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TMI Blog2019 (11) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... at the AO has made an addition of Rs. 3,21,062/- incurred on foreign travel of a Director of the Appellant on the ground that there may be an element of personal and pleasure trip cannot be ruled out without bringing any other material fact on record. 4. That on the facts and circumstances of the case, even if there was some personal element in the expenditure, disallowance of the whole sum cannot be made. 5. That on the facts and circumstances of the case and in law, the Ld., Commissioner erred in not appreciating the fact that the Appellant had incurred expenditure on the mediacl treatment of its Director Mr. G.L. Didwania only on the grounds of commercial expediency, so that it could continue to make use of his knowledge. 6. That on the facts and circumstances of the case and in law, the Ld., Commissioner in not appreciating the fact that Mr. G.L. Didwania was the founder of the appellant company and possessed immense know how and that it was in the Appellant's interest to continue to utilise the knowledge and that it was commercially expcuiv*^ Appellant to incur this expenditure. 7. That on the facts and circumstances of the case and in law, the Ld., Commissioner erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of the assessee was selected for scrutiny and statutory notices under the Income-tax Act, 1961 (in short 'the Act') were issued and complied with. In the scrutiny assessment completed on 02/03/2015 under section 143(3) of the Act, the Assessing Officer made disallowance of Rs. 3,21,065/- on account of expenses incurred on foreign travel and disallowance of medical expenses of Rs. 18,13,574/- on treatment of one of the directors of the assessee company. On further appeal, the Ld. CIT(A) upheld the disallowances. Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced above. 4. In the grounds raised, mainly two disallowances made by the Assessing Officer, have been challenged, i.e., firstly, the disallowance out of foreign travel expenses and secondly, disallowance out of medical expenses incurred on treatment of one of the Director. 4.1 The facts qua the first issue of disallowance of foreign travel expenses are that the Assessing Officer (AO) out of the travelling of directors amounting to Rs. 37,24,282/-, noted expenses of Rs. 3,21,065/- as incurred on the foreign travel to USA made by Ms Unnati Didwania, daughter of managing director of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se was private in nature and in absence of any details furnished by the appellant, the requirements of section 37 (that to be allowed the expenditure has to be wholly and exclusively for business and not being of capital nature and not involving personal elements) are not met. No case of business expediency has also been made out, except a general statement made in this behalf. 4.2 Before us also, the Ld. counsel of the assessee failed to furnish any evidence to substantiate that the expenses were incurred wholly and exclusively for the purpose of the business. The only contention which has been made before us is that entire expenditure of Rs. 3,21,065/- should not have been disallowed and a part of expenses should only be disallowed. 4.3 The learned DR, on the other hand, relied on the order of the lower authorities and submitted that the assessee has failed to substantiate the business purpose of travel and for the vouchers of foreign exchange purchased by the assessee, it was evident that the foreign travel in dispute was private in nature and, therefore, disallowance was justified. 4.4 We have heard the rival submissions and perused the relevant material on record. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the same under section 17(2) of the Act as the expenditure has been incurred on the ground of commercial expediency. The copy of the resolution has been produced by the learned CIT(A) in the impugned order. The learned CIT(A) distinguished the case relied upon by the assessee and held that the claims failed to pass the muster and dismissed as not a permissible deduction. The Ld. CIT(A), held that medical reimbursement paid falls in the nature of the perquisite in terms of section 17(2) of the Act and relying of the decision of the Gururaj Mahuli (supra) sustained the disallowance observing as under: "4.3.8 As it stands on going through the CBDT circulars and instructions and as held in CIT vs Raghu Sinha 2003] 130 TAXMAN 254 (RAJ.) whether the medical reimbursement is perquisite or not within the meaning of section 17(2) of the Act, 1961, we have to see the provisions. The relevant sub-section (2) of section 17 of the Act, 1961 reads as under:- 'For the purposes of sections 15 ,16 and of this section - (1) "Salary" includes- (i) to (iii) ** ** ** (iv) any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages; (v) to (viii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to perquisites and hence cannot be taxed. 4.3.11 Thus the amount here could be treated as a perquisite. 4.3.12 In fact, the medical reimbursement is to be treated to be part of perquisites, even as per the resolution. The resolution increased the perquisite up to Rs. 25 lakh in addition to other benefits along with salary of Rs. 36,000/- per month. But it was not so treated by the company in the salary of the director. Neither this was included in the salary nor any TDS effected thereon." 5.2 Before us, the Ld. counsel of the assessee reiterated the submission made before the learned CIT(A) and argued that expenses were incurred as commercial expediency and, thus, should have been allowed under section 37(1) of the Act. 5.3 The learned DR, on the other hand, relied on the order of the lower authorities. 5.4 We have heard the rival submission and perused the relevant material on record. The fact that medical expenditure of Rs. 16,57,798/- was incurred toward treatment of Sh. GL Didwaniya, who was director of the company during relevant time is undisputed. The assessee has submitted copy of the resolution passed in extraordinary general meeting wherein remuneration of the wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ART C Provision for Car for use on Company's business and telephone at residence will not be considered as perquisite. Personal long distance calls on telephone and use of Car for private purpose shall be billed by the Company to the Whole time Director. Nature of Duties: Mr. G. L. Didwania is employed on Whole-time basis and is overall in charge of all operational matter like finance, purchase, sales, production, liasioning, management etc. He is currently reporting to the Board of Directors. Except Mr. G. L. Didwania no other director is interested in the aforesaid resolution." 5.5 In view of the above resolution passed in the general body meeting of the company, there is no dispute as the reimbursement of medical expenses was allowed to Sh. G.L. Didwaniya as perquisite and not as commercial expediency. The assessee was required to deduct tax at source on the said amount of perquisite, which was part of the salary as defined under section 17 (2) of the Act. In the facts and circumstances of the case, we do not find any error in the order of the learned CIT(A) on the issue in dispute and accordingly, we uphold the same. The grounds of the appeal of the assessee, related t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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