By K. B. Bhujle, Advocate
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[J. K. Industries Ltd. v. CIT, 335 ITR 170 (Cal.)]
In May 1986, the assessee-company had passed a resolution stating that for the business of the company, the managing director was required to go on tours to countries abroad, that if on such tours he were accompanied by his wife, it would go a long way to benefit the company since warm human relations and social mixing promoted better business understanding, that the wife of the managing director was also sometimes required to accompany him on tours abroad as a matter of reciprocity in international business and that the company has decided to bear the expenses of such travel. In the A.Y. 2000-01, the assessee had sent its managing director and the deputy managing director abroad along with their wives for the purpose of the assessee’s business and claimed deduction of the expenses. The Assessing Officer disallowed the expenses on the two wives. The Commissioner (Appeals) and the Tribunal confirmed the disallowance.
On appeal by the assessee, the Calcutta High Court held as under : “
(i) The Income-tax authorities have to decide whether the expenditure was incurred voluntarily and on the grounds of commercial expediency. In applying the test of expediency for determining whether the expenditure was wholly and exclusively laid out for the purpose of the business, the reasonableness of the expenditure has to be adjudged from the point of view of the businessman and not of the Revenue.
(ii) When the board of directors of the assessee had thought it fit to spend on the foreign tour of the accompanying wife of the managing director for commercial expediency for reasons reflected in its resolution, it was not within the province of the Income-tax authority to disallow such expenditure.
(iii) However, there was no resolution authorising expenditure on the travel of the wife of the deputy managing director. The expenses on such travel were rightly disallowed.”
