9911796707
TMI Blog2007 (11) TMI 539X X X X Extracts X X X X X X X X Extracts X X X X ..... members headed by Shri Kanshi Sitaram Deora. In the assessment year 2001-02 the assessee had debited an amount of Rs. 24,13,356 under the head director's training expenses. In the course of assessment proceedings, the assessee was asked to furnish the details in respect of the same and also to explain as to why such expenses could be allowed as business expenditure. In response to the same, the details were filed and it was stated that the director Shri Darshan Kanshi Deora was sent abroad to a course of BBA in Finance & Management and Systems Engineering for a period of 5 years at the University of Pennsylvania of USA. According to the assessee the director was sent abroad since such study would help the assessee-company in the production and marketing of its products. Reliance was placed on the judgments of High Courts viz., CIT v. Kohinoor Paper Products [1997] 226 ITR 2201 (MP) and Delhi Cloth & General Mills Co. Ltd. v. CIT [1986] 158 ITR 64 (Delhi). 3. The perusal of the details furnished by the assessee showed that Mr. Darshan K. Deora was only of 18 years old when he was appointed as a director of the assessee's company on 3-8-1998 and his educational qualification at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch for the assessment years 1999-2000 and 2000-01. 5. The matter was carried in appeal before the CIT(A), before whom it was submitted that the director was sent for further study so that after completion of the training he could handle production and marketing of the products of assessee-company. It was further submitted that the said director has executed an indemnity bond to the effect that he shall remain in service of the company for a period of 5 years from the date of his arrival in India and that if he fails to serve the company, he shall be liable to repay the company the amount of training expenses. In support of this claim, the assessee relied upon the resolution passed by the Board of Directors and also the correspondence between the assessee and the Reserve Bank of India as well as Bank of India. It was also submitted that Mr. Darshan Deora handled the production and marketing of the company whenever he came to India. The assessee relied on the decisions which were cited before the Assessing Officer as well as the decision of Madras High Court in the case of Addl. CIT v. Southern Leather Industries [1987] 164 ITR 194 1 of Calcutta High Court in the case of Hindustan A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als before the Tribunal for all the years. 7. The learned counsel for the assessee has reiterated the stand of the assessee taken before the lower authorities. It was also submitted by him that the expenditure was incurred for the benefit of assessee's business, i.e., promoting the production and marketing of the products manufactured by the assessee. He also drew our attention to the agreement wherein it was provided that Mr. Darshan Deora was required to join the company after the training and in case of his failure to join the company he was required to reimburse the money spent on his training. It was also submitted by him that after the training, Mr. Darshan Deora has joined the company. Thus, the expenditure was allowable under section 37 of the Act. Reliance has been placed on the decision of Bombay High Court in the case of Sakal Papers (P.) Ltd. v. CIT [1978] 114 ITR 256 and the decision of Madhya Pradesh High Court in the case of CIT v. Kohinoor Paper Products [1997] 226 ITR 220 1 as well as the decision of the Tribunal in the case of J.B. Advani & Co. Ltd. v. Jt. CIT [IT Appeal No. 5511 (Mum.) of 2000, dated 30-9-2004]. 8. On the other hand, the learned DR has heavily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted in 1997 when he was not even a director and, therefore, it is clear that such process was started by the father of Mr. Darshan Deora in discharging of his personal obligation. He was made director only for the purpose of availing deduction in order to reduce the business profits. There is also no evidence to prove the contention of the assessee that Mr. Darshan Deora assisted in the business of the assessee whenever he came to India. He was also not an employee of the assessee-company. The expenditure related to the education of Mr. Darshan Deora and it was a misnomer for the assessee to describe the same as expenditure on training. It is also to be noted that the assessee-company is a family concern comprising of husband, wife and children and, therefore, it was very easy for the assessee-company to induct Mr. Darshan Deora as a director so as to claim deduction in respect of the expenditure which was supposed to be incurred by the father of Mr. Darshan Deora. In our opinion, the entire process was merely a paper work just for claiming the deduction. In our opinion, there is no nexus between the expenditure incurred and the purpose of the business. The issue before us is squa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to work. During the years 1960, 1961 and 1962 an expenditure of Rs. 29,654 was incurred in connection with her trip to USA which included passage money and certain expenditure prior to her departure. This amount was disallowed by the Assessing Officer. However, the Tribunal held that such expenditure could not be attributed to any extra commercial consideration but the disallowance was confirmed on the ground that the assessee not behaved in a sensible or business, like manner as the daughter was not bound to join the assessee-company after training. On reference, the High Court held that merely because there was no commitment or contract or bond taken from the trainee, the expenditure which was otherwise proper could not be disallowed. The facts as stated before reveal that the daughter of the directors was already in service with the assessee-company for the last 5 years. She was a Master of Arts with English and French as special subjects and was working in the editorial department of the newspaper. Therefore, the specialised education in Journalism and Business Administration was for the benefit of the assessee-company and there was a complete nexus between the business of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
