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TMI Blog2018 (12) TMI 1210X X X X Extracts X X X X X X X X Extracts X X X X ..... and in the circumstances of the case, the authorities below have erred in disallowing the revenue expenditure of Rs. 29,72,710/- incurred wholly and exclusively for the purpose of expenditure by disregarding the correct factual and legal position and the illegal addition is, therefore, liable to be deleted. 3. The authorities below have erred in not following the binding decisions of Courts and Tribunals placed before them directly on the place by the appellant and thereby misled themselves to pass the impugned illegal orders which are liable to be quashed. 4. The appellant has furnished all the records and documents as well as supporting data and case law which had not been examined in the proper perspective and the impugned addition cannot be sustained. 5. The disputed illegal demands of tax, interest and notice for penalty are, therefore, liable to be set aside and quashed as unsustainable, both of facts and in law. 3. Identical grounds have been raised in other assessment year except change of amount. 4. Briefly stated facts of the case are that in the assessment year 2001-02, the assessment under section 143(3) read with section 263 of the Income-tax Act, 1961 (in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account to come to the' conclusion as to whether the expenditure was incurred by the directors of the company out of love and affection towards their daughter or it was an expenditure incurred in the course of business of the assessee. Therefore, we think it fit to restore the matter to the file of the AO, before whom complete evidence available with the assessee in this respect starting from the date of making of the application shall be filed and thereafter he will decide the issue as per Jaw after hearing the assessee. Thus, this ground is treated as allowed for statistical purposes." 5. In compliance to the order of the Tribunal, the Assessing Officer allowed the opportunity of hearing to the assessee and after taking into account submission of the assessee, passed assessment orders, sustaining the disallowance mainly on the ground that the assessee did not produce the original application form of Miss Esha Arya for admission to the Boston University. The Assessing Officer also noted that the assessee did not have any scheme for training of the employees and particularly for imparting higher education. 6. On further appeal, the Ld. CIT(A) upheld the disallowance as the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but only because of her relationship with the one of the directors of the company. The decisive test in a situation like this is to ask a question whether an assessee will incur expenditure of the type being claimed in case of appellant as business expenditure in case of any employee. If this test is applied, it would be clear that huge expenditure on foreign education is incurred because she is daughter of the Director of the appellant companyand such expenditure has no business connection. It is thus apparent that only consideration for incurring huge expenditure on Miss Esha Arya is because she being the daughter of one of the directors of the appellant-company. Thus, the only logical conclusion which could be drawn on these facts of the case is that there is no nexus between education expenses incurred abroad for Miss Esha Arya and the business of the appellant-company. In any case, such expenditure on facts cannot be said to be laid out or expbiTdeTwholly and exclusively for the purpose of business. In view of the foregoing discussion and for the reasons given by the AO, I am of the considered view that the expenditure on education of Miss Esha Arya is in nature of personal ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... education, the sales turnover of the company increased tremendously and she turned the loss-making assessee company into a profit-making company. The Ld. counsel relied on the submission made before the Ld. CIT(A), a copy of which is available on page 98 to 103 of the paperbook. The Ld. counsel submitted that the Assessing Officer totally disregarded the fact of contribution by Ms Esha Arya, in improving the performance of the company. He submitted that the finding of the Assessing Officer that the company did not have any scheme for training of the employees was not relevant as the company was a closely held company and it was not a public company. In support of the contention that the expenditure was incurred for the purpose of the business of the assessee company and allowable under the provisions of the Act, the Ld. counsel relied on following two decisions: 1. Commissioner of Income Tax & Anr. Vs. RAS Information Technology (P.) Ltd., (2011) 238 CTR 76 (Ker.) 2. Mallige Medical Centre P. Ltd. Vs. Joint Commissioner of Income Tax, [2015] 375 ITR 522 (Karn.) 9. On the contrary, the Ld DR referred to page 222 to 224 of the assessee's paper book, which was claimed by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement was made between the assessee and Ms Esha Arya, where she was agreed to work for a period of not less than one year from the date of the completion of higher studies abroad and in case of default she was asked to pay money of Rs. 50,000/-. Thus, according to him, the bond was duly signed between the assessee and Ms Esha Arya. 12. We have heard the rival submissions and perused the relevant material on record including the paper book submitted by the assessee. In the instant appeals, the common issue involved is whether the expenses on education of Ms Esha Arya, (who, happened to be daughter of one of the directors of the assessee company) at the Boston University, which included college fee, boarding, travelling from India and back and other incidental expenses, have been incurred wholly and exclusively for the purpose of the business and allowable under section 37(1) of the Act or not. The assessee is before us in second round of proceedings. In first round, the Tribunal, questioned the assessee about the fact whether at the time of making application for admission to the MBA program, the company had sponsored Ms. Esha Arya or she had applied independently. The assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance of the salary to the extent of Rs. 33,337/- paid by the appellant to Ms. Esha Arya. This matter was also restored to the file of the AO for fresh adjudication after ascertaining whether any service was rendered by her to the assessee company in this year for during her vocation period. In this regard, the copy of the extracts of the minutes of the meeting of the Board of Directors dated 06.05.2002 was furnished before the A.O. as well as before the undersigned. The above-quoted letter dated 06.05.2002 does not indicate anything about the expenses in question and its justification from the point of commercial expediency. In order to claim a deduction on account of expenditure for purposes of business the onus lies on the assessee to prove that the expenditure was incurred for the purposes of business and was not of a capital nature. If it is to be allowed, the onus is on the assessee to prove the amount of expenditure which can be allowed. In order that an expenditure should qualify for deduction as contemplated by section 37(1), one of the requirements of the provision is that the expenditure must have been laid out wholly and exclusively for the purpose of the business. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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