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TMI Blog2004 (10) TMI 595X X X X Extracts X X X X X X X X Extracts X X X X ..... computing business income of the assessee- company. We see no infirmity in CIT(A) s sustaining the said disallowance. Ground No. 1 is thus dismissed. Vehicle expenses - The disallowance has been confirmed by the CIT(A) treating the expenses as personal expenses. But then, a company is an artificial juridical person, and, therefore there cannot be any personal expenses in the case of the company. This is so held in the judgment of Hon ble Gujarat High Court in the case of Sayaji Iron ; Engg. Co. v. CIT [ 2001 (7) TMI 70 - GUJARAT HIGH COURT] which has also been followed by a number of Benches of the Tribunal, including by the Ahmedabad Bench in the reported case of Dy. CIT v. Mira Industries [ 2003 (4) TMI 220 - ITAT AHMEDABAD-A] . Thus, we direct the Assessing Officer to delete the impugned disallowance. The assessee will get the relief to that extent. Ground No. 2 is thus allowed. Entertainment expenses - We find that it is an undisputed position that the canteen expenses were incurred for the purpose of staff members and managers of the company but the objection is taken by the revenue that the outsiders being provided the tea and snacks from the same canteen cannot be ruled out. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer distinguished the facts of the case by observing that in the said case, son of the Managing Director was already inducted into the assessee-company when he left for foreign studies abroad, whereas in the present case Shri Rishav Mehra had not joined the assessee-company at the point of time of leaving for education abroad. As for Hindustan Hosiery Industries case (supra), it was noted that the said Tribunal s decision has been reversed by Their Lordships of Hon ble Bombay High Court in the case of CIT v. Hindustan Hosiery Industries (1994) 209 ITR 383. In the backdrop of these observations, the Assessing Officer came to the conclusion that assessee s claim of ₹ 11,50,438 in respect of study of the MD s son is held as an expenditure of personal nature and the same is disallowed and added back to the assessee s total income . Aggrieved by the conclusions so arrived at by the Assessing Officer, assessee carried the matter in appeal before the CIT(A), but without any success. The assessee is not satisfied as is in second appeal before us. 3. We have heard Shri Anil Mehta, learned counsel for the assessee, and Shri O.P. Sharma, learned Departmental Representat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the learned counsel for the assessee that the expenditure in question was incurred in relation to the business of the assessee firm. We have no hesitation in recording our conclusion that to the fact that the expenditure incurred by the assessee has no nexus with the business of the assessee. We agree with the conclusion arrived at by the ITO and the CIT(A). It is thus clear that Hon ble Bombay High Court has rejected the school of thought that merely because the assessee would also benefit from the foreign education being received by the partner would be a reason good enough to hold that the expenditure so incurred on the foreign education as a 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 Managing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qualifications, as also in her abilities, to serve the paper. The ground which appealed to the Tribunal, however, was that the company had not taken any commitment about the service from the trainee, and, according to the Tribunal, it had not behaved in a sensible and businesslike manner. According to the Tribunal, therefore, the spending of such a large amount on her training without obliging her to undertake service of the company clearly smacked of the extra commercial consideration. The question about allowability per se, of the foreign education of director s children, was not before Their Lordships. This judgment, therefore, cannot be construed as an authority for allowability of foreign education expenses incurred on Managing Director s children even if education received by the children is relevant to the assessee-company and even though, after receiving such education, those children work in the assessee- company. This is besides the fact that in Sakal Papers (P.) Ltd. s case (supra), P worked for five years in the assessee-company before being sent abroad for higher education and the fact that P s selection could not be attributed to extra commercial consi-derations. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of Sakal Papers (P.) Ltd. (supra), which, as discussed earlier, is not relevant on the facts of this case. We, therefore, regret our inability to follow the SMC decision in the case of Trikaya Grey Advertising India Ltd. (supra), which, in any event, is not a binding precedent for a division Bench of the Tribunal. 9. In the case of K.B. Mehta v. Dy. CIT (2003) 86 ITD 256(Pune) TM, this issue was subject-matter of dissenting views between the members constituting the division Bench, and this issue was then referred to a Third Member in accordance with the provisions of section 255(4) of the Act. In this case also, there was no employer- employee relationship at the point of time when the agreement was entered into. In paragraph 3 of the Third Member s order, due note of this fact was taken. The judicial precedents referred to by the assessee, i.e., Sakal Papers and Kohinoor Paper Products, were also taken note of. It was also in the Third Member decision, which was the majority view, the Tribunal, inter alia, concluded as follows : The true test of an expenditure laid out wholly and exclusively for the purpose of trade or business is that it is incurred by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT(A) erred in sustaining the disallowance of vehicle expenses of ₹ 76,316. So far as this ground of appeal is concerned, it is sufficient to take note of the fact that the disallowance of 25 per cent of vehicle expenses is made for want of log book of the vehicles and as non-business expenditure. In appeal, CIT(A) confirmed the said action on the basis of his order for the preceding years, wherein, dealing with similar disallowance, the CIT(A) had observed as follows: I have considered the facts. The appellant company is located at SEEPZ Andheri. Considering the location of the factory, the expenses claimed is not excessive. The appellant admits that 5% of the total vehicle expenses may be attributable to personal use. Taking into account all these factors, the Assessing Officer is directed to disallow 10 per cent of the vehicle expenses. The CIT(A) thus confirmed the disallowance of 25 per cent of vehicle expenses. The assessee is not satisfied and is in second appeal before us. 13. Parties are heard and records have been perused. 14. The disallowance has been confirmed by the CIT(A) treating the expenses as personal expenses. But then, a company is an artificial juridic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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