2014 (5) TMI 391 - AT - Income Tax

Disallowance of educational expenses of director Held that - Relying upon Commissioner of Income-tax Versus Ras Information Technologies (P.) Ltd. 2010 (7) TMI 670 - KARNATAKA HIGH COURT - expenses incurred by assessee-company on the foreign education of Sri Goenka whole time director of the company, be treated as business expenditure of the assessee - addition made by AO and sustained by CIT(A) disallowing the expenses is set aside Decided in favour of Assessee. Addition of TDS already written off Held that - Following M/s. Ricoh India Limited Versus The Dy. Commissioner of Income-tax 2013 (11) TMI 273 - ITAT MUMBAI - except for internal documents, there is no material on record to indicate as to why so many parties refused to issue TDS certificates to the assessee after duly deducting the same - No reason worth the name has been stated as to why the assessee did not take any action as prescribed under the law against such erring parties Decided against Assessee.

Summary

Issues:
1. Disallowance of expenses incurred for the studies of Whole Time Director.
2. Addition of TDS amount written off by the appellant.

Issue 1: Disallowance of expenses incurred for the studies of Whole Time Director

The appellant appealed against the order of Ld. CIT(A)-I Baroda dated 13-09-2010, specifically challenging the disallowance of Rs. 33,95,589/- for expenses related to the educational studies of the Whole Time Director. The Assessing Officer (AO) observed that the company debited an amount towards the director's foreign education expenses and requested details and nature of these expenses. The appellant claimed that the expenditure was to improve management and profitability, sponsored the director's MBA studies, and cited the director's appointment details. However, the AO disallowed the expenses as personal expenditure of the director due to the absence of a company policy for sponsoring employee studies. The Ld. CIT(A) upheld the AO's decision, stating the business purpose was contingent and remote. The appellant cited various case laws to support their claim, emphasizing a board resolution approving the sponsorship of the director's studies. The Tribunal found the expenses to be business expenditure based on the resolution and agreement between the company and the director, deleting the addition made by the AO.

Issue 2: Addition of TDS amount written off by the appellant

The second ground of appeal related to the addition of Rs. 58,386/- for TDS written off by the appellant. The AO disallowed the claim as the TDS amount was not revenue in nature. The appellant argued that the TDS amount was receivable for specific assessment years but was written off due to non-receipt of TDS certificates. The Ld. CIT(A) confirmed the AO's decision. The revenue relied on a decision from ITAT Mumbai Bench, emphasizing that tax payment is not deductible as it is an application of income, and any sum paid on taxes is not deductible against income. The Tribunal upheld the Ld. CIT(A)'s decision, dismissing the appellant's claim based on the applicable legal interpretation regarding TDS receivable and business loss deduction. Consequently, the order passed by Ld. CIT(A) was upheld, and this ground of appeal was dismissed.

In conclusion, the Tribunal partially allowed the appellant's appeal by deleting the disallowance of expenses incurred for the director's studies while upholding the addition related to the TDS amount written off. The judgment provides a detailed analysis of each issue, considering legal interpretations and relevant precedents to reach a decision on the disputed matters.