Bhaskar Bhattacharya, J. - (1.) THIS appeal under Section 260A of the Income-tax Act, 1961 is at the instance of an assessee and is directed against an order dated June 29, 2004 passed by the Income-tax Appellate Tribunal, "D" Bench, Calcutta, in Income-tax Appeal being ITA No.2471/Kol/2003 for the assessment year 2001 by which the Tribunal has affirmed the order passed by the Commissioner of Income-tax Appeal.
(2.) A Division Bench of this Court at the time of admission of this appeal formulated the following substantial question of law: "I) Whether the Tribunal was justified in law in disallowing the foreign travel expenditure of the spouses of the appellant"s Managing Directors and Deputy Managing Directors who accompanied their husbands on business visit and its purported findings that the accompaniment of the spouses was not for business expedience/purpose of the business/direct or indirect benefit to the appellant and disallowing the expenditure of Rs.7,92,058/- for the assessment year 2000-01 are arbitrary, unreasonable and perverse?" The facts giving rise to filing of this appeal may be summed up thus: a) The assessee is a company which took a resolution by its Board of Directors on 5th May, 1986 to the following effect: "For the business of the Company, the Managing Director is required to go on tours to countries abroad. If on such tours he is accompanied by his wife, it goes a long way to benefit the Company since warm human relations and social mixing promotes better business understanding. Also wife of the Director is sometimes required to accompany him on his tour abroad as a matter of reciprocity in international business. In the circumstances, it was felt that wife of the Managing Director may accompany him on tours abroad as and when necessary. The matter was discussed and there being unanimity on the point, it was. Resolved that the Managing Director of the Company be and is hereby authorised whenever necessary to take his wife on his tours overseas for the business of the company and that the travel expenses of the wife be borne by the Company subject to the approval of the Reserve bank of India, where necessary.
(3.) THE Board may be apprised of the Managing Director"s visit abroad." b) Pursuant to the said resolution, for the relevant assessment year, the company sent its Managing Director and the Deputy Managing Director abroad along with the respective wives for the purpose of assessee"s business. According to the assessee, in order to strengthen the business relation and promote better business understanding, it was necessary for the Managing Director and the Deputy Managing Director to be accompanied by their respective wives in accordance with the practice abroad. THE assessee, consequently, in keeping with the practice of modern times and social customs sent those two officers along with their respective wives and on the foreign travel of the two wives of the two officers, the total expenditure amounted to Rs.7,92,058/- and the assessee claimed deduction of the aforesaid amount as business expenditure. c) THE Assessing Officer turned down such claim holding that those two ladies were not the employees of the assessee and the expenses of their foreign tour could not be allowed as business expenditure. Being dissatisfied, the assessee preferred an appeal before the Commissioner of Income-tax Appeal but the said appellate officer by his order dated 25th April, 2003 was pleased to dismiss the said appeal. Being dissatisfied, the appellant preferred a further appeal before the Income tax Appellate Tribunal and by the order impugned herein, the said Tribunal has dismissed the abovementioned claim of the assessee of Rs.7,92,058/- by upholding the views of the CIT (Appeal). Being dissatisfied, the assessee has come up with the present appeal. THErefore, the short question that arises for determination in this appeal is whether the expenditure made by the assessee for the foreign travel of the spouses of the Managing Director and the Deputy Managing Director who accompanied their husbands on business visit should be treated to be business expenditure of the appellant so as to claim deduction in terms of Section 37 of the Income-tax Act. Mr. Khaitan, the learned Senior Advocate appearing on behalf of the appellant, strenuously contended before us that the aforesaid business expenditure claimed by his client was in tune with the decision taken by the Board of Directors of the company and as such it is open to his client to claim such amount as business expenditure. By referring to the decision of the Supreme Court in the case of Commissioner of Income-tax, Bombay vs. Walchand and Co. Pvt. Ltd., reported in (1967) 65 ITR 381= AIR 1967 SC 1435, Mr. Khaitan contends that it is open to the Tribunal to come to a conclusion either that the alleged payment is not real or that it is not incurred by the assessee in the character of a trader or that it is not laid out wholly or exclusively for the purpose of business of the assessee and to disallow it. But it is not the function of the Tribunal to determine the expenditure for the business was justified. By relying upon the said decision, Mr. Khaitan contends that the assessee having decided to spend that amount as reasonable business expenditure, the Assessing Officer, Commissioner of Income-tax (Appeal) and the Tribunal below erred in law in disallowing the same.;