Business Expense - U/s 37

[KR Ramesh]

Hi

Need a clarification on the below subject matter;

Company is paying the mobile bill of the Director directly which is used for business purpose. The bill is in the name of the Director & not in company name.
The auditor is making an objection that since the bill is not in the name of the company it would be disallowed under Section 37 treating as 'Expenditure of personal nature'. But if the Director pays the bills and in turn get it reimbursed then it would be treated as business expenditure.

Though some technically is involved in their argument but still wondering if payment directly by the company would be considered as allowable expenses.

Please suggest

Thanks & Regards

Ramesh

 

 

[DR.MARIAPPAN GOVINDARAJAN]

Dear Sir,

The company is to provide for furnishing mobile to the Director in the name of the company or there may be some provisions that the Director may reimburse the expenses to the extent as approved for the mobile phone which is in the name of the Director. In such circumstances it will be an allowance expenditure.

Regards,

Dr. M. Govindarajan

[K.S.AIYAR & CO.]

If there is a contract with the Director wherein it is provided that company will provide such facility, I do not see any issue with allowing the expenditure even if paid directly by the company.

[DR.MARIAPPAN GOVINDARAJAN]

Even your view is correct, it is to satisfy the Departmental Officers for the allowability of expenditure. If it is done procedurally there would be no problem.

AI Summary

Business expense deductibility: company-paid director mobile bills may be allowable with contractual terms or approved reimbursement and proper records. Business expense deductibility of company-paid mobile bills for a director hinges on demonstrating business use and having supporting arrangements. A contractual provision making the company responsible for providing the mobile facility, or an authorised reimbursement policy documenting business use and approved limits, will support treating the payment as an allowable business expenditure. Procedural compliance and evidence (company naming, approvals, records) are necessary to satisfy tax authorities.