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Issues involved: The judgment involves the question of whether the expenditure incurred on the foreign tour of the director and his wife in connection with the medical treatment of the director can be considered as business expenditure of the assessee and allowable as a deduction under the Income-tax Act, 1961.
Summary: The case involved the non-applicant assessee, a private limited company deriving income from the manufacture and sale of steel ingots, claiming foreign travel expenses for the assessment year 1981-82. The expenses included travel and medical costs for the financial director and his wife, authorized by a resolution due to the director's heart ailment. The Inspecting Assistant Commissioner disallowed the expenses, leading to appeals and ultimately a Tribunal decision partially allowing the deduction for medical treatment and travel. The Commissioner of Income-tax filed an application requesting a reference to the High Court, which was dismissed by the Tribunal, prompting a direct application to the High Court under section 256(2) of the Income-tax Act. Upon review, the High Court found that the expenses incurred on the director's medical treatment and travel were authorized by a resolution based on commercial expediency, as the director's services were crucial for the company. The Tribunal's decision to allow these expenses as deductible under section 37 of the Income-tax Act was upheld, as there was no evidence of arbitrariness, excessiveness, or unreasonableness in the expenses. The Court ruled in favor of the assessee, affirming the Tribunal's decision and rejecting the Department's contentions. In conclusion, the High Court answered the question in favor of the assessee, emphasizing the commercial expediency and necessity of the expenses incurred for the director's medical treatment and travel. No costs were awarded, and the decision was transmitted to the Tribunal for compliance.
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