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TMI Blog2011 (3) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the order passed by the Commissioner of Income-tax Appeal. 2. A Division Bench of this Court at the time of admission of this appeal formulated the following substantial question of law: ("I) Whether the Tribunal was justified in law in disallowing the foreign travel expenditure of the spouses of the appellant's Managing Directors and Deputy Managing Directors who accompanied their husbands on business visit and its purported findings that the accompaniment of the spouses was not for business expedience/purpose of the business/direct or indirect benefit to the appellant and disallowing the expenditure of Rs.7,92,058/- for the assessment year 2000-01 are arbitrary, unreasonable and perverse?" 3. The facts giving rise to filing of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Managing Director and the Deputy Managing Director to be accompanied by their respective wives in accordance with the practice abroad. The assessee, consequently, in keeping with the practice of modern times and social customs sent those two officers along with their respective wives and on the foreign travel of the two wives of the two officers, the total expenditure amounted to Rs.7,92,058/- and the assessee claimed deduction of the aforesaid amount as business expenditure. (c) The Assessing Officer turned down such claim holding that those two ladies were not the employees of the assessee and the expenses of their foreign tour could not be allowed as business expenditure. 4. Being dissatisfied, the assessee preferred an appeal be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er that the alleged payment is not real or that it is not incurred by the assessee in the character of a trader or that it is not laid out wholly or exclusively for the purpose of business of the assessee and to disallow it. But it is not the function of the Tribunal to determine the expenditure for the business was justified. 9. By relying upon the said decision, Mr. Khaitan contends that the assessee having decided to spend that amount as reasonable business expenditure, the Assessing Officer, Commissioner of Income-tax (Appeal) and the Tribunal below erred in law in disallowing the same. 10. In this connection Mr. Khaitan further relies upon a Division Bench decision in the Kerala High Court in the case of Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naging Director, the same is definitely authorized by the resolution of the Board of Directors and, therefore, we propose to consider whether such expenditure can be excluded as the business expenditure of the company within the meaning of Section 37 of the Act. 16. In the Act itself the word 'business expenditure' has not been defined but Sections 30 to 37 deal with the claim of deduction on business expenditure. According to those provisions, if any expenditure is made in the nature mentioned in Sections 30 to 36 of the Act, those must be in tune with those provisions, but if any other expenditure is made which is not in the nature prescribed in Sections 30 to 36 of the Act those can be allowed as business expenditure provided those are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding and as a matter of reciprocity in international business for the reasons thought fit by the Company. Therefore, the reason assigned by the Tribunal, that as the wife of the Managing Director is not an employee the expenditure made for her foreign tour cannot be accepted as business expenditure, is not tenable in the eye of law. It is not the law that business expenditure should be limited to the expenditure made for an employee only. 20. As pointed out by the Supreme Court in the case of The Commissioner of Income-tax, Bombay vs. M/s. Walchand and Co. (Pvt.) Ltd., Bombay (supra), the Income-tax authorities have to decide whether the expenditure claimed as an allowance was incurred voluntarily and on grounds of commercial expedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Director for commercial expediency, the reasons being reflected in its resolution quoted by us, it was not within the province of the Income-tax Authority to disallow such expenditure by sitting over the decision of the Board, in the absence of any specific bar created by the Statute for such expenditure. 22. We, therefore, set aside the order of the Tribunal below and partly allow this appeal by directing the Assessing Officer to give benefit of deduction on the amount spent on the foreign tour of only the wife of the Managing Director and not on that of the wife of the Deputy Managing Director as business expenditure and we, thus, answer the point formulated by the Division Bench in the affirmative only to the extent indicated above. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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