TMI Blog2011 (3) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... e Managing Director and not on that of the wife of the Deputy Managing Director as business expenditure. - ITA No. 624/2004 - - - Dated:- 17-3-2011 - Hon ble Mr. Justice Bhaskar Bhattacharya Hon ble Justice Sambuddha Chakrabarti Appellant: Mr. J.P. Khaitan, Mr. Sanjoy Bhowmick. Respondent: Mr. R.N. Bandopadhyay, Mrs. S. Das Dey. 1. This appeal under Section 260A of the Income-tax Act, 1961 is at the instance of an assessee and is directed against an order dated June 29, 2004 passed by the Income-tax Appellate Tribunal, D Bench, Calcutta, in Income-tax Appeal being ITA No.2471/Kol/2003 for the assessment year 2001 by which the Tribunal has affirmed the order passed by the Commissioner of Income-tax Appeal. 2. A Division ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and is hereby authorised whenever necessary to take his wife on his tours overseas for the business of the company and that the travel expenses of the wife be borne by the Company subject to the approval of the Reserve bank of India, where necessary. The Board may be apprised of the Managing Director s visit abroad. (b) Pursuant to the said resolution, for the relevant assessment year, the company sent its Managing Director and the Deputy Managing Director abroad along with the respective wives for the purpose of assessee s business. According to the assessee, in order to strengthen the business relation and promote better business understanding, it was necessary for the Managing Director and the Deputy Managing Director to be accompan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the appellant so as to claim deduction in terms of Section 37 of the Income-tax Act. 8. Mr. Khaitan, the learned Senior Advocate appearing on behalf of the appellant, strenuously contended before us that the aforesaid business expenditure claimed by his client was in tune with the decision taken by the Board of Directors of the company and as such it is open to his client to claim such amount as business expenditure. By referring to the decision of the Supreme Court in the case of Commissioner of Income-tax, Bombay vs. Walchand Co. Pvt. Ltd., reported in (1967) 65 ITR 381= AIR 1967 SC 1435, Mr. Khaitan contends that it is open to the Tribunal to come to a conclusion either that the alleged payment is not real or that it is not incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for dismissal of this appeal 14. . After hearing of the learned counsel for the parties and after going through the resolution taken by the assessee regarding the expenditure for foreign tour of the wife of the Managing Director, we find that in the resolution, the Company had not taken decision for spending on the foreign tour of the wife of a Deputy Managing Director and thus, the amount claimed for the foreign tour of the wife of the Deputy Managing Director is on the face of it not authorized by the said resolution and cannot be considered for deduction under Section 37 of the Act. 15 . However, as regards the expenditure made for the foreign tour of the wife of the Managing Director, the same is definitely authorized by the reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Board of Directors of the assessee that the wife of the Managing Director accompanied him because of the following decision of the Board: If on such tours he is accompanied by his wife, it goes a long way to benefit the Company since warm human relations and social mixing promotes better business understanding. Also wife of the Director is sometimes required to accompany him on his tour abroad as a matter of reciprocity in international business. In the circumstances, it was felt that wife of the Managing Director may accompany him on tours abroad as and when necessary. 19. Thus, it was a decision of the Company to send her for promoting better business understanding and as a matter of reciprocity in international business fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, disapproved the said reason and held that an employer in fixing the remuneration of his employees is entitled to consider the extent of his business, the nature of the duties to be performed, and the special aptitude of the employee, future prospects of extension of the business and a host of other related circumstances. The rule that increased remuneration can only be justified if there be corresponding increase in the profits of the employer was erroneous. 21. Applying the aforesaid principle to the facts of our case, we hold that when the Board of Directors of the assessee had thought it fit to spend on the foreign tour of the accompanying wife of the Managing Director for commercial expediency, the reasons being reflected in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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