2022 (8) TMI 674 - AT - Income Tax

Personal medical expenses for director's spouse not deductible as business expense

The ACIT, Corporate Circle 2, Madurai Versus T.V. Sundaram Iyengar & Sons Ltd.

The Tribunal allowed the Revenue's appeal, overturning the Commissioner of Income Tax (Appeals) decision to allow medical expenses incurred abroad for the ... Personal expenditure - Disallowance of expenses relatable to medical treatment of one of the Director’s wife - allowable revenue expenses or not? - HELD THAT:- Issue decided against assessee as in its own case [2022 (8) TMI 595 - ITAT CHENNAI] wherein held that there should be expectation by the employee for payment of medical expenses. The sum of money was expended on the ground of commercial expediency and in order to facilitate indirectly the carrying on of the business of the assessee. If any one of the tests was not satisfied that medical expenditure incurred on by an employee should not be allowed as a valid business expenditure in the hands of the assessee under section 37 - Based upon the above points, the High court held that the expenditure in connection with the payment of Medical expenses met out by the company even though, the same had been spelt out in the letter of appointment cannot be regarded as sufficient for treating the expenditure as business expenditure. In view of the above decision of the Hon’ble Madras High Court in the case of CIT v. TIAM House Service Ltd [1998 (11) TMI 45 - MADRAS HIGH COURT] wherein, the decision of the Hon’ble Supreme Court was followed. We are of the view that these expenses incurred towards medical expenses of the relative of the Director of the assessee company in foreign currency are personal in nature and not in relation to any business connection. Hence, the lower authorities have rightly disallowed the same and we confirm the same. - Decided in favour of revenue. Issues:Disallowance of medical treatment expenses incurred abroad for the spouse of the whole-time director as a business expense.Analysis:The case involves an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of expenses related to medical treatment abroad for the wife of a director. The Revenue contended that the medical expenses were personal and not incidental to the business of the company. The Commissioner allowed the claim, stating that the expenses were incurred as per the terms of employment and should not be treated as perquisites. The Revenue challenged this decision before the Tribunal.The Tribunal considered previous decisions and highlighted the importance of certain tests laid down by the Supreme Court regarding the treatment of medical expenses as valid business expenditure. The Tribunal referred to a case where the High Court held that medical expenses incurred for the relative of a director in foreign currency were personal and not related to any business connection. Consequently, the Tribunal upheld the disallowance of the medical expenses incurred abroad for the director's spouse.In conclusion, the Tribunal allowed the appeal filed by the Revenue, setting aside the order of the Commissioner of Income Tax (Appeals) and confirming the disallowance of the medical expenses. The judgment was pronounced in an open court on 2nd August 2022 in Chennai.