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TaxTMI 
TaxTMI 
TaxTMI 
2013 (9) TMI 794
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....r section 143(3) of the Income-tax Act, 1961 (Act) by the Assessing Officer (AO) determining total income at Rs.4.07 crores under the normal computation. During the assessment proceedings, the Assessing Officer found that wives of the directors had undertaken visit to foreign countries. The details of journeys undertaken were tabulated by the Assessing Officer as under : S. No. Name of the person Place Fare, visa and airport charges (Rs.) Other expenses (Rs.) Total (Rs.) 1. Smt. Neeta V. Pittie Not filed 4,19,078 4,66,185 8,85,263 2. Smt. D. M. Pittie 50,019 1,73,250 2,23,269 3. Smt. S. M. Pittie 1,24,503 1,05,610 2,30,113 Total 5,93,600 7,45,045 13,38,645 After considering the submissions of the assessee, the Assessing Officer held that the assessee had not highlighted any business necessity or exi- gency based on which it was necessary for the spouses of the directors to undertake the journey in the business interest ....
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....board of directors had approved the tour of the spouses of the directors, that earlier year's order of the Tribunal should be followed. The Departmental representative (DR) submitted that incurred expenses were not for the business of the company, that expenditure on foreign tour of wives of the directors was not wholly and exclusively for carrying out the business of the assessee, that the Assessing Officer had recorded the statements of the spouses of the directors, that the wives of the directors were not aware about the business activities of the company or tours undertaken by them, that in earlier years facts were different. He relied upon the order of the jurisdictional High Court in the case of CIT v. Bhor Industries P. Ltd. [2006] 284 ITR 319 (Bom). He further argued that facts of the case under consideration were different form the facts of the cases relied upon by the authorised representative. We have heard the rival submissions and perused the material placed before us. Where spouse of a director accompanies her/him on a foreign tour, should the expenditure incurred for his/her travel be treated as a deductible business expenditure or not has been subject matter of num....
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....sed and should be incurred after the business is set up ; (iv) it should not be in the nature of personal expenses of the assessee ; (v) it should not be in the nature of capital expenditure ; and (vi) it should have been laid out or expended wholly and exclusively for the purpose of such business. While some broad principles have been indicated in various judicial pronouncements in regard to what is an allowable expenditure, yet it is primarily a question of fact. Basic issue to be decided is whether the expenditure is laid out wholly for the purpose of the business ? It cannot be disputed that before an assessee can become entitled to an allowance under that provision, he must satisfy the Assessing Officer of the purpose for which the amount is spent. It is true that the taxing authorities are not entitled to go into the reasonableness of the expenses, but they are certainly entitled to be satisfied as to the commercial necessity of expending that amount. In most cases, the question will be as to the nature of the relation between the expenditure and the business, whether the benefit is remote or near, prospective or immediate, imaginary or real and so forth. The capacity in....
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....ose cannot be diluted. By using three words, i.e. wholly, exclusively and purpose the Legislature had made it mandatory to find out the reason behind the expenditure. In the case under consideration the dispute between the Revenue authorities and the appellant-company is as to whether the expenditure incurred by it on the foreign tours of spouses of the directors can be said to have been incurred wholly and exclusively for the purpose of the business of the assessee or not ? the Assessing Officer and the first appellate authority have given a categorical finding that expenditure incurred by the assessee-company was not for carrying out of business of the appellant. The Assessing Officer had recorded the statements of the wives of the directors and has clearly held that they were not aware about the basic facts of the foreign tour undertaken by them. In the earlier years the Assessing Officer had made additions without making in depth investigation, whereas in the year under consideration the Assessing Officer has made inquiry and then arrived at a definite conclusion. The first appellate authority has confirmed the facts found by the Assessing Officer. The assessee has not produce....
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....as invited to attend an advanced management programme at Harvard "along with his wife". In that case the first appellate authority had recorded a categorical finding of fact that the said expenses were incurred for the purposes of the business of the assessee. That finding of the fact was affirmed by the Tribunal. Deciding the appeal filed by the Department, the hon'ble High Court held as under (page 447 of 282 ITR) : "Considering the concurrent finding of fact recorded by both the authorities below, in our view, the expenditure would be allowable as deduction while computing the profits and gains of the business. Before concluding, we wish to clarify that the case needs to be decided on its own facts primarily considering the business expediency. That, per se, the expenses incurred by the assessee on the foreign trip of the wife may not always be allowable as deduction in computing the profits and gains of the business unless it is connected with the business of the assessee. We are, therefore, confining our judgment to the facts of this case which we have decided in the light of the concurrent findings of fact recorded by both the authorities below." From the above it is clear ....
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..... Thus, in the case of Zuari Finance Ltd. [2004] 271 ITR 538 (Bom) does not help the assessee in any manner. In the case of Zuari Industries the hon'ble court has empathised the principle that onus of proving the fact of incurring of expenditure on foreign travel of wife of an executive is on the assessee and the assessee has also to prove that such expenditure was incurred wholly and exclusively for the purpose of business. We find that in the case under consideration the assessee has failed on both the counts. After considering the facts of the cases of Hindustan Lever Ltd., (I. T. A. No. 4628/ Mum/ 2003 dated February 8, 2012), J. K. Industries Ltd. [2011] 335 ITR 170 (Cal) (I.T.A. No. 624 of 2004), Mercedes Benz India P. Ltd., (W.P. No. 1614 of 2010) and J. K. T. Fabrics P. Ltd. v. Deputy CIT [2005] 4 SOT 84 (Mum) relied upon by the authorised representative we are of the opinion that they are not applicable to the facts of the case under consideration. As far as the orders for the earlier assessment years delivered by the Tribunal are concerned we are of the opinion that in those years no investigation was made by the Assessing Officer about the foreign tours of the wives of t....
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....orded a categorical finding that the expenditure on the travel of Mrs. Patel was not for the business purposes. The Tribunal could not have reversed its finding without holding that the finding to be erroneous with further finding that the expenditure on foreign tour of Mrs. Patel was incurred for the purposes of business of the assessee-company. It is no doubt true that this court has allowed similar type of expenditure in the case of Alfa Laval (I.) Ltd. [2006] 282 ITR 445 (Bom). However, in that case, the Tribunal had recorded a clear cut finding of fact that the expenditure incurred on the foreign tour of the wife of the president of the assessee-company was for the purposes of business. In view of this categorical finding of fact recorded by the authorities below, this court had treated the expenditure on foreign travel of the wife of the company's president as of revenue nature. In the case on hand, there is categorical adverse finding recorded by the Commissioner of Income-tax (Appeals) that no business purpose was involved in the foreign tour of Mrs. Patel. Consequently, the expenditure incurred was rightly disallowed, in toto, by the Commissioner of Income-tax (Appeals). T....