1994 (9) TMI 115 - AT - Income Tax

Summary

Issues:
1. Disallowance of expenditure on a foreign tour for pre-operation investigation of eyes.
2. Disallowance of interest on borrowed amount used for professional purposes.

Issue 1: Disallowance of expenditure on a foreign tour for pre-operation investigation of eyes:

The assessee, a solicitor, claimed Rs. 43,600 as expenditure on a foreign tour for pre-operation investigation of eyes. The Assessing Officer disallowed the claim, stating it was personal expenditure not related to the profession. The CIT(A) upheld the decision. The assessee argued that eyes are essential for the profession, drawing analogies with medical expenses for film artists or lawyers' gowns. The Departmental Representative contended that eyes serve personal as well as professional purposes, citing section 80V. The Tribunal analyzed the expenditure under section 37(1) of the Income-tax Act, emphasizing that it must be wholly and exclusively for the profession. The Tribunal held that eyes are crucial for effective living, making eye treatment personal expenditure. While vision aids the profession, it does not make the expenditure solely for business. As the expenditure had a personal element, it was not allowed as a business expense. Thus, the appeal was dismissed on this ground.

Issue 2: Disallowance of interest on borrowed amount used for professional purposes:

The second ground involved the disallowance of interest on a borrowed amount used to pay counsel fees for a client. The CIT(A) disallowed the interest, stating it was not solely for professional purposes. The assessee argued that the borrowed money was indeed used for the profession. After hearing both parties, the Tribunal held that the borrowed amount was utilized for professional purposes, specifically for paying counsel fees. Therefore, the interest on the borrowings was allowed, and the addition made by the CIT(A) was deleted. Consequently, the appeal was partly allowed on this ground.

In conclusion, the Tribunal upheld the disallowance of expenditure on a foreign tour for eye treatment due to its personal element, while allowing the interest on borrowed amount used for professional purposes.