Travelling expenses of Director's wife

In Glaxo Laboratories (India) Ltd. v/s ITO (1986) 26 TTJ (Bom.) 214 (Special Bench) the Assessing Offer had disallowed certain travelling expenses on foreign tour of chairmen's wife, and therefore on appeal to the I.T.A.T., it was held that in the modern age, and mere so in western countries, the senior executives are, as a matter of social custom, accompanied by their wives when they visit, though for business purpose, it is an allowable expenditure as it is in the business interest.

This is because the personal contacts built up and strengthened which leads to cementing of business relationships and thus helps business.

Regards,

Keval.Shah

Many a time A.O shall only evaluate whether Directors visit is necessary and the accompayning is absolute necessary like ill health , prospects for business increases etc. in this case the visit is absolutely unreasobale which also does not derive any business interest , hence not allowable

A small query can reimbursement of medical expenses of director's wife are allowed if it is specifically mentioned in the appointment letter.

Deductible for the company if for business, but taxable for the director:

• Company: wife's travel expenses are deductible under Sec 37(1) if the company establishes a business purpose (e.g. Glaxo Laboratories, ITAT: expenses of wives accompanying directors on business tours allowed where the company's policy and business needs supported it). Without business purpose, they'll be disallowed.

• Director (as employee or WTD): reimbursement of the wife's travel is a perquisite taxable as salary (Sec 17(2)(iv): obligation of employee met by employer). The foreign travel of family members is taxable unless the employee's business trip requires them (rarely accepted).

• Companies Act: payments to a WTD form part of managerial remuneration (Sec 197), so check the limits and approvals.

• TCS on foreign tour packages (Sec 206C(1G)) is creditable to the payer (company).