TaxTMI 
TaxTMI 
2011 (4) TMI 454
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....) Smt. Sangeeta Jain and (v) Smt. Niti Jain with 30%, 17.50%, 17.50%, 17.50% and 17.50% shares respectively. The return was filed on 2.12.2003 declaring total income of Rs. 43,13,920/-. The return was processed u/s 143(1) of the Income-tax Act, 1961 (the Act) on 25.03.2004. Subsequently, statutory notices were issued under sections 143(2) and 142(1) with a view to scrutinize the return. It was inter-alia found that the assessee-firm incurred expenses in respect of education of Shri Gaurav Shyam for pursuing Master's Degree in Strategic Marketing from De Mont Fort University, U.K., amounting to Rs. 12,30,799/-. Shri Gaurav Shyam is the grandson of Dr. M.R. Jain, who is a partner on behalf of Dr. M.R. Jain and Sons, HUF. The details of the expenses so incurred are as under:- Date Amount (Rs.) Debit Head Particulars 11/09/2002 6,89,715 Staff training and welfare D.D.isued to De Mont Fort University for admission of Mr. Gaurav Shyam in M.Sc. Strategic Marketing 13/09/2002 1,82,500 -do- D.D. for accommodation 13/09/2002 38,550 -do- GBP 599 purchased for Mr. Gaurav Shyam 26/09/2002 80,500 -do- Air ticket for Mr. Gaurav Sh....
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....e-firm and such knowledge was used because he joined the firm as partner. Therefore, the expenditure had been incurred wholly and exclusively for the purpose of business, deductible under section 37(1) of the Act in computing the total income. In order to support this contention, reliance has been placed on the decision reported in 114 ITR 256; 159 ITR 673; 226 ITR 220; 1 SOT 830; 7 SOT 755 and 80 ITR 687. 3.2 In reply, the ld. DR referred to various findings of the AO. In particular, our attention has been drawn towards the fact that in the financial year 2004-05, the major source of income of Shri Gaurav Shyam had been salaries from Panipat Weaving and Processing (P) Ltd. and Pushpsons Fibrol Pvt. Ltd., being Rs. 3,99,600/- and Rs. 2,16,300/- respectively, aggregating to Rs. 6,15,900/-. Both these firms are connected concerns. Therefore, it was submitted that the primary purpose of education abroad was not to advance the business of the assessee but to educate Shri Gaurav Shyam for earning income by way of salaries. The argument that the expenditure was the personal expenditure, not connected with the business of the assessee, has been supported by relying on the decisi....
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....The company incurred expenditure in respect of education of Ms. Leela Parulekar, the daughter of both the directors and share-holders, on her education in USA. She was holding master's degree in Arts from Poona University with English and French as special subjects. She had been working in the editorial department from September, 1975, starting as an apprentice. A resolution was passed by the company that she should be sent abroad for education in journalism and business administration in a good university in USA, which would be good for progress of the paper. University and course were selected by Ms. Parulekar in consultation with one of the directors. In pursuance of the resolution, she went to USA and attended Graduates' School of Journalism at Columbia University at New York and secured Master's Degree in Journalism. She further spent three months for obtaining practical training in printing and lithography. Expenditure of Rs. 29,654/- was incurred by the company in this year, which included the passage money and expenses. Out of this amount, a sum of Rs. 6,000/- was claimed as deduction for the year in question. On return from the U.S, she joined the editorial department, whe....
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....acts of the two cases, it can be very well said that they are completely distinguishable. There was no relationship of the employees with any director. 28 employees were sent abroad for training who committed to serve the assessee-company for a long period of five years at a pre-fixed salary. The case of the ld. counsel is that there was a condition of coming back and serving the assessee company, which has been fulfilled in this case also. There is no evidence of the commitment. Further, we are of the view that this is not the crux of the decision as the question primarily revolves around the expenditure being capital or revenue in nature. The assessee has not sent any one else abroad except Shri Gaurav Shyam in earlier or subsequent periods, while 28 employees were sent abroad in that case by the assessee-company. Therefore, the ratio of this case does not advance the case of the assessee. 4.4 In the case of CIT vs. Kohinoor Paper Products, (1997) 226 ITR 220, one of the questions before Hon'ble Madhya Pradesh High Court was-whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in allowing Rs. 42,974/- spent on education of a part....
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....nnected concerns. Nonetheless, the ratio which comes clearly from the decision is that the material question to be seen is as to whether the expenditure was incurred wholly and exclusively for the purpose of business. While doing so, all circumstances have to be taken into account. The fact that he was grand-son of a partner or that there was no written contract may not become material if the expenditure is found as a matter of fact to have been incurred for the purpose of business. 4.5 The facts in the case of CIT vs. Dr. M.S. Shroff, (1971) 80 ITR 687 (Del) are that the assessee is an ophthalmic surgeon in New Delhi. He derives income by way of salary and also from his profession. The assessee visited several hospitals in different countries in Europe and Egypt, with a view to keep himself abreast with the latest techniques in ophthalmology. An expenditure of Rs. 10,079/- was incurred on the tour, which included expenditure on tickets and visa also. This amount was claimed as expenditure against the professional income. The Tribunal found as a matter of fact that the assessee had visited foreign countries on his own and that he had not been deputed by his employer, Dr. ....
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....a trainee as relevant documents had not been furnished. Therefore, the only logical conclusion is that there is no nexus between the expenditure incurred on foreign education abroad and the business of the assessee company. This finding was confirmed by the Court. The facts were sought to be distinguished by the ld. counsel by mentioning that there was no evidence of appointment as trainee and the capacity of the director's son was not established. 4.8 In the case of Ocean City Trading (India) Pvt. Ltd., (2010) 328 ITR 290 (Bom.), one of the questions was-whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that expenses incurred by the appellant in relation to the training of the employee abroad was not wholly and exclusively for the purpose of the business of the appellant? The Hon'ble Court mentioned that it did not see any reason to interfere with the decision of the Tribunal having regard to the factual position. It has been noted that the assessee was not able to substantiate that sending Shri Nawal Kumar for training abroad was for the benefit of the business of the assessee. The decision in the case of Echjay Forgings Ltd. (sup....
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....s of any open examination or interview. No record of discussion between partners had been placed on record to show that they considered him fit for education. After obtaining education, he became a partner in the firm but the terms and conditions of the deed are not known. He is also stated to have written a dissertation, but its contents are not known. What is striking is that he took up employment with two related companies and got salary of about Rs. 6.00 lakh from these companies. The turnover of the assessee did not increase on joining the firm as partner. These facts show that the primary purpose was to equip Shri Gaurav Shyam with necessary qualification to pursue his career subsequently. Joining the firm as partner is only incidental. The major portion of his income was by way of salaries. The facts of the case do not show that the business of the assessee-firm increased. In fact, there was a reduction in turnover. Although none of the factors when taken individually can lead to any conclusion in the matter, the overall conclusion which emerges clearly is that the foreign education was not undertaken in the course of business of the assessee. The same was obtained for pursu....