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TMI Blog2005 (1) TMI 617X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee-company from 1-4-1986 at a monthly stipend of Rs. 300 as per the agreement dated 1-8-1986 between the assessee-company and Shri Vinay Kumar Mohota and the assessee company agreed to send Mr. Mohota for training abroad in United States of America at Rhode Island University for a period of five years and company agreed to bear and pay cost of good lodging, boarding, training fee, if any, washing and other sundry expenses of the apprentice for the term of five years and as per this agreement, the company agreed to pay a maximum of US$ 15,000 per year during this period of five years of apprenticeship. It was also provided in the agreement that Mr. Mohota will join the assessee-company after his return from abroad for a period of five years and in case, he fails or declines to serve the assessee-company for the said period, he had to reimburse the entire educational and living expenses, air passage and other monies paid to him for the said purpose and also pay to the company Rs. 20,000 as liquidated damages for non- fulfilment of the contract. This agreement is appearing on page Nos. 1 to 4 of the paper book. This agreement with Mr. Mohota was approved by the Board in the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also submitted that the Assessing Officer has proceeded by considering that the total expenditure involved is Rs. 18 lakhs; but in fact only Rs. 5,21,548 was incurred during four years, out of which expenses in two earlier years i.e. in assessment years 1987-88 and 1988-89 were allowed and only a sum of Rs. 1,27,526 incurred in assessment year 1989-90, a sum of Rs. 81,387 incurred in assessment year 1990-91 were disallowed. It was submitted that the case of the assessee is fully covered by the Judgment of Hon ble Jurisdictional High Court rendered in the case of Sakal Papers (P.) Ltd. ( supra ) and by the judgment of Hon ble M.P. High Court in the case of Kohinoor Paper Products ( supra ); and hence, disallowance in both the years should be deleted. 5. As against this, it was submitted by learned DR of the revenue that this issue is fully covered against the assessee and in favour of the revenue by the Tribunal order in the case of Intersil India Ltd. v. Addl. CIT [IT Appeal No. 1357 (Mum.) of 2001, dated 29-10-2004], copy of which was submitted and kept on record. It was submitted that the facts are identical because in that case also, son of the Managing Director w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfer right in favour of the assessee and if there is mistake in earlier years, same can be rectified in subsequent years. We find that the Tribunal s order in the case of Intersil India Ltd. ( supra ) is squarely applicable in the present case because the facts are identical. Regarding the contention of learned AR of the assessee that there is no finding in this Tribunal s order about the actual joining of the son of the MD after coming back from abroad and actual benefit accruing to the assessee-company on his joining, we are of the considered opinion that the issue has been decided by the Tribunal on the basis that the only connection of Mr. Mohota in that case with the assessee-company at the relevant point of time was that he was son of the MD of the company and in the present case also, we find that the situation is identical because Mr. Mohota was appointed as an apprentice in the month of April 1986 after approval of his admission at American University; and hence, in fact, the only connection between the assessee-company and Mr. Mohota at the relevant point of time was that Mr. Mohota was son of Dy. MD of the assessee-company. It was contended that he was taken as a trai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness deduction and in the case of M. Subramaniam Bros. v. CIT [2001] 250 ITR 769 , Their Lordships of Hon ble Madras High Court has dissented from the view taken by Hon ble M.P. High Court in the case of Kohinoor Paper Products ( supra ) and observed that "the facts that one of the sons Vishwanathan was sent abroad for further education cannot be regarded as deputation made by the firm of one of its partners in connection with business". In para No. 4 of this Tribunal order, Judgment of Hon ble Jurisdictional High Court rendered in the case of CIT v. Hindustan Hosiery Industries [1994] 209 ITR 383 (Bom.) and the relevant Tribunal order, part of which is also reproduced in the Tribunal order is very much relevant; and, therefore, this para No. 4 of the Tribunal order is reproduced below : "4. In the case of Hindustan Hosiery Industries v. ITO ( 5 ITD 349) a co-ordinate bench of this Tribunal was in seisin of a materially indentical situation. The assessee firm in that case was engaged in the business of manufacture and sale of hosiery goods. One of the partners of the said concern was sent to USA for further education in business management. The expenditure of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the partner would be a reason good enough to hold that the expenditure so incurred on the foreign education as business expenditure. Their Lordships have also rejected the contention that the expenditure in acquiring that knowledge had a direct nexus with the business carried on by the firm, which could be evident from the results in the subsequent years and the fact that person so receiving the education actually worked with the assessee in subsequent years. The facts of the case before Their Lordships were much better inasmuch as the person whose education costs were met was a partner, whereas in the present case, he is son of the MD and without any formal status in the assessee-company." 9. From the above, we find that in the case of Hindustan Hosiery Industries ( supra ) also, there was increase in sales in the subsequent years; but in spite of this, it was held by Hon ble High Court that merely because the assessee would also benefit from the foreign education being received by the partner, would not be a reason good enough to hold that the expenditure so incurred on the foreign education is allowable as business expenditure. In the present case, much stress was laid by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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