Case Note & Summary
The case pertains to a reference under Section 256(1) of the Income Tax Act, 1961, by the Income Tax Appellate Tribunal to the Bombay High Court. The applicant-assessee, a solicitor by profession, incurred an expenditure of Rs.43,600/- on a foreign tour for pre-operation investigation of his eyes during the assessment year 1986-87. The Assessing Officer disallowed this claim in the assessment order dated 31st March, 1987, on the ground that it was personal expenditure and not arising in the course of profession nor incidental to it. The assessee appealed to the Commissioner of Income Tax (Appeals), who upheld the disallowance by order dated 12th October, 1988, reasoning that if the assessee's logic were accepted, even expenditure on food to preserve oneself would be allowable under Section 37(1). The assessee then approached the Tribunal, which by order dated 13th September, 1994, concurred with the lower authorities, relying on the Supreme Court decision in State of Madras vs. C.J. Coelho (53 ITR 186) to hold that 'personal expenses' mean expenses on the person of the assessee or to satisfy personal needs such as clothes, food, etc., or for purposes not related to business. The Tribunal observed that eyes are an important organ for effective living, implying the expenditure was personal. The High Court, in its judgment pronounced on 28th October, 2015, answered the question of law in the affirmative, holding that the Tribunal was right in law in holding that the expenditure had an element of personal expenditure and was not allowable under Section 37(1). The court did not find any error in the concurrent findings of the authorities below.
Headnote
A) Income Tax - Business Expenditure - Personal Expenditure - Section 37(1) Income Tax Act, 1961 - Disallowance of medical treatment expenditure - The assessee, a solicitor, claimed deduction for expenditure on foreign tour for pre-operation investigation of his eyes. The Assessing Officer, CIT(A), and Tribunal disallowed the claim holding it as personal expenditure. The High Court upheld the disallowance, holding that the expenditure was personal in nature and not incurred wholly and exclusively for the purpose of profession. The court relied on the principle that personal expenses include expenses on the person of the assessee or to satisfy personal needs such as clothes, food, etc., or for purposes not related to business. (Paras 1-4)
Issue of Consideration
Whether expenditure of Rs.43,600/- incurred by the assessee on a foreign tour for pre-operation investigation of his eyes is allowable as business expenditure under Section 37(1) of the Income Tax Act, 1961.
Final Decision
The High Court answered the question of law in the affirmative, holding that the Tribunal was right in law in holding that the expenditure of Rs.43,600/- on medical treatment of eyes for improving vision has an element of personal expenditure, and accordingly the expenditure incurred by the appellant on foreign tour for pre-operation investigation relating to his eyes cannot be allowed as business expenditure under Section 37(1) of the Income Tax Act, 1961.
Law Points
- Personal expenditure
- Business expenditure
- Section 37(1) Income Tax Act
- 1961
- Medical treatment
- Foreign tour
- Solicitor profession
