2015 (2) TMI 768 - HC - Income Tax

Court Upholds Disallowance of Medical & Camp Office Expenses for Director

Commissioner of Income Tax (Central), Ludhiana Versus M/s Hero Cycles Ltd., Ludhiana

The Court dismissed the appeal in favor of the respondent-assessee, upholding the Income Tax Appellate Tribunal's decision regarding the disallowance of ... Disallowance of Medical expenses of a Director - Held that:- As relying on Porritts & Spencer (Asia) Ltd. Vs. Commissioner of Income Tax [2008 (9) TMI 918 - PUNJAB & HARYANA HIGH COURT] wherein it has been held that the medical reimbursement expenses are part of the salary covered under Section 40A(5) of the Income Tax Act, 1961. - Decided against revenue. Disallowance of Camp Office expenses - Directors' Wives accompanying their husbands on business tours - Tribunal deleted addition - Held that:- nce the Tribunal has recorded a finding of fact that the wives of the Directors had accompanied their husbands on business tour, therefore, such finding of fact does give rise to any substantial question of law. See Ram Bahadur Thakur Ltd. Vs. CIT [2003 (1) TMI 66 - KERALA High Court] and CIT Vs. Bhor Industries P. Ltd. (2005 (8) TMI 75 - BOMBAY High Court) - Decided against revenue. Issues:1. Disallowance of Medical expenses of a Director under Section 40A(5) of the Income Tax Act.2. Disallowance of Camp Office expenses without evidence of participative role of Directors' Wives on business tours.Analysis:1. Disallowance of Medical expenses of a Director under Section 40A(5) of the Income Tax Act:The Revenue appealed against the order of the Income Tax Appellate Tribunal (ITAT) relating to the assessment year 1988-89. The first substantial question of law raised was whether the ITAT was correct in not considering medical expenses of a Director as covered under Section 40A(5) of the Income Tax Act. The respondent relied on a judgment stating that medical reimbursement expenses are part of salary under Section 40A(5), leading the Court to conclude that this question did not require consideration. The judgment cited by the appellant from Kerala High Court and Bombay High Court did not alter the decision as the Tribunal had already found that the medical expenses were part of the salary, thus dismissing this issue in favor of the respondent.2. Disallowance of Camp Office expenses without evidence of participative role of Directors' Wives on business tours:The second substantial question of law was whether the ITAT was correct in deleting the disallowance of Camp Office expenses without evidence of the participative role of Directors' Wives on business tours. The appellant referred to judgments from Kerala High Court and Bombay High Court to argue that the expenses would be admissible if for business purposes. However, the Tribunal had already found as a matter of fact that the wives of the Directors were part of the business tour, rendering this question irrelevant. Consequently, the Court dismissed this issue in favor of the respondent as well.In conclusion, both substantial questions of law were resolved in favor of the respondent-assessee and against the Revenue-appellant. The appeal was dismissed based on the findings of fact by the Tribunal, which determined that the medical expenses and camp office expenses were justified in the context of the business activities involved.