9911796707
TMI Blog2019 (10) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the assessee company. 3. In the assessment year 2001-02, the appellant claimed expenditure of Rs. 29, 72,710/- on account of educational expenses of Ms. Esha Arya. The said expenditure was disallowed on the ground that it was personal in nature. On appeal, the learned CIT (A) dismissed the same. Similar expenditure was claimed in subsequent years i.e. 2002-03, 2003-04 and 2004-05 and they were also disallowed and additions of Rs. 16, 62,227/-, Rs. 21, 51,045/- and Rs. 3, 27,837/- were made by the Assessing Officer in the said years. 4. The assessee preferred appeals against the said orders, which too were dismissed. In respect of all the four assessment years i.e. 2001-02 to 2004- 05, the assessee preferred appeals before the Tribunal. Vide a consolidated order dated 27.02.2009, the Tribunal restored to the file of the Assessing Officer, the issue of disallowance of educational expenses incurred by the assesee, on behalf of Ms. Esha Arya, daughter of one of the Directors. 5. The assessee was permitted to produce evidence in relation to the said expenditure. The Assessing Officer granted sufficient opportunities to the assessee and, thereafter, passed assessment orders sust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produce/adduce any direct or circumstantial evidence in order to prove that as to when she got the admission in Boston University. 6.4 It is also observed that the assessee has not adopted any procedure for selection of the employees for higher education in Foreign University. Miss Esha Arya was sent for the higher education not on the basis of requirement of the company or her ability 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 company and 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 expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till making the last payment, for determining 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 the business of the assessee. 13. As far as requirement of the filing of the application form, the Assessing Officer has noted that no original application was filed by the assessee before him. The Ld. CIT(A) has also noted that no copy of application for admission was filed by the assessee before him. He has also noted that no other evidence have been filed related to documents submitted during visa interview before the USA Embassy Authorities. Thus, it is evident that the assessee has not complied with the direction of the Tribunal issued at the time of remanding the matter back to the Assessing Officer. Before us also, only information sheet/medical & physical history of the student has been filed and copy of admission form has not been filed. 14. We find that the assessee has accepted the decision of the Tribunal in first round of proceedings and no appeal has been filed against the said direction of the Tribunal. In such circumstances, not complying with the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to be satisfied as to the commercial necessity of expending that amount. The question will always be as to the nature of the relation between the expenditure and the business, whether the benefit is remote or near, prospective or immediate, imaginary or real and so forth. The capacity in which the assessee spends will also be relevant. In the instant case, the assessee did not furnish any material to the Assessing Officer to arrive at the conclusion favoring the assessee. The A.O. therefore, exercised his judgment and discretion which cannot be said to be arbitrary or unreasonable. As a result, the addition of Rs. 33,337/- on account of salary paid by the appellant to Ms Esha Arya is confirmed and ground No.5 is dismissed." 17. We find that the assessee has not taken any ground of appeal against the above finding of the Ld. CIT(A), and, thus, the fact that no services were rendered by her even during vocation period, become final. 18. We find that in the case of RAS information technology (p) Ltd., the Hon'ble High Court in para 6 of the decision has noted that during the course of pursuing his postgraduate course at USA, the son of the director of the company updated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent to obtain higher education. This Court distinguished Kostub Investment Ltd. (supra) from Natco Exports Pvt. Ltd. v. CIT, (2012) 345 ITR 188 (Delhi), and held in favour of the assessee that the said expenditure was allowable. 10. Per contra, learned counsel for the respondent, firstly, submits that no question of law arises for consideration since the entire dispute is completely factual. She submits that there are concurrent findings of fact returned by the Assessing Officer, CIT (A) and the Tribunal after examining the materials produced by the appellant. The onus to justify the deduction of the expenditure incurred by the appellant was entirely upon the appellant, and the appellant had failed to discharge the same. She submits that an issue of appreciation of evidence does not raise a question of law, particularly when concurrent findings of facts have been returned and no perversity is pointed out in the finding concurrently returned by the authorities and the tribunal. She points out that the two Directors of the company, who participated in the Board Meeting which resolved to send Ms. Esha Arya to Boston University to undertake the MBA Course were her parents, and none e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e claimed and the business of the assessee, whether it was wholly and exclusively expended for the purpose of business of the assessee. This requires the assessee to produce reliable evidence before the Assessing Officer. The evaluation of the claim of expenditure has to be considered on the basis of the material on record, and there cannot be any straight jacket formula for such determination. Each case would turn on its own facts, and the decision would vest on the fact whether the assessee has discharged the burden of showing that the expenditure was wholly and exclusively for the purpose of the business of the assessee under Section 37(1), to include the conclusion that the expenditure, which is of personal nature, is not claimed as business expenditure. In the present case, the assessee has failed to produce material and documents to support that the expenditure was incurred for the purpose of the business of the assessee. The findings of the AO, affirmed in the successive appeals are all factual. The assessee has not been able to show as to how the findings are perverse or contrary to the evidence and material on record. 15. It is also to be noted that the Appellant is a Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when she was inducted as the Director of the Company. The terms of the said agreement also defy logic. It is highly improbable that a Company which would incur expenditure to the tune of Rs. 70 lacs approximate on overseas education, agreed to have Ms. Esha Arya make a commitment to work for the Company only for a period of one year and, in the event she were to leave the Company before the expiry of the said period, she was required to pay only Rs. 50,000/- as default money, which too could also be waived off at the discretion of the Director of the assessee. When these contradictions were pointed out, the Assessee produced the supplemental agreement dated 01.11.2000 wherein she agreed to serve the Company for not less than two years and in the event of default, reimburse 50% of the expenditure incurred on higher education. These facts cannot be ignored and one can easily infer that the expenses were not incurred wholly and exclusively for the business of the Company. Significantly, when the learned ITAT restored the matter to the file of the AO, in the first round of a challenge, the assessee, despite opportunity failed to produce the evidence that would justify the expenditure, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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