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Dhimant Hiralal Thakar Versus The Commissioner of Income Tax -B. C. II

2015 (10) TMI 2381 - BOMBAY HIGH COURT

Expenditure on medical treatment of eyes for improving the vision - whether a business expenditure u/s 37 (1) ? - Held that:- We are not persuaded to accept the submission on behalf of the applicant that eyes are required to be exclusively used for the purpose of profession by the applicant. As observed above eyes are an important organ of the human body and is essential for the efficient survival of a human being. Eyes are thus essential not only for the purpose of business or profession but fo .....

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ct. - Decided in favour of revenue. - Income Tax Reference No. 487 of 1997 - Dated:- 28-10-2015 - M. S. Sanklecha And G. S. Kulkarni, JJ. For the Petitioner : Mr. Nitesh Joshi with Mr. Bharat Damodar i/b Kanga & Co., Advocates For the Respondent : Mr. Suresh Kumar Advocate JUDGMENT ( Per G. S. Kulkarni, J ) 1. By this reference under section 256 (1) of the Income Tax Act, 1961 (the Act),the Income Tax Appellate Tribunal (Tribunal) has referred the following question of law for answer the opi .....

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or by profession. During the assessment year 198687, the applicant incurred an expenditure of ₹ 43,600/on a foreign tour in connection with a pre-operation investigation of his eyes while determining his total income. This claim was disallowed by the Assessing Officer in the assessment order dated 31st March, 1987 passed under section 143 (3) of the Act on the ground it was personal expenditure. Therefore, it did not arise in the course of the profession nor was it incidental to the profes .....

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rred for business or profession. 4. The applicant being aggrieved by the order dated 12th October, 1988 passed by the CIT (A) approached the Tribunal. By an order dated 13th September 1994 the Tribunal concurred with the findings of the Assessing Officer and the C.I.T.(Appeals) disallowing the expenditure incurred for investigation of the eyes. The Tribunal inter alia relied upon the decision of the Supreme Court in case of State of Madras vs. C.J.Coelho (53 ITR 186) to hold that the correct con .....

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carried on by the person. In the alternative, the Tribunal held that if the expenditure is attributable to both personal and professional as contended by the applicant, yet it cannot be allowed as a deduction. This is so as the expenditure has an element other then business or profession, therefore, it cannot be said to have been incurred wholly and exclusively for the purpose of profession. Therefore, the expenditure of medical treatment on eyes was disallowed under Section 37 of the Act. 5. T .....

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₹ 43,600/. This expenditure was necessarily an expenditure relating to the assessee s profession. It is urged that but for this treatment the assessee would not have been able to continue with his profession and therefore the expenditure ought to have been allowed as a deduction. He submits that eyes have a direct nexus with the professional activity of the applicant and therefore, it is not a personal expenditure as held by Tribunal. It is submitted that medical treatment for eyes is so v .....

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the case of (1) Sakal Papers Pvt.Ltd vs. Commissioner of Income Tax Poona 114 ITR 256, (2) Mehboob Productions Private Ltd vs. Commissioner of Income Tax Bombay CityI (106 ITR 758), (3) Commissioner of Income Tax vs Steel Ingots Pvt. Ltd. (220 ITR 552) and (4) Commissioner of Income Tax, Delhi vs Delhi Safe Deposit Co.Ltd, (133 ITR 756). 7. Mr.Joshi learned counsel for the applicant next submits that the expression 'wholly and exclusively' as used in Section 37 (1) of the Act does not me .....

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(I) Pvt. Ltd. (Income Tax Appeal No.538 of 2012). 8. Per contra Mr. Suresh Kumar learned counsel for the revenue would submit that the contentions as raised on behalf of the applicant are wholly unfounded. Mr. Suresh Kumar would submit that the tax authorities and the Tribunal have rightly rejected the assessee's claim by disallowing the expenditure on the said foreign tour undertaken by the applicant. Mr. Suresh Kumar would submit that the ratio of the decision of the Delhi High Court in th .....

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al use of the eyes then the assessee cannot claim expenditure for treatment of eyes under Section 37 of the Act. It is submitted that expenditure as claimed by the applicant goes completely beyond the ambit and scope of Section 37 of the Act. Mr.Suresh Kumar submits that this expenditure as claimed by the applicant has been rightly held as a personal expenditure. 9. To appreciate the contentions as raised on behalf of the parties, it would be useful to reproduce the relevant portion of Section 3 .....

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y provision. From the wordings of Section 37(1) of the Act, it can be clearly gathered that in order to be eligible for deduction under this provision following conditions were required to be satisfied: (1) The expenditure must not be of the nature described in Sections 30 to 60; (2) The expenditure must have been laid down wholly and exclusively for the purpose of business / profession of the assessee; (3) The expenditure must not be capital in nature; (4) The expenditure must not be personal i .....

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vestigation and treatment of the eyes, it would be impossible to carry on the profession of an Solicitor. Thus, the expense was for the purposes of the profession and must be allowed. The Tribunal did not accept the above submissions by inter alia holding that eyes are necessary for effective living as an human being. An identical issue arose before the Delhi High Court in Shanti Bhushan (supra). The only difference being the expenses claimed therein was for the treatment of the heart and here i .....

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ct or immediate nexus between the expenses incurred by the assessee on the coronary surgery and his efficiency in the professional filed per se. Therefore, to claim a deduction on account of expenses incurred by the assessee on his coronary surgery under Section 37(1) of the Income Tax Act would have to be rejected. There is, as a matter of fact, no evidence brought on record, which would suggest that the assessee could have continued in the same state without the medical procedure undertaken by .....

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visually challenged was as such appointed as Additional Advocate General of West Bengal in 1978 and the Advocate General in 1986. Besides, we cannot but agree with the observation of the CIT(A) in his order dated 12th October, 1988 that if the submission of the applicant is taken to its logical conclusion, then every and all expense incurred on daily living and food would be allowable as expenditure under Section 37 of the Act. Thus, we find no substance in the contention that it is not a person .....

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eing personal in nature. In all the three cases, the assessee which was a body corporate had not incurred any personal expenses but had claimed deduction of expenses being amounts paid by it to others i.e. employees or relatives of the employees. It was in the above context that the Court held it was be allowed on commercial expediency. Thus, the question of considering the words 'not being in the nature of personal expenses of the assessee' was not the issue for consideration. Therefore .....

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benefit if any as a professional is incidental. 15. The next limb of Mr. Joshi's submission is that the expression wholly and exclusively as used in section 37 (1) of the Act does not mean necessarily or solely . Therefore, it is for the assessee to decide whether the expenses should be incurred in the course of his business or profession or not. However, if the expenditure is incurred for the purposes of the business, incidental benefit to some other person would not take the expenditure o .....

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er, in all the above cases, persons other than the assessee who incurred the expenditure also benefited. In the above context, it was held that where such expenditure is incurred for the purposes of the business and some third party gets incidental benefit, the expenditure under Section 37(1) of the Act cannot be disallowed. There can be no dispute with the above proposition. However, in this case, it is an expenditure which is personal in nature as held by us and the benefit of such expenditure .....

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rofessional activity. In view of the above, it is submitted that some part of the expenditure has to be allowed as being incurred for professional or business purposes. The words used in Section 37(1) of the Act is wholly and exclusively for the purposes of business. In this case, the finding of fact is that it is incurred for the personal purposes. Be that as it may, the words used are wholly and exclusively for the purposes of business or profession . In normal understanding the word wholly wo .....

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y be whether in the absence of being in business or profession, would the applicant have incurred the expenditure to improve his eyes and the answer has to be 'yes' keeping in view the normal conduct of human affairs. This is because effective eye sight is a necessity for living a life of a complete human. Therefore, in this case the expenditure is personal and incidental benefit if any is to the profession carried out by the applicant. The Supreme Court in the case of CIT, Delhi vs. Del .....

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ing activities of the assessee and thus the assessee was entitled to claim deduction under section 37. Moreover the Supreme Court in considering the various decisions of the English Courts in construing as to what would be wholly and exclusively for the purpose of business or profession observed thus: The true test of an expenditure laid out wholly and exclusively for the purposes of trade or business is that it is incurred by the assessee as incidental to his trade for the purpose of keeping th .....

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e day to day running of a business but also the rationalization of its administration and modernization of its machinery it may include measure for the preservation of the business and for the protection of its assets and property from expropriation, coercive, process or assertion of hostile titles, it may also comprehend payment of statutory dues and taxes imposed as a pre-condition to commence or for carrying on of a business, it may comprehend many other acts incidental to the carrying on of .....

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to claim a deduction under Section 37 which is a residuary provision is quite clear, which is that the expenditure must not be of the nature described in section 30 to 36; secondly the expenditure must not be capital in nature; thirdly the expenditure must have been laid down wholly and exclusively for the purpose of business/profession of the assessee; and fourthly the expenditure must not be personal in nature. Applying these requirements of the statutory provision and the settled position in .....

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