1983 (5) TMI 47 - AT - Income Tax

Summary

Issues Involved:
1. Deduction of management and training expenses of a partner.
2. Binding nature of Tribunal's previous decision.
3. Nature of the expenditure (capital vs. revenue).

Summary:

1. Deduction of Management and Training Expenses:
The assessee, a partnership firm engaged in the manufacture and sale of hosiery goods, claimed a deduction of Rs. 36,786 for the management and training expenses of one of its partners. The partner had gone to the United States for training in Business Management. The Income Tax Officer (ITO) disallowed the claim, and the Commissioner (Appeals) upheld this decision, arguing that there was no direct connection between the expense and the business carried on by the assessee.

2. Binding Nature of Tribunal's Previous Decision:
The assessee contended that the Commissioner (Appeals) was bound by the Tribunal's earlier decision, which had allowed a similar expense in the preceding assessment year. The Tribunal had previously ruled that the expense was for the purpose of the business and was neither personal nor capital in nature. The Commissioner (Appeals) disagreed, stating that the Tribunal's reliance on the case of CIT v. Natwarlal Tribhovandas was misplaced and that the decision in Travancore Titanium Product Ltd. v. CIT was more applicable.

3. Nature of the Expenditure (Capital vs. Revenue):
The Tribunal reconsidered the facts and concluded that the training in modern Business Management was beneficial to the business carried on by the assessee-firm. The expenditure was incurred wholly and exclusively for the purpose of the business, and the incidental benefit to the partner was immaterial. The Tribunal also found that the expenditure was not capital in nature, referencing the decision in Empire Jute Co. Ltd. v. CIT, which states that an expenditure bringing an enduring benefit is not necessarily capital unless it is in the capital field.

Conclusion:
The Tribunal vacated the orders of the ITO and the Commissioner (Appeals) and directed that the sum of Rs. 36,786 be deleted from the total income of the assessee-firm. The appeal was allowed.