Ruling in Dhimant Hiralal Thakar v Commissioner of Income Tax BC II, Bombay High Court held that expenditure for a pre-operation investigation of a lawyer’s eyes in the US was not wholly and exclusively incurred for the purposes of a profession and a deduction could not be claimed as per section 37 of the Income Tax Act, 1961.
Thakar had sought a deduction of ₹43,600 under section 37 for the expenditure. The claim was disallowed by the assessing officer on the ground it was a personal expenditure and did not arise in the course of his professional work. An appeal before the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal (ITAT) had been unsuccessful. The commissioner said that going by Thakar’s logic even expenditure incurred on food to preserve a person could be treated as an allowable deduction under section 37(1).
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This prompted Thakar to file a reference application to the ITAT on the above question of law, under section 256(1) of the Income Tax Act. The ITAT in turn referred the application to Bombay High Court.
Thakar argued that the expenditure on his eyes related to his profession and but for the treatment he received he would not have been able to continue with his profession. Therefore the expenditure ought to have been allowed as a deduction.
The court held that while eyes are an important organ of the human body and essential for the efficient survival of a human being, they are essential not only for the purpose of business or profession but for purposes other than these. “If at all the expenses in this case is personal and the incidental benefit, if any, is to carrying on of profession.”
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The dispute digest is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.
