COMMISSIONER OF INCOME TAX Vs. VASAN PUBLICATIONS LIMITED

JUDGEMENT

(1.) THE Revenue has preferred the appeal as against the order of the Income Tax Appellate Tribunal relating to assessment year 1997-98. The above Tax Case (Appeal) was admitted on the following substantial question of law:-

(2.) WHILE completing the assessment, the Assessing Officer disallowed the sum of Rs.10,59,363/- being the expenditure stated to have been incurred by the company to meet the medical and travelling expenses of the Managing Director and his wife for his treatment in U.S.A. The Assessing Officer pointed out that there was no obligation on the assesee company to pay such huge amount towards medical expenses to the Managing Director. Further the Managing Director was not actively engaged in the business affairs of the company during the previous year. From letter dated 24.1.2000 filed by the assessee, it is seen that the Director had relinquished his responsibilities as Managing Director from 3.11.1996 and the above said expenditure was incurred only after this date. Thus, the Assessing Officer disallowed the sum of Rs.10,59,363/-. Aggrieved by the same, the assessee went on appeal before the Commissioner of Income Tax (Appeals), who held that the claim of expenditure had to be seen from the angle of commercial expediency and was a bona fide one. He pointed out that the Director was managing the affairs of the Company for more than 30 years and the salary was much less than what would have been justified on the basis of the market trends. Further, the Managing Director developed the weekly to its present form. Thus, the decision taken by the Board of Directors was a commercially prudent decision. Consequently, the relief was granted to the assessee. Aggrieved by the same, the Revenue went on appeal before the Income Tax Appellate Tribunal. The Tribunal followed the decision of Madhya Pradesh High Court reported in 220 ITR 552 COMMISSIONER OF INCOME TAX v. STEEL INGOTS PRIVATE LIMITED as well as the decision of the Bombay High Court reported in 106 ITR 758 MEHBOOB PRODUCTIONS PVT. LTD v. COMMISSIONER OF INCOME TAX, BOMBAY CITY and submitted that Balasubramaniam, who was the Managing Director, thereafterwards became Managing Editor, had nurtured and developed the weekly Tamil Magazine and taking note of the services, the decision was taken by the Board of Directors in its General Body Meeting to finance his medical treatment. The Tribunal called this decision as a commercially viable decision. Consequently, the appeal filed by the Revenue was dismissed. Aggrieved by the same, the Revenue has preferred the above appeal.

(3.) HEARD learned standing counsel for the Revenue and learned counsel for the assessee and perused the materials available on record.