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TMI Blog2021 (5) TMI 516X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no nexus between the expenditure of higher education for a management trainee and propagation of business of the assessee (c) the expenditure cannot be treated is business expenditure as it is incurred for future services to be obtained by the company. On appeal, the Ld. First Appellate Authority upheld the order of the Assessing Officer and held as follows:- "4.5. Perusal of these details reveal that Shri Karan Kanodia was simply 10th passed when he has been supposedly offered a job by the assessee company. He had applied for further studies at Babson College and his visa was issued on 17.06.2009. Thus for seeking admission in Babson College Shri Karan Kanodia must have applied at least 2-3 months in advance. Even for visa he must have applied at least 2-3 weeks in advance. Under the circumstances it is apparent that the company has not chosen a course for Shri Karan Kanodia, as claimed by company in its submissions. Besides only a 10th passed. Shri Karan Kanodia did not possess any special qualification which may justify selection and sponsoring of his studies abroad by the company. If the company was bothered about improving its functioning it would have hired a qualif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see's case are distinguishable from the cases relied upon by the assessee. On the other hand it is similar to the cases of JBM Industries Ltd. (Supra) and Indian Galvanics Cyrium Foils Ltd. (Supra). Hence, assessee's contentions are not acceptable. 4.6. In view of the discussion above the disallowance of Rs. 23,69,443/- is confirmed." 3. Aggrieved, the assessee is in appeal before us. 4. The ld. Counsel for the assessee, Shri S.M. Surana, submitted that (a) expenses were claimed erroneously under a wrong head of expenditure and this cannot be the reason for making a disallowance (b) sponsorship expenses can be treated as business expenditure and for this proposition, he relied on certain case-law (c) the expenditure in question were incurred on an unrelated party for the purpose of business improvement and hence has to be allowed, (d) that Mr. Karan Kanodia, is not related in any way to any of the directors of the assessee company and that, subsequent to the education obtained by him, Mr. Karan Kanodia is serving the assessee company till date for more than five years with a minimum salary of Rs. 50,000/- per month only. Thus, the expenditure should be allowed. He relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Directors of the Company end shall honestly, diligently and faithfully serve the Company and use his utmost endeavor to promote the interest of the Company. 7. That the said trainee shall be just and faithful to the Company in ali matters and shall not at any time except under legal process, divulge to any person whosoever and shall use his best endeavors to prevent the publication or disclosure of any trade secret or software development process or any information concerning management decision of the Company or of its dealings, transactions, or affairs which may come to his knowledge. 8. That, this agreement shall be determined upon the death of the said trainee and in that event, his legal heirs, executors, and administrators shall be entitled to a proportionate part of his remuneration and other legal dues computed till the date of his death and the employee's heirs executors and administrators shall not be liable to pay any liquidated damages. 9. That, if at any time during his employment, the said trainee is found guilty of misconduct or any willful breach or continuous negligence of the terms of this agreement or dereliction of the duties and/or instructions given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein earlier. C. That the said trainee shall not take up whole time or part lime employment with any other company engaged in the similar businesses, for a period of 12 months even if he leaves the services of the company after paying liquidated damages and fulfilling all conditions as stipulated in this agreement. D. That the said trainee shall undergo training in India or abroad as and when required by the Compare at its cost. In case the trainee is required to take further training abroad, and is so sponsored by the Company, the trainee would be required to sign a separate agreement. E. That in the event of any dispute or difference arising between parties hereto either during subsistence of this agreement of afterwards relating to this agreement, the same shall be referred to the Arbitration of Managing Director of the Company whose decision shall be final and binding on the parties. The provisions, of the Indian Arbitration Act, 1996 or any statutory modification or re-enactment thereof for the time being in force shall be applicable KOI.KATA courts alone will have exclusive jurisdiction in all matters connected with this agreement." 8. The genuineness of this agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s borne by the company with interest @18 per cent per annum. It appears that a written agreement was signed and executed to this effect and the same was produced before the assessing officer, Commissioner of Income Tax(Appeal) as well as before the Tribunal. The Commissioner of Income Tax (Appeal) had duly noted the aforesaid documents and accepted the same. Unfortunately the Learned Tribunal did not discuss legality and validity of those documents nor discarded the same expressly and the Learned Tribunal went on presuming adversely that a son of a President cannot become a trainee or expenditure for his higher education could not be treated to be relatable to the expenditure of the company. We are unable to accept the logic of the Learned Tribunal particularly when we noticed those resolutions are unchallenged and unimpeachable and those have been carried into effect there is no reason to discard the same. Those documents were not created, it was a contemporaneous one and pursuant to the said resolution followed by an agreement the trainee went for abroad training and education. Simply because a trainee happens to be the son of the President one cannot jump to the conclusion t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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