a previous Supreme Court ruling. Therefore, the court ruled in favor of the tax authorities, disallowing the expenses claimed by the company and ordering them to pay the costs of the reference. This judgment highlights the distinction between personal and business expenses, emphasizing that expenses incurred for personal needs, even if related to business activities, cannot be claimed as business expenditure. The court's decision underscores the importance of maintaining clear boundaries between personal and business expenses in tax matters.
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