Tribunal Disallows Foreign Travel & Medical Expenses as Business Deductions

The Tribunal upheld the disallowance of both foreign travel expenses and medical expenses, agreeing that the assessee did not sufficiently prove the business nature of the travel and that the medical expenses were considered perquisites, not business expenses. The decision was made on 31st October 2019.

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Issues Involved:
1. Disallowance of foreign travel expenses.
2. Disallowance of medical expenses incurred on the treatment of a director.

Detailed Analysis:

1. Disallowance of Foreign Travel Expenses:

The primary issue revolves around the disallowance of Rs. 3,21,065/- out of the total foreign travel expenses of Rs. 37,24,282/- incurred by Ms. Unnati Didwania, the daughter of the managing director. The Assessing Officer (AO) questioned the business purpose of the trip to the USA, as the assessee failed to provide documentary evidence such as tour reports, client meeting details, or seminar/conference attendance records. The AO concluded that the trip might have been personal and disallowed the expenses.

The CIT(A) upheld the AO's decision, noting that the purchase of foreign currency under the scheme "PRIWTSIT" indicated a private purpose. The CIT(A) found no evidence to support the claim that the expenses were incurred wholly and exclusively for business purposes.

The Tribunal also upheld the disallowance, agreeing with the lower authorities that the assessee failed to substantiate the business purpose of the travel. The Tribunal emphasized that the onus was on the assessee to prove the business nature of the expenses, which was not met.

2. Disallowance of Medical Expenses:

The second issue pertains to the disallowance of Rs. 18,13,574/- claimed as medical expenses for the treatment of Mr. G.L. Didwania, a director and founder of the company. The AO disallowed the expenses, treating them as perquisites under section 17(2) of the Income Tax Act, 1961, and not as business expenses.

The CIT(A) supported the AO's view, stating that the medical expenses were indeed perquisites and should have been treated as part of the director's salary. The CIT(A) referred to the company's resolution, which allowed medical reimbursement as a perquisite up to Rs. 25,00,000/- per annum. The CIT(A) cited the case of Gururaj Mahuli, which differentiated between general medical expenses and those incurred due to accidents in the course of employment. The CIT(A) concluded that the medical reimbursement was a perquisite and not a business expense.

The Tribunal upheld the CIT(A)'s decision, noting that the medical expenses were approved as perquisites in the company's extraordinary general meeting. The Tribunal emphasized that the expenses were part of the director's remuneration package and should have been subjected to tax deduction at source. The Tribunal found no error in the CIT(A)'s order and dismissed the appeal.

Conclusion:

The Tribunal dismissed the appeal, confirming the disallowance of both the foreign travel expenses and medical expenses. The Tribunal agreed with the lower authorities that the assessee failed to substantiate the business purpose of the foreign travel and that the medical expenses were perquisites, not business expenses. The Tribunal's decision was pronounced on 31st October 2019.

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