2012 (8) TMI 241

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....he expenditure incurred on foreign travel and medical treatment of the Managing Director and his wife is allowable as a deduction under Section 37(1) of the Income Tax Act?"   2. While completing the assessment, the Assessing Officer disallowed the sum of Rs.10,59,363/- being the expenditure stated to have been incurred by the company to meet the medical and travelling expenses of the Managing Director and his wife for his treatment in U.S.A. The Assessing Officer pointed out that there was no obligation on the assesee company to pay such huge amount towards medical expenses to the Managing Director. Further the Managing Director was not actively engaged in the business affairs of the company during the previous year. From letter da....

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....n by the Board of Directors in its General Body Meeting to finance his medical treatment. The Tribunal called this decision as a commercially viable decision. Consequently, the appeal filed by the Revenue was dismissed. Aggrieved by the same, the Revenue has preferred the above appeal.   3. Learned standing counsel for the Revenue placed reliance on the decision of this Court reported in 263 ITR 115 CIT v. SAMBANDAM SPG. MILLS and submitted that in the absence of any obligation on the part of the company to meet the medical and travelling expenses, the payment made could not be treated as one of commercial expediency. He further submitted that there are no materials to point out that the payment was made on account of commercial exp....

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.... was a Director in the company. Thus, he viewed that the expenditure was purely a personal one and not incurred out of a commercial expediency arising out of the contractual obligation.   7. As far as the first Appellate Authority is concerned, he accepted the case of the assessee that the decision taken by the Board of Directors was a commercially prudent decision. The Tribunal confirmed this view by holding that the decision taken is a commercially viable decision. Except for stating as prudent decision or viable decision, there is hardly any material to indicate that it was expanded out a commercial expediency. The commercially viable decision need not be one arising out of commercial expediency. The fact is that the said person ....