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TMI Blog2017 (3) TMI 570X X X X Extracts X X X X X X X X Extracts X X X X ..... vocate Revenue by : Shri Rajat Kumar Kureel, JCIT Sr. DR ORDER Per Dr. Arjun Lal Saini, AM The captioned appeal filed by the assessee, pertaining to Assessment Year 2010-2011, is directed against the order passed by ld. Commissioner of Income Tax (Appeals)-II, Kolkata, in Appeal No.19/CCXXI/ CIT(A)C-II/13-14, dated 09.12.2013, which in turn arises out of an order passed by the Assessing Officer (AO) Under Section 143(3) of the Income Tax Act 1961, (in short the Act ), dated 25.03.2013. 2. Brief facts of the case qua the assessee are that the assessee company engaged in the business of manufacturing of fabricated metal structural products, filed its e-return of income on 24.09.2010 showing total income of ₹ 9,99,292/-. Thereafter the case of the assessee was selected for scrutiny and the AO framed the assessment making disallowance of ₹ 13,79,177/- of staff welfare expenses and ₹ 5,59,225/- of travelling expenses on account of expenses incurred by the assessee for higher studies of a staff of the company. 3. Aggrieved from the order of ld. Assessing Officer, the assessee filed an appeal before the ld. CIT(A), who has also confirmed the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rship Agreement (Bond), it appears that all the documents were made and planning was done so that the expenditure incurred on the higher studies of Ms. Megha Goyal may be claimed as business expenditure of the appellant company and cleverly debited under the heads 'Staff welfare Expenses' and 'Travelling Expenses' and not shown separately as 'Education Sponsorship Expenses'. It is an admitted fact on record that Ms. Megha Goyal herself approached the appellant company for sponsorship of her higher education at UK and this happened only because her paternal uncle was the director of the company. This could have not been possible for any other employee not related to the management of the company. The appellant company incurred the substantial amount of expenditure only for the reason that she is a relative of the director. It is argued by the appellant that it was a prudent business decision to send Ms. Goyal for higher study so that after her return, the company may reap the benefits of her expertise and knowledge to promote the business of the appellant company. However, I am of the opinion that this argument is only on paper. In actual what benefits were d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture of ₹ 19,38,402/-. Further, as mentioned above, Ms. Goyal left the company before the expiry of bond period. In view of above facts, I am of the opinion that the AO has arrived on a correct conclusion that the expenditure was not incurred wholly and exclusively for the purpose of business of appellant company and, therefore, not allowable as deduction u/s 37 of the Act. 5.3 In the case of CIT vs. R.K.K.R. Steels (P) Ltd., 258 ITR 306 (Mad.), the assessee company was engaged in the business of rerolling and manufacturing of steel. The company claimed that the expenditure incurred on meeting the cost of travel to USA and the expenditure connected with the education of the son of Balwant Rai who was the director of the company, was deductible as business expenditure as the said Rajiv Rai had acquired a MBA degree and had later on joined the company. It was claimed that the expenditure was incurred for the benefit of the business of the company as he subsequently became the director of the company. The claim of the assessee was disallowed by the AO but allowed by the Tribunal. On further appeal to the High Court, the Hon'ble Madras High Court has held as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down by the Hon'ble Bombay High Court and the Madras High Court, it is held that the expenditure of ₹ 13,79,177/- and ₹ 5,59,225/- debited under the heads 'Staff Welfare' and 'Traveling' aggregating to ₹ 19,38,402/- is not allowable as business expenditure u/s 37 of the Act. The disallowance made by the AO is confirmed. The ground no. 2 is dismissed. 4. Not being satisfied with the order of ld. CIT(A), the Assessee is in further appeal before us and has taken the following grounds of appeal :- 1. That on the facts circumstances of the case the order passed by learned Assessing Officer CIT (A) was wrong against the facts of the case. 2. That on the facts circumstances of the case, learned Assessing Officer as well as CIT (A) was wrong in not allowing ₹ 13,79,177/ - out of Staff Welfare Expenses ₹ 5,59,225/ - out of Travelling expenses on account of expenses incurred by; the appellant for higher studies of a staff of the company. 3. That on the facts circumstances of the case, appellant may alter, add delete any of the grounds of appeal on or before the hearing of the appeal. 4.1 The ld. AR for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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