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TMI Blog2003 (4) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... the managing director in the United States of America is a business expenditure is erroneous in law. X X X X Extracts X X X X X X X X Extracts X X X X ..... f about 25,000 spindles and further increase of the spindle capacity was also proposed and taking into consideration the hard and untiring efforts of the managing director, the board of directors felt that the services of the managing director were essential for the assessee-company and passed a resolution to bear the medical as well as travelling expenses of the managing director, held that the claim of the assessee was justified and allowed the same. Not satisfied with the order of the Appellate Tribunal, the above reference has been made at the instance of the Revenue. Learned counsel for the Revenue, Mrs. Pushya Sitaraman, has contended that merely because a resolution has been passed by the board of directors to incur the medical expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tiam House Service Limited, purchased air tickets of Sri A.M.M. Arunachalam and his wife for their travel to the U.K. and purchased demand drafts and travellers cheques in foreign currency for Sri Arunachalam's treatment and the living expenses of Sri Arunachalam, his wife and a relative, who was also a director of the assessee-company, in the U.K., which trip was undertaken for a by-pass surgery for Sri Arunachalam. The amount so spent was not an amount which the company was required to spend under the terms of the contract of employment of Sri Arunachalam with the company. This court after taking into consideration the terms of employment and also taking into account the resolution passed by the board of directors resolving to bear the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case to that of Tiam House's case [2000] 243 ITR 695 (Mad). This court in the case of Rane (Madras) Ltd. v. CIT [2003] 259 ITR 307, while answering the question that the reimbursement of the medical expenses made to the directors/divisional managers/secretary of the company constitutes benefit or amenity to them and, hence, the amount given as reimbursement had to be taken into account for computing ceiling under section 40(c) or section 40A(5) of the Income-tax Act, has answered the question in favour of the Revenue and against the assessee by referring to the earlier judgment of this court in Sundaram Industries Ltd. v. CIT [1999] 239 ITR 405. The same is the view taken by this court in the case of Ennore Foundries Ltd. v. CIT [2003] 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any one of the tests have been satisfied. There is no material to prove that the payment made was one which had any link with the quantum of salary or other benefits to the managing director. As a matter of fact, a specific finding has been recorded by the Commissioner of Income-tax (Appeals) that the amount was paid outside its contractual obligation at paragraph 6 of its order. It is not the case of the assessee also that the managing director had any expectation of getting the amount from the assessee for medical treatment. Hence, the payment so made cannot be regarded as having been made on the ground of commercial expediency, in order indirectly to facilitate the carrying on of the business of the assessee. The gratuitous payment like ..... X X X X Extracts X X X X X X X X Extracts X X X X
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