TMI Blog1995 (6) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer after considering the facts and circumstances, of the case and taking into account the explanation given by the assessee took the view that the visit of Mrs. Wadia was not wholly and exclusively for the purposes of assessee's business and hence he disallowed the entire claim pertaining to the air-tickets in respect of Mrs. Wadia and disallowed 5096 of the foreign exchange amount spent by the couple, treating 50% as having been incurred on or by Mrs. Wadia which was not wholly and exclusively for the purposes of assessee's business and thus disallowed and added back an amount of Rs. 51,547 on this account. 3. When the assessee went in appeal before the ld. CIT (Appeals) he also took into account the explanation and the evidence filed on behalf of the assessee. Yet, he took the view that the expenditure incurred on the airtickets of Mrs. Wadia was not for the purposes of assessee's business and hence upheld the disallowance of expenditure on air tickets of Mrs. Wadia amounting to Rs. 1,01,049. However, regarding the expenditure incurred in terms of foreign exchange drawn in the name of Mr. Wadia, the ld. CIT (Appeals) took the view that most of the expenditure in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... social custom, accompanied by their wives since most foreign visits though for business purpose have invariably and necessarily some social aspect also. It has also been emphasized during the course of arguments that business aggregating to Rs. 22.83 lakhs was concluded during the period of Mr. Wadia's visit to USA and Europe. 6. The ld. Departmental Representative on the other hand vehemently argued that as per assessee's own contentions Mrs. Wadia had accompanied the Chairman of the Company not for the purposes of assessee's business but for the purposes of several social engagements/appointments, and in accordance with the social customs as mentioned on page 3 of the Paper Book filed by the assessee. In these circumstances, according to the Departmental Representative, the expenditure incurred on Mrs. Wadia could not be said to have been incurred for the purposes of assessee's business at all, much less " wholly and exclusively for the purposes of assessee's business'. in these circumstances according to the ld. Departmental Representative, the expenditure claimed by the assessee-company as having been incurred on Mrs. Wadia could not be said to be allowable under the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrelated with the sales yet there is nothing on record to indicate that the presence of Mrs. Wadia along with Mr. Wadia was for the purpose of assessee's business. We have further taken note of the fact that the assessee-company had a blank exchange permit during that year and in its report submitted to the RBI, in the prescribed proforma the name of only Mr. Nusli N. Wadia, Chairman and Executive Director has been mentioned and the purpose given is export promotion. Nowhere has it been indicated that the blank exchange permit was to be utilised by taking Mrs. Wadia with the Chairman and Executive Director. In fact in item 3(1)(a) of the Report which requires name(s) of the person(s) deputed, name of only Mr. Nusli N. Wadia has been given in both the reports. This would clearly indicate that even an intimation for taking Mrs. Wadia was not given to the RBI. Further, while mentioning the particulars of the business done also it has been mentioned as under : " Business aggregating to Rs. 19.22 lakhs was concluded during the period of Mr. Wadia's visit to Switzerland and USA." Similarly in the second report it is mentioned : " Business aggregating to Rs. 3.61 lakhs was conclud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd hence in this regard the decision of the lower authorities is upheld. 9. Now we may deal with the case law on which the ld. counsel for the assessee has very vehemently relied. We find that in the case of Indian Products Ltd., the Assessing Officer himself had allowed 50% of the expenditure on the travelling of the wife of the Director. Moreover, the wife of the Director herself was a Director in the Company and in this view of the matter the Hon'ble Court had taken the view that the foreign travel of Mrs. M.N. Shah was also a business tour, otherwise no portion of the foreign travel expenses attributable to her could have been allowed by the ITO as business expenditure. In the instant case, as we have already mentioned, Mrs. Wadia is not only not a Director, no part of her expenditure incurred on foreign travelling had been allowed by the Assessing Officer and we have also given a finding that her foreign travelling has not been proved to be for the purposes of assessee's business, much less wholly and exclusively for assessee's business. Hence ratio of this decision does not apply to assessee's case. 10. In the case of Bralco Metal Industries (P.) Ltd. their Lordships note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s assessed at an income of Rs. 35,65,020 and the claim of Rs. 25,090 forms a very negligible proportion thereto, and that the assessee-company was a reputed firm of Chartered Accountants which also represented in India and internationally renowned accounting firm Peat Marwick Mitchell Co. and that the aforesaid international accounting firm had associates in countries all over the world. It was also noted that the assessee received substantial amount of professional work in the form of clients, educational facilities, literature and training of their staff from this foreign firm. Moreover, in this case also the wife of the senior partner had been invited in connection with conferences to be held in foreign countries and in the application made to the RBI the assessee had disclosed to the RBI that Mrs. Khanna was to accompany in connection with professional purposes of the assessee-firm. In the instant case, the computation of income filed by the assessee shows that out of total income of Rs. 15,23,782 as per the profit and loss account, income to the tune of Rs. 11,29,441 consisted of income by way of dividends of Rs. 7,71,625 and Rs. 3,28,991 by way of profit on sale of import e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a fact that there was no business purpose, much less the tour of Mrs. Wadia could be proved to be wholly and exclusively for the purposes of assessee's business. 13. Now, coming to the decisions of Hon'ble Madras High Court and the Gujarat High Court in the cases of Hajee Moosa Co. and Bombay Mineral Supply Co. (P.) Ltd. we may mention that their Lordships have laid down the law very clearly on the subject. Thus, in the case of Hajee Moosa Co. their Lordships have observed on page 426 of the report as under : " While we agree that a businessman in indifferent health ought not to be discouraged from undertaking a foreign tour accompanied either by his wife or a nurse or other attendant, we cannot at the same time hold that expenses incurred either for availing himself of the company of his wife or the services of a nurse or attendant are anytheless personal, however much the expenses are either necessary or even otherwise productive of good health or other enjoyable results from the point of view of the personal need and requirement of such a businessman." 14. Their Lordships also dealt with the question that the expenditure might have been incurred partly for the bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was submitted either to the RBI or to any other authority or even to the Board of Directors regarding the actual work done by Mrs. Wadia during her visits to foreign countries. Of course, there is an approval of the Board dated 20-8-1986 which shows that foreign travelling expenses of Rs. 3,08,703 incurred during the year by the company, out of which Rs. 1,01,409 against actual figure of Rs. 1,01,049, are the expenses towards air-fare for Mrs. Wadia's trip to UK and Western Europe and USA and that her presence with the Chairman and Executive Director was required necessarily and exclusively for the purposes of the business of the company. This note also does not specify about any work done by Mrs. Wadia. The report submitted to the RBI mentioned the name of only Mr. Nusli N. Wadia and made no mention about Mrs. Wadia accompanying him. In these circumstances we hold that the foreign travelling of Mrs. Wadia was not for the purpose of assessee's business and hence cannot be allowed as a deduction while computing the business income of the assessee-company. We find support while taking this view from the decision of the Jurisdictional High Court in the case of Cooper Engg. Ltd v. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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