2012 (8) TMI 70 - HC - Income Tax

Claim of expenditure incurred for foreign education of company s ex director s son - Held that - Considering material placed on record that Shri Siddharth Chhajlani was an employee of the assessee Company not only before going but even during the period he was undertaking studies in printing technology at London and also on his return from London which was directly related with the business of the assessee Company. Interest on unsecured loan in view of Section 14A and 36(1) (iii) - Held that - As the assessee had properly utilized the amount of interest bearing funds for the purpose of its business only and there was no diversion of such interest bearing funds for non-business purposes while allowing the interest expenditure - appeals do not involve any question of law.

Summary

Issues:
1. Disallowance of expenditure for foreign education of company's ex director's son treated as an employee.
2. Disallowance of interest on unsecured loan under Section 14A and S. 36(1)(iii) of the Income Tax Act, 1961.

Analysis:
1. The first issue pertains to the disallowance of expenses made on foreign education of an individual, treated as an employee of the company. The respondent-assessee, engaged in printing and distribution, had claimed expenses for the education of Shri Siddharth Chhajlani, which were disallowed by the Assessing Officer and upheld by the Commissioner of Income Tax (Appeals). However, the Tribunal allowed the claim, considering Chhajlani as an employee sent for advanced knowledge related to the company's business. The Tribunal's decision was based on factual findings, noting Chhajlani's employment since 2003-04, salary details, bond for post-study work, and completion of relevant studies. The Tribunal concluded the expenditure was solely for the business purpose, supported by evidence, and dismissed the appellant's challenge as concluded by factual findings.

2. The second issue concerns the disallowance of interest on unsecured loan under Section 14A and S. 36(1)(iii) of the Income Tax Act. The Tribunal allowed the interest deduction, relying on a previous order for the assessment year 2004-05, where the claim was accepted. It found that the interest funds were used for business purposes without diversion for non-business uses. This finding was also factual, and the appellant's argument did not raise any legal question. Consequently, the appeals were dismissed as the issues raised were factual and concluded by the Tribunal's findings, without any legal implications.