1985 (7) TMI 165 - AT - Income Tax

Business Expenditure, Allowability of, Assessee, Salaries, Entertainment Expenditure, Chargeability Of

Summary

Issues:
Claim of expenditure incurred in running a school for training of Archakas as a business expense.

Analysis:
The firm, comprising 17 partners who conduct poojas at a temple, incurred expenses in running a school to train Archakas. The scheme governing the temple's administration mandated qualified Archakas, leading the firm to establish the school to ensure an adequate number of qualified individuals. Initially, the firm bore all school expenses, but later, the government provided stipends and teacher salaries, leaving the firm responsible for boarding and lodging costs. The Income Tax Officer (ITO) allowed expenses related to partners' children but disallowed the rest, deeming it personal expenditure. The Commissioner affirmed the ITO's decision, stating the expenditure was personal. However, the firm argued the school was essential for fulfilling obligations under the scheme and compared its case to a Supreme Court decision on training jockeys.

The Appellate Tribunal noted the firm's obligation to provide qualified Archakas for temple ceremonies as per the scheme. The long-term need for trained Archakas to replace partners and fulfill hereditary rights was highlighted. The Tribunal emphasized the necessity of running the school to meet short-term and long-term obligations. It rejected the Commissioner's view that the expenditure was personal, emphasizing its professional nature. The Tribunal also dismissed the argument that the firm's partners were temple employees, citing the partners' independence in conducting poojas. Additionally, the Tribunal found the government's partial funding did not absolve the firm of its obligation to cover remaining expenses for students, categorizing such expenses as professional and not charitable or entertainment-related.

In conclusion, the Appellate Tribunal allowed the firm's appeal, recognizing the expenditure on the school for training Archakas as a legitimate business deduction.