Brief of the Case
Bombay High Court held In the case of Dhimant Hiralal Thakar vs. CIT that eyes are an important organ of the human body and is essential for the efficient survival of a human being. Eyes are thus essential not only for the purpose of business or profession but for purposes other than these which are so many. It is therefore clear that the said expenditure as claimed by the applicant is not in the nature of the expenditure wholly and exclusively incurred for the purposes of the profession of the applicant and thus this expenditure cannot be claimed u/s Section 37.
Facts of the Case
The assessee is a Solicitor by profession.During the assessment year 198687, the applicant incurredan expenditure of Rs.43,600/ on a foreign tour in connection with a preoperation investigation of his eyes while determining his total income. This claim was disallowed by the Assessing Officer in the assessment order dated 31st March,1987 passed under section 143 (3) on the ground it was personal expenditure. Therefore, it did not arise in the course of the profession nor was it incidental to the Profession.
Contention of the Assessee
The ld counsel of the assessee submitted that for the assessment year, the assessee who is a Solicitor by profession had visited the U.S.A. for preoperation investigation of his eyes and had incurred an expenditure of Rs.43,600/. This expenditure was necessarily an expenditure relating to the assessee’s profession. It is urged that but for this treatment the assessee would not have been able to continue with his profession and therefore the expenditure ought to have been allowed as a deduction. He submits that eyes have a direct nexus with the professional activity of the applicant and therefore, it is not a personal expenditure as held by Tribunal. It is submitted that medical treatment for eyes is so very important from the point of view of the profession of the assessee and as such has a direct relation to the profession of the assessee. If the medical treatment was not to be undertaken, then the assessee would not have been in a position to practice his profession. It is submitted that Section 37 of the Act is required to be interpreted so as to permit allowing of such medical expenditure as claimed by the assessee. In support of these submissions, Mr. Joshi has relied upon the decisions in the case of (1) “Sakal Papers Pvt. Ltd vs. Commissioner of Income Tax Poona 114 ITR 256, (2) Mehboob Productions Private Ltd vs. Commissioner of Income Tax Bombay CityI (106 ITR 758), (3) Commissioner of Income Tax vs Steel Ingots Pvt. Ltd. (220 ITR 552) and (4) Commissioner of Income Tax, Delhi vs Delhi Safe Deposit Co. Ltd, (133 ITR 756).
Further he submitted that the expression ‘wholly and exclusively’ as used in Section 37 (1) does not mean necessarily and that it is for the assessee to decide whether the expenditure should be incurred in the course of business or profession. In support of this submission, Mr. Joshi places reliance on the decisions of the Supreme Court in the case of Sasoon J.David & Co. Pvt. Ltd vs. Commissioner of Income Tax (Bombay) (118 ITR 281) Eastern Investments Ltd vs Commissioner of Income Tax West Bengal 20 ITR and an unreported decision of this Court in Commissioner of Income Tax v/s. NGL Network (I) Pvt. Ltd. (Income Tax Appeal No.538 of 2012).
Contention of the Revenue
The ld counsel of the revenue submitted that the contentions as raised on behalf of the applicant are wholly unfounded. He would submit that the tax authorities and the Tribunal have rightly rejected the assessee’s claim by disallowing the expenditure on the said foreign tour undertaken by the applicant. Mr. Suresh Kumar would submit that the ratio of the decision of the Delhi High Court in the case of Shanti Bhushan vs. Commissioner of Income Tax (2011) 336 ITR 26 (Delhi) would be clearly applicable to the facts of the present case. It is submitted that eyes are not only useful for profession but also are essential otherwise than for professional purposes and is a human need. Mr. Suresh Kumar submits that it is not the case that the assessee cannot function as a Solicitor in the absence of eyes. The moment this test is applied and it becomes apparent that there is a element of personal use of the eyes then the assessee cannot claim expenditure for treatment of eyes under Section 37 of the Act. It is submitted that expenditure as claimed by the applicant goes completely beyond the ambit and scope of Section 37 of the Act. Mr. Suresh Kumar submits that this expenditure as claimed by the applicant has been rightly held as a personal expenditure.
Held by CIT (A)
CIT (A) upheld the order of the Assessing Officer disallowing the said expenditure on the ground that if the logic of the applicant is stretched, it would mean that even expenditure incurred on food to preserve oneself should also be treated as allowable under Section 37(1) as being incurred for business or profession.
Held by ITAT
The Tribunal concurred with the findings of the Assessing Officer and the CIT(A) disallowing the expenditure incurred for investigation of the eyes. The Tribunal inter alia relied upon the decision of the Supreme Court in case of State of Madras vs. C.J. Coelho (53 ITR 186) to hold that the correct connotation of the words “personal expenses” would mean only expenses on the person of the assessee or to satisfy his personal needs such as clothes, food etc or for the purposes not related to business. On the above basis, it observed that eyes are an important organ for an effective living of every human being and in case of any defect in the eyes the medical treatment thereof is very much necessary for the effective living of a human being. This irrespective of the business, profession or vocation carried on by the person.
In the alternative, the Tribunal held that if the expenditures attributable to both personal and professional as contended by the applicant, yet it cannot be allowed as a deduction. This is so as the expenditure has an element other then business or profession, therefore, it cannot be said to have been incurred wholly and exclusively for the purpose of profession. Therefore, the expenditure of medical treatment on eyes was disallowed under Section 37.
The applicant thereafter moved a reference application under Section 256 (1) to the Tribunal seeking a reference of the above question of law.
Held by High Court
It is apparent that Section 37 is a residuary provision. From the wordings of Section 37(1) , it can bclearly gathered that in order to be eligible for deduction under this provision following conditions were required to be satisfied: (1)The expenditure must not be of the nature described in Sections 30 to 36; (2)The expenditure must have been laid down wholly and exclusively for the purpose of business / profession of the assessee;(3)The expenditure must not be capital in nature;(4)The expenditure must not be personal in nature.An identical issue arose before the Delhi High Court in Shanti Bhushan. The only difference being the expenses claimed thereinwas for the treatment of the heart and here it is for eyes. The Delhi High Court held that there is thus no direct or immediate nexus between the expenses incurred by the assessee on the coronary surgery and his efficiency in the professional filed per se. Therefore, to claim a deduction on account of expenses incurred by the assessee on his coronary surgery under Section 37(1) would have to be rejected. There is, as a matter of fact, no evidence brought on record, which would suggest that the assessee could have continued in the same state without the medical procedure undertaken by him.”
In the present case as well no evidence has been brought on record to establish that in the absence of investigation and treatment, the applicant would be handicapped in discharging his obligation as a Solicitor/ Advocate. While at this, we cannot resist but point out that in this Court itself, we have a couple of visually challenged Advocates who are very competent in discharging their duties. We may also make reference to the late Mr. Sadhan Gupta who passed away recently and though visually challenged was as such appointed as Additional Advocate General of West Bengal in 1978 and the Advocate General in 1986. Besides, we cannot but agree with the observation of the CIT(A) in his order dated 12th October, 1988 that if the submission of the applicant is taken to its logical conclusion, then Every and all expense incurred on daily living and food would be allowable as expenditure under Section 37 of the Act. Thus, we find no substance in the contention that it is not a personal expenditure incurred by the Appellant.
We are not persuaded to accept the submission on behalf of the applicant that eyes are required to be exclusively used for the purpose of profession by the applicant. As observed above eyes are an important organ of the human body and is essential for the efficient survival of a human being. Eyes are thus essential not only for the purpose of business or profession but for purposes other than these which are so many. It is therefore clear that the said expenditure as claimed by the applicant is not in the nature of the expenditure wholly and exclusively incurred for the purposes of the profession of the applicant and thus this expenditure cannot be claimed by the applicant to be allowed as deduction in computing the income chargeable under the head profits and gains from business or profession in case of the applicant as per the provisions of Section 37 .
Accordingly appeal of the assessee dismissed.