AI Drafter 
TaxTMI 
TaxTMI 
2003 (10) TMI 656
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.... Rs. 2,92,855, being medical expenses incurred on treatment of wife of appellant's chauffer, on the plea that such expenses are charitable expenses in nature and are not necessitated by business expediency. 2. We have heard the parties, perused the records and taken into account factual matrix of the case as also the applicable legal position. Before we come to the core issue in this appeal, it is desirable to briefly set out the material facts. 3. The assessee derives income from professional receipts as a cine artist. One person by the name of Shri Rawat (R, in short) was working with the assessee as a chauffer. It is not in dispute that the salaries and allowances paid to R constitute admissible deduction in the hands of the assess....
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....ility to allow the expense incurred as a deduction in computation of taxable income, by observing as follows: "I appreciate the arguments advanced by the learned Shri Anil Sekhri more for compassionate appeal rather than legal content and justification. The learned counsel himself admits that the appellant incurred medical expenses in question as his moral duty (as distinguished from the professional obligations of the appellant) to look after the health of employee and his family. I agree with the argument of Shri Sekhri that the employer should be compassionate enough to look after the medical needs of the employees. However, the employers should charge such expenses on account of magnanimity and generosity or charitable/moral gr....
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....se that could be allowed as a deduction should be such as a hard nosed, and perhaps devoid of senses of compassion, professional or businessman alone would incur in furtherance of his professional or business pursuits. It is not in dispute that R was an employee of the assessee and the employee cost in respect of R, constitutes an admissible deduction. The question then is that when an assessee incurs more costs on employment of R than the cost, strictly speaking from a legal or contractual point of view, the assessee was required to incur, whether such a cost will be admissible deduction or not. 8. We find guidance from a passage from the judgment of House of Lords in the case of Atherton v. British Insulated & Helsbey Cables Ltd. 1925 ....
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....r that even if an expense is incurred voluntarily, it may still be construed as 'wholly and exclusively'. Explaining this principle, Hon'ble Supreme Court has, in the case of Sasson J. David & Co. P. Ltd. v. CIT (1979) 118 ITR 261inter alia observed that : "It has to be observed here that the expression "wholly and exclusively" used in section 10(2)(xv) of the Act does not mean "necessarily". Ordinarily, it is for the assessee to decide whether any expenditure should be incurred in the course of his or its business. Such expenditure may be incurred voluntarily and without any necessity and if it is incurred for promoting the business and to earn profits, the assessee can claim deduction under section 10(2)(xv) of the Act even thoug....
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....as that whether a payment made to the employee, which is otherwise eligible for deduction being in the nature of employee cost on account of medical reimbursements, without there being any legal or contractual obligation to do so would be disqualified from deduction, or not. Our answer is an emphatic no. We are also of the view that even if assessee's incurring an employee cost is motivated more by philanthropic desires rather than hard nosed business sense, it will still continue to be employee cost and, hence, deductible as usual under section 37(1) of the Act. As for learned Commissioner (Appeals) remark that no doubt "the employer should be compassionate enough to look after the medical needs of the employees" but "employer should charg....