ACIT Corporate Circle 2 , Madurai V. T.V.Sundaram Iyengar & Sons Ltd. , Madurai

ITA 1713/CHNY/2017

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 1061 (ITAT-CHENNAI)
• Duration Of Justice: 5 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 11-07-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business expenditure; Opportunity of being heard; Additional evidence; Commercial expediency; Set aside
• Section: 37

Judgement Text

आयकर अपीलीय अिधकरण, ‘बी’ ᭠यायपीठ, चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI Įी महावीर ͧसंह, उपाÚय¢ एवं Įी मनोज क ु मार अĒवाल, लेखा सदèय के सम¢ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 1713/CHNY/2017 िनधाᭅरण वषᭅ /Assessment Year:2009-10 The ACIT, Corporate Circle 2, Madurai v. T. V. Sundaram Iyengar & Sons Ltd., 7-B, T.V.S. Building, West Veli Street, Madurai – 625 001. PAN: AABCT 0159K (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri R. Boopathi, JCIT ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Ms. N.V. Lakshmi, Advocate स ु नवाई कȧ तारȣख/Date of Hearing : 02.08.2022 घोषणा कȧ तारȣख/Date of Pronouncement : 02.08.2022 आदेश /O R D E R PER MAHAVIR SINGH, VICE PRESIDENT: This appeal filed by the Revenue is directed against the order of learned Commissioner of Income Tax (Appeals)-1, Madurai in ITA No.0081/2015-16 dated 19.04.2017. The assessment was framed by the DCIT, Corporate Circle 2, Madurai for the assessment year 2 I.T.A. No.1713/Chny/2017 2009-10 u/s.143(3) r.w.s.147 of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 31.03.2015. 2. The only issue in this appeal of Revenue is against the order of CIT(A) deleting the disallowance made by the AO of expenses relatable to medical treatment of one of the Director’s wife amounting to Rs.1,53,82,792/-. For this Revenue has raised following three effective grounds:- 2. The CIT(A) has erred in holding that no disallowance of Rs.1,53,82,792/- towards medical treatment aboard of Smt Mahesh, Wife of Shri Mahesh, whole time Director of the company in hands of the assessee. 3. The CIT(A) ought to have seen that the medical expenses incurred aboard for the spouse of the whole time director of the company is personal in nature and not incidental to the business of the company and hence ought to have sustained the addition made by the Assessing officer. 4. The CIT(A) ought to have given an opportunity of being heard to the Assessing officer under rule 46A before admitting additional evidences in the form of terms of employment based on which allegedly the medical expenses of the family member was incurred by the company. 3. Brief facts are that during the relevant financial year 2008-09 relevant to assessment year 2009-10, the assessee claimed medical expenses of Rs.1,53,82,792/- incurred in respect of one Mrs. Shrimathi Mahesh, wife of Shri Mahesh, Director of the company. According to AO, the issue is covered by the decision of Hon’ble High Court of Madras in the case of CIT vs. TIAM House Service 3 I.T.A. No.1713/Chny/2017 Ltd., 243 ITR 695, wherein it is held that “Medical expenses of advisor to company met by company as decided by Board of Directors – Not deductible”. Accordingly, the AO disallowed the expenses. Aggrieved assessee preferred appeal before CIT(A). The CIT(A) allowed the claim of assessee by observing in para 7.3 as under:- 7.3 I have considered the submissions of the representative. It is seen that the appellant company has to be bear the medical expenses of Shri.Mahesh and his family members as per the terms of employment. The only question is whether it can be considered as perquisites in the hands of Shri.Mahesh. As contended by the representative, the medical expenses incurred abroad in respect of any employee or his family members shall not be treated as perquisites u/s.17(2)(vi)(1) subject to the condition that the amount shall not exceed the extent permitted by the RBI. In any case, this has to be examined only in the hands of Shri Mahesh and no disallowance can be made in the hands of the company. I, therefore, direct the Assessing Officer to delete the addition. Aggrieved, Revenue came in appeal before the Tribunal. 4. Before us, the ld. Senior DR stated that the issue is covered against the assessee by Tribunal’s decision in assessee’s own case for the assessment years 2012-13 & 2013-14 in ITA Nos.2759 & 2760/Chny/2019 vide order dated 22.06.2022, wherein it is held as under:- 4 I.T.A. No.1713/Chny/2017 6.4 We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that this issue has been decided by the Hon’ble Madras High Court in the case of CIT v. TIAM House Service Ltd. (supra), wherein, the following question was decided: ‘Whether, on the facts and in the circumstances of the case, the Income tax Appellate Tribunal was right in holding that the medical expenditure to the extent of Rs.2,54,994/- incurred on by an employee should be allowed as a valid business expenditure in the hands of the assessee under section 37 of the Income tax Act, 1961?” The Hon’ble Madras High Court relied on the decision of the Hon’ble Supreme Court in the case of Gordon Woodroffe Leather Manufacturing Co. v. CIT reported in [1962] 44 ITR 551, wherein, certain tests laid down by the Hon’ble Supreme Court were that the payment should have been made as a matter of practice which affected the quantum of salary. There should be expectation by the employee for payment of medical expenses. The sum of money was expended on the ground of commercial expediency and in order to facilitate indirectly the carrying on of the business of the assessee. If any one of the tests was not satisfied that medical expenditure incurred on by an employee should not be allowed as a valid business expenditure in the hands of the assessee under section 37 of the Income Tax Act, 1961. Based upon the above points, the High court held that the expenditure in connection with the payment of Medical expenses met out by the company even though, the same had been spelt out in the letter of appointment cannot be regarded as sufficient for treating the expenditure as business expenditure. 5 I.T.A. No.1713/Chny/2017 6.5 In view of the above decision of the Hon’ble Madras High Court in the case of CIT v. TIAM House Service Ltd. (Supra), wherein, the decision of the Hon’ble Supreme Court was followed. We are of the view that these expenses incurred towards medical expenses of the relative of the Director of the assessee company in foreign currency amounting to Rs.9,74,968/- are personal in nature and not in relation to any business connection. Hence, the lower authorities have rightly disallowed the same and we confirm the same. Respectfully following the same, we set aside the order of CIT(A) and allow the appeal of the Revenue. 5. In the result, the appeal filed by the Revenue is allowed. Order pronounced in the open court on 2 nd August, 2022 at Chennai. Sd/- Sd/- (मनोज कुमार अᮕवाल) (MANOJ KUMAR AGGARWAL) लेखा सद᭭य /ACCOUNTANT MEMBER (महावीर ᳲसह ) (MAHAVIR SINGH) उपा᭟यᭃ /VICE PRESIDENT चे᳖ई/Chennai, ᳰदनांक/Dated, the 2 nd August, 2022 RSR आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकर आयुᲦ (अपील)/CIT(A) 4. आयकर आयुᲦ /CIT 5. िवभागीय ᮧितिनिध/DR 6. गाडᭅ फाईल/GF.