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TMI Blog2011 (2) TMI 963X X X X Extracts X X X X X X X X Extracts X X X X ..... has gone to USA for training in New York University during the year under consideration. Thus the assessee is not entitled to deduction claimed as training expenses of a Director sent to USA for the course of Cinematography and film/video production - uphold the findings of the ld. CIT(A) in sustaining the disallowance made by the Assessing Officer. - 305 (MUM.) OF 2009 - - - Dated:- 25-2-2011 - D.K. AGARWAL, PRAMOD KUMAR, JJ. Dr. K. Shivaram for the Appellant. Smt. Ashima Gupta for the Respondent. ORDER D.K. Agarwal, Judicial Member. This appeal preferred by the assessee is directed against the order dated 21-10-2008 passed by the ld. CIT(A) for the assessment year 2004-05. 2. Briefly stated facts of the case are that the assessee company is engaged in the business of production of feature films and T.V. serials. During the previous year relevant to the assessment year under consideration four films viz. 'Saaya', 'Footpath, 'Inthiah' and 'Murder' were released. During the course of assessment proceeding, it was inter alia observed by the Assessing Officer that the assessee has spent Rs. 21,43,220 in foreign currency for the training of Mr. Vishesh B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration and the resolution is not bona fide in the interest of the assessee company but was passed with an ulterior motive to benefit the son of the Director holding 99.99 per cent share of the company and consequently he disallowed the amount of Rs. 21,43,220 and added to the income of the assessee. 3. Before the ld. CIT(A), the assessee while relying on the same explanation as put forth before the Assessing Officer further submits that Mr. Vishesh Bhatt had given an undertaking to work exclusively for the appellant company for five years and to complete at least one project every year and there is also penal clause for violating the conditions of the agreement, therefore, the expenses claimed by the assessee are allowable as business expenditure. The ld. CIT(A) while observing that shareholding position clearly shows that the father and mother of Mr. Vishesh Bhatt are 99 per cent shareholders of the company. The age of Mr. Vishesh Bhatt also shows that he had to continue his studies after class XII, which he did. The parents perhaps desired that their son undertake study connected with film making, they being in film making business, for which they sent him abroad. This is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed merely because the relationship with the Director (daughter of Director) held that the expenditure incurred on the foreign education of the daughter was allowable as a deduction. The reliance was also placed on the decision in the case of CIT v. Kohinoor Paper Products [1997] 226 ITR 220/92 Taxman 316 (MP) wherein it has been held that the expenses incurred for better education and greater experience of partner are allowable as business expenditure. Reliance was also placed on the decision of Mumbai Bench of the Tribunal in the case of ITO v. Seftech India (P.) Ltd. [IT Appeal Nos. 4407 6119 (Mum.) of 2003, dated 22-7-2005] wherein the Tribunal following the decision of Bombay High Court in Sakal Papers (P.) Ltd.'s case (supra) held that in the instant case the person was working as a director before proceeding to higher studies and continued to serve the assessee even after getting the training which in turn helped the assessee company in furthering its business, allowed the expenses claimed by the assessee. Reliance was also placed in the case of Prabhudas Lilladhar (P.) Ltd. v. Dy. CIT [IT Appeal Nos. 2042 2157 (Mum.) of 2004, dated 22-4-2008] wherein it has been held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has been held that there was no agreement entered upon by the partner with the firm in the earlier case whereas there is an agreement entered upon by the Director with the assessee company to work wholly and exclusively for the company for five years, therefore, the same is distinguishable and hence not applicable. Reliance was also placed on the decision of Hon'ble Supreme Court in the case of CIT v. Sun Engineering Works (P.) Ltd. [1992] 198 ITR 297/64 Taxman 442 (SC) for the proposition that the judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the court and while applying the decision to the later case, courts must carefully try to ascertain the true principle laid down by the decision. The ld. counsel for the assessee also distinguished the recent decisions of Hon'ble Bombay High Court in the case of Echjay Forgings Ltd. v. Asstt. CIT [2010] 328 ITR 286 (Bom.) and Ocean City Trading (India) (P.) Ltd. v. CIT [2010] 328 ITR 290 (Bom.) for the reasons that the facts of those cases are distinguishable to the facts of the assessee's case. In the light of the above, he submits that the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exclusively work for the company for a period of five years after his training and will complete atleast one project every year. The Director will accept a monthly remuneration of Rs. 30,000. (7) In the event of any default by the Director of the terms and breach of commitment of work the Director agrees and undertakes to replenish pay back 20 per cent every year to the company of all the expenses incurred by the company on his training. 9. Based upon the above documents, the assessee company has sent Mr. Vishesh Bhatt to USA for study in New York University in cinematography and film/video production. It is the claim of the assessee that the assessee company is a corporate entity and there is no personal element for a corporate entity. The Director has worked for five years as per the terms of the agreement and still working for the company. The expenses were incurred wholly and exclusively for the purpose of business as the training was necessary in view of competition in the market. 10. Per contra, the case of the revenue is that almost 99.9 per cent of paid up equity shares of the company is owned and controlled by Mr. Mukesh Bhatt and his wife. Their son, Mr. Vishes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bai 22 5-9-2005 Departure from Mumbai 19 5-9-2005 Arrival in New York 19 18-12-2005 Departure from New York to Mumbai 18-12-2005 Arrival in Mumbai 22 [Emphasis supplied] 12. From the above details, it is observed that during the financial year 2003-04 relevant to assessment year 2004-05 under consideration, Mr. Vishesh Bhatt went to Italy and U.K. and has not gone to New York. From the copy of the Passport appearing at page Nos. 15 to 27 of the assessee's paper book, it is also observed that at page No. 20 Mr. Vishesh Bhatt got VISA of USA on 23-7-2004 which falls in the financial year 2004-05 relevant to the assessment year 2005-06 and not in the year under consideration i.e., assessment year 2004-05. Therefore, it cannot be said that during the year under consideration the Mr. Vishesh Bhatt has gone on tour to New York, USA for study in New York University, passed in the Board Resolution (supra). We further find that the assessee in his letter dated 28-2-2004 addressed to Manager, Thomas Cook (India) Ltd., Mumbai has stated that our Director Mr. Vishesh Bhatt is presently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidence which is against the assessee in view of our finding recorded in para 12 of this order. Therefore, the decisions relied on by the ld. counsel for the assessee are distinguishable and not applicable to the facts of the present case. 14. In Echjay Forgings Ltd.'s case (supra) it has been held (Head note) : "Held, dismissing the appeal, that there was no evidence or record to show that any other person at any point of time, either prior to 1996 or subsequent thereto till date was appointed as trainee or sent abroad for higher education. No documentary evidence with respect to appointment of was produced before the Tribunal or before the assessing authority. The expenditure was not deductible." 15. Ocean City Trading (India) (P.) Ltd.'s case (supra) it has been held : "That the assessee was not able to substantiate that sending a person for training abroad was for the benefit of the business of the assessee. The expenses incurred in training were not deductible." (p. 290) 16. For the aforesaid reasons, we are of the view that the assessee is not entitled to deduction of Rs. 21,43,220 claimed as training expenses of a Director sent to USA for the course of Cinematogra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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