2018 (12) TMI 833 - HC - Income Tax

Allowable business expenditure - expenditure incurred on the foreign tour of the wife of a Senior Executive of the company, in connection with the medical treatment of the said Executive - Held that - In the present case, there was no business purpose at all and the Senior Executive was traveling abroad for the purpose of a heart surgery. We are not sure as to whether the expenditure incurred by the Senior Executive was reimbursed and claimed as a deduction. That would definitely be permissible as a medical reimbursement. The dispute, as of now, is only the disallowance of the expenditure incurred for the wife s travel. The wife had accompanied the Senior Executive, when such Senior Executive had traveled abroad for a heart surgery. The wife s presence though imperative, we are unable to find it to be a business expenditure. We do not think that the same can be called a business expenditure and the travel itself is not for a business purpose. - Decided against the assessee

Summary

Issues:
1. Allowability of expenditure incurred on the foreign tour of a Senior Executive's wife in connection with the medical treatment under the Income Tax Act, 1961.

Analysis:
The main issue in this case was whether the expenditure incurred on the foreign tour of the wife of a Senior Executive of a company, in connection with the medical treatment of the Executive, is an allowable deduction under the Income Tax Act, 1961. The assessee had claimed the expenses as business expenditure, but the Assessing Officer disallowed the expenditure on the wife's travel. The Tribunal found that the Senior Executive had to go abroad for heart surgery, and the company decided to meet his expenditure, including the expense of his wife. The Counsel for the assessee relied on previous decisions to support their claim.

A Full Bench in a previous case considered a conflict between decisions regarding business expenditure claimed for the wife's travel abroad. The dispute centered around whether the wife's travel was for a business purpose when accompanying the husband, an employee or a Director of the company, traveling abroad for business purposes. The Division Bench found in some cases that there was no nexus between the expenditure and business purpose, while in others, the expenses were permitted as business expenditure based on specific circumstances.

In the present case, it was established that the Senior Executive was traveling abroad for heart surgery, and there was no business purpose involved. While the expenditure incurred by the Senior Executive for medical treatment could be permissible as a medical reimbursement, the dispute was regarding the disallowance of the expenditure for the wife's travel. The Court concluded that the wife's presence, although necessary, did not constitute a business expenditure as the travel was not for a business purpose. Therefore, the question was answered in favor of the Revenue, and the IT Revision was dismissed without costs.

In summary, the judgment clarified that the allowance of business expenditure for accompanying family members on foreign tours would depend on the specific facts of each case and the presence of a clear nexus between the expenditure and the business purpose. In this instance, as the wife's travel was not for a business purpose but to accompany the Senior Executive for medical treatment, the expenditure on her travel was rightly disallowed under the Income Tax Act, 1961.