Hardayal Hardy, J.
(1) The following two questions have been referred to this Court under Section 256(1) of the Income-tax Act 1961 which will hereafter be described as the Act, by an order dated 11-2-1966 made by the Income-tax Appellate Tribunal (Delhi Bench C' :--
'1. Whether on the facts and in the circumstances of the case the expenditure of Rs. 6,900.00 incurred by the assessed was incidental to the business carried on by it and allowable '2. Whether on the facts and in the circumstances of the case, disallowance of a sum of Rs. 5,493.00 out of the assessed's claim of Rs. 10,893.00 paid as rent for the house, provided rent free to Shiri S. K. Sanghi, Director is justified in law ?'
The asscssee is a private limited company and the assessment year is 1962-63, the relevant accounting period being the year ended 30th September 1961. The facts are simple and there is no doubt about them. Motilal Sanghi. a former Chairman of the assessed company, died in July 1961 and his dead body was taken to Jodhpur by a specially chartered plane from where he had come to Delhi on a tour of inspection of the company's business. A sum of Rs. 6,900.00 was charged on that account and was claimed as a deduction under Section 37 of the Act. The Income-tax Officer disallowed the sum holding the expense as not incidental to the business. When the matter came up before the Appellate Assistant Commissioner he held that the expense could not be treated as an expenditure for carrying on the business of the company or for the purpose of the business of the company and consequently disallowed the same.
(2) The assessed took up the matter to the Tribunal On a passage in the judgment of Calcutta High Court in Andrew Yule and Co. v. Commissioner of Income-tax, Calcutta : 49ITR57(Cal) the Tribunal held that since Motilal Sanghi had died while on an inspection tour of the company it was permissible expenditure to have his body transferred back to the place from where he had come. As such the Tribunal was of the view that it was an expenditure incidental to the carrying on of the business and hence allowed the assessed's claim. On an application by the Commissioner of Income-tax question No. 1 was referred to this Court. Although this was an application by the Commissioner the assessed wanted the Tribunal to refer three other questions of law which according to it. had arisen out of the Tribunal's order. One of the questions formulated by the assessed was as follows :-
'WHETHER on the facts and in the circumstances of the case the sum of Rs. 5,493.00 out of Rs. 10,893.00 paid as house allowance to Shri S. K. Sanghi. Director, in accordance with the terms and conditions of his contract of service with the company was rightly disallowed ?'
The Tribunal however held that out of the three questions formulated by the assessed it was question No. 2 which could actually be referred to the Court. The question was however recast and as a result both the questions are now before us. The assessed has not placed on record any rules or bye-laws of the company nor has our attention been invited to any regulation in the Articles of Association providing turn payment of any charges to the Chairman of the company for arriving at Delhi in connection with the business of the company. Only a copy of the minutes of the meeting of the Board of Directors of the company held on 21-7-1961 wherein besides paying homage to the memory of the deceased, a resolution stating that transport charges of Rs. 6,900.00 payable to Messrs Indian Air-lines Corporation for chartering one plane to on 22-7-1961 to take the dead body of Shri Motilal Sanghi who expired on 21-7-1961 at Delhi due to heart failure while he was on an inspection lour of the company, should be borne by the company, has been placed on record. But it appears from the order of the Appellate Assistant Commissioner that if Motilal Sanghi was alive his traveling expenses could be treated as business expenses of the company. It thereforee follows that there were some regulations which provided for payment of traveling expenses to the Chairman of the company if and when he happened to come to Delhi on an inspection tour of the company's business. If the deceased was residing at Jodhpur and he happened to come to Delhi on company's business while he was alive it would have been the liability of the company to meet his traveling expenses from Jodhpur to Delhi and from Delhi to Jodhpur. He would thus have been entitled to traveling expenses both ways. The question thereforee is whether his death made such a difference to the situation that the liability of the company ceased and his body could not be sent back to the place from where he had come. According to the Appellant Assistant Commissioner, the carrying of his body to his native place, was the responsibility of his relatives and that the only reason for debiting these expenses to the traveling expense account of the company was that the other Directors were the brother, son and nephew of the deceased,
(3) We do not think this is a correct approach to the problem. It was held by the Supreme Court in Commissioner of Income-tax, Kerala v. Malayalam Plantations Ltd. : 53ITR140(SC) that the expression 'for the purpose of the business' as used in Section 2(10) (xv) of the Income-tax Act. 1922 which is analogous to Section 37 of the new Act is wider in scope than the expression ''for the purpose of earning profits.' Various illustrations have been given .in that judgment and it is said that the range of this expression is wide. It may take in not only the day to day running of the business but also the rationalisation of its administration and modernisation of its machinery; it may include measures for the preservation of the business and for the protection of its assets and property from expropriation, coercive process or assertion of hostile title: it may also comprehend payment of statutory dues and taxes imposed as a pre-condition to commence or for the carrying on of the business; it may comprehend many other acts incidental to the carrying on of the business. The Supreme Court however said that however wide the meaning of the expression may be, its limits are implicit in it. The purpose shall be for the purpose of the business, that is to say, the expenditure incurred shall be for the carrying on of the business and the assessed shall incur it in his capacity as a person carrying on the business. It is not the case of the Revenue that the expenses on chartering a plane were excessive and that there could be other methods of taking the dead body of the deceased to Jodhpur. The question sidcred by the Tribunal and also referred to this Court is whether the expenditure of Rs. 6,900.00 incurred by the assessed was incidental to the business carried on by the assessed-company. In the case of Commissioner of Income-Tax, Bombay v. Walchand and. Co. Private Limited : 65ITR381(SC) the test of commercial expediency for determining whether an expenditure was wholly and exclusively laid out for the purpose of the business, reasonableness of the expenditure was held to be adjudged from the point of view of the businessman and not of the Revenue.
(4) The deceased had cum to Delhi for the business of the company. When he would have gone back from Delhi to Jodhpur it would have again been on the business of the company for it: was the liability of the company to meet his traveling expenses and to take him back to Jodhpur. In either event the visit of the deceased to Delhi and his return journey to Jodhpur would have been for the purposes of the business of the assessed. The expenditure in curred by the assessed would have been for the carrying on of the business. It was argued on behalf of the Revenue that the moment the deceased died his interest in the business of the assessed came to an end and his dead body could not have been sent back to Jodhpur by the assessed for carrying on its business. It is too narrow a view of the expression 'for the purpose of the business'. By his death the deceased may have lost all interest in the business of the company but the business of the company was still being carried on and the expenditure incurred by the assessed for carrying the dead body of the deceased being the liability of the company which was incidental to the business of the company, this liability had to be discharged. The expenditure was thereforee incidental to the carrying on of the business of the company and its commercial capacity has to be adjudged from the point of view of the assessed itself and not by the Revenue, Question No. 1 is thereforee answered in favor of the assessed and against the Revenue. The amount spent by the assessed was an allowable deduction. As regards question No. 2 the assessed had claimed a sum of Rs. 10,893.00 as house allowance paid to Shri S. K. Sanghi Director of the assessed-company. in accordance with the terms and conditions of his contract of service. Out of this amount a sum of Rs. 5,493.00 was disallowed by the Tribunal. Shri S. K. Sanghi who was darwing a salary of Rs. 1,750.00 p.m. and was also living in his own house at Indore, was transferred to Delhi where his salary was increased to Rs. 2000.00 p.m. from 1st September 1959 with free furnished residence and conveyance. He took up a house in. Delhi for which he was paid by the assessed-company a sum of Rs. 900.00 per mensem by way of rent. Ii the assessment year 1961-62 the Tribunal held that: the allowance of Rs. 900.00 per mensem was rather excessive and that on an estimate a sum of Rs. 450.00 per mensem was considered reasonable. In connection with the assessment year 1962-63 with which we are concerned in this case the Tribunal relied upon its previous order, followed the same decision and thus disallowed the balance of Rs. 5,493.00. The argument advanced by the learned counsel for the assessed is that it was not open to the Tribunal to use its own ipse dixit. If the Director himself had been paying rent at the rate of Rs. 900.00 p.m. unless it was found that the actual work done by him did not permit that amount or the quantum of income earned by the company did not allow such expenditure or there were certain other allied considerations on which an opinion could be formed whether or not the payment was reasonable or excessive, the Tribunal was not right in reducing the expenditure.
(5) Reliance Was placed on a decision of Madras High Court in Naiesan and Co. (Private) Limited v. Commissioner of Income- tax, Madras 51 Itr 386 where the court was concerned with the question of remuneration paid to a director of the company. It appears to us that in the present case the assessed was not dissatisfied with the order made by the Tribunal for the assessment year 1961-62. The income of the assessed for the year under reference is more or less the same. The Tribunal having applied its mind to the nature of the business of the company and the necessity to pay remuneration to the director, it cannot he said that there was no application of mind. In the circumstances, the decision of the Tribunal cannot be treated as unreasonable. The question is thereforee answered in favor of Revenue and against the assessed.
(6) The reference is answered accordingly, but since both the sides have succeeded partly there will be no order as to costs. Rejerence ansered accordingly.