9911796707
TMI Blog2008 (2) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... 8, respectively. 2. In this case, the assessee filed the return of income for the Assessment Years 1996-97 and 1997-98 in which he had claimed certain amount as business expenditure incurred by it on studies of Shri Varun Mehta son of Director of the company on the ground that under agreement between the company and the said Varun, he was to serve the company for at least three years after finishing his studies abroad. 3. The Assessing Officer disallowed the said expenditure and the same was added towards the income. On appeals by the assessee, the said order became final up to the ITAT. Thereafter, the Department started proceedings under Section 271(1) (c) of the Income Tax Act (hereinafter referred to as 'the Act') against the responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on claimed by the assessee by way of a debit in the profit & loss account cannot be said to be bereft of bona fides. This is for the reason that the assessee incurred expenditure as an obligation under agreement by way of which the beneficiary was to serve with the assessee company for a stipulated period after finishing his studies in abroad. It is, of course, a different matter that the claim of the assessee has not ultimately found favour with the Revenue authorities but that by itself does not justify an inference that it was lacking in bona fides. It is a well settled legal proposition that mere disallowance of expenditure claimed cannot ipso-facto be considered to be giving rise to penal action u/s 271(1)(c) of Act unless it is demons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he circumstances and the fact position in the instant case, we do not find it a fit case for imposition of penalty u/s 271(1)(c) of the Act. Hence, we hereby affirm the decision of the CIT (Appeals) on this aspect." 5. We have heard the counsel for the appellant and perused the impugned order. Undisputedly, in this case, the assessee had only claimed certain expenditure incurred on the education of Mr. Varun Mehta on the basis of a written agreement, according to which, he was to serve the company for at least three years after finishing his studies abroad. It is neither the case of the revenue nor there is any material to this effect available on the record that the said agreement was false and fabricated document. Moreover, there is no s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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