TaxTMI 
TaxTMI 
2011 (2) TMI 963
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....n various facts such as qualification of Mr. Vishesh Bhatt, relationship with the major shareholders, his age, academic qualification and purpose of expenses incurred, the assessee was requested to explain why the expenses should not be disallowed as the same was not incurred wholly and exclusively for the purpose of business. The assessee inter alia submitted as under :- "Mr. Vishesh Bhatt went to study cinematography and film/video production. - He is also a Director in the company. - There was a Board resolution for such purpose upon which an agreement was entered into with the said Director. - Mr. Vishesh Bhatt is young in age and his training would be beneficial to the interest of the company. - The expense is neither capital nor personal in nature. - The training was necessary in view of the competition in market." Such argument did not find favour with the Assessing Officer The Assessing Officer observed that Shri Mukesh Bhatt owns 29,206 out of 50,000 shares of the company and 20,788 shares are owned by Vishesh Films Pvt. Ltd. whi....
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.... have been a post tax matter. The arrangement made to show that this was a commercial decision is not acceptable. The ld. CIT(A) relying on the ratio of the decision in the case of Bengal Enamel Works Ltd. (supra) while agreeing with the findings of the Assessing Officer held that it is clearly a personal decision for education of the child which is attempted to be passed on as a commercial decision and accordingly rejected the claim of the assessee. 4. Being aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us taking the following ground of appeal :- "On the facts and circumstances of the case as well in law the learned CIT(A)-XI erred in confirming the disallowance made by learned Assessing Officer on account of training expenses Rs. 21,43,220 of a director in the USA for the course of cinematography with binding Memorandum of Undertaking entered with the director." 5. At the time of hearing the ld. counsel for the assessee while reiterating the same submissions as submitted before the Assessing Officer and ld. CIT(A) draws our attention to the Board's resolution dated 1-4-2003 and Memorandum of Undertaking dated 10-4-2003 between Vishesh Enterta....
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....curred by the assessee in giving tuition fees of Mr. Mihir A. Sheth in pursuing his degree in MBA in USA is an allowable deduction. The reliance was also placed on the decision in the case of J.B. Advani & Co. v. Jt. CIT [2005] 92 TTJ (Mumbai) 175/1 SOT 830 (Mum.) wherein it has been held that the expenses incurred for the education of the director abroad and after completing the studies working for the company held to be for the furthering its business is allowable expenditure. Reliance was also placed in Asstt. CIT v. Padmakshi Financial Services (P.) Ltd. [IT Appeal No. 4036 (Mum.) of 2006, dated 21-10-2008] holding that Director's educational expenses on higher education are allowable. Reliance was also placed in the case of Shahzada Nand & Sons v. CIT [1977] 108 ITR 358 (SC) wherein Their Lordships held that commercial expediency must be tested in the context of socio economic thinking. The amount was spent for the purpose of business and the training has bearing on the business of the company, hence the same may be allowed as business expenditure. The ld. counsel for the assessee further submits that the decisions relied on by the Assessing Officer and ld. CIT(A) are not appl....
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....urred by the assessee for training of the Director abroad was for the benefit of the assessee, therefore, the same be allowed as business expenditure and the Assessing Officer and the ld. CIT(A) have erred in not allowing the same. 6. On the other hand, the ld. D.R. while relying on the order of the Assessing Officer and the ld. CIT(A) further submits that for the reasons as mentioned in the order of the Assessing Officer and ld. CIT(A), the ld. CIT(A) was fully justified in upholding the disallowance of training expenses of Rs. 21,43,220 not allowable as business expenditure and accordingly the order passed by the Assessing Officer be upheld. 7. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that according to the assessee, the assessee company has passed Board Resolution dated 1-4-2003 as under :- "That Mr. Vishesh Bhatt be sent for training in New York University for a maximum period of Three Years. And that Company should bear his all expenses to and fro fare on all his visits, his tuition fees, Lodging Boarding expenses during his stay together with other incidental expenses. And that Mr. Vishesh ....
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....d by Mr. Mukesh Bhatt and his wife. Their son, Mr. Vishesh Bhatt is a non-shareholding Director of the company who had studied up to Class XII. His date of birth is 7-5-1984. He left for training abroad at the age of 19 years. He was made a Director in the immediately preceding assessment year. It was held by the Assessing Officer that education of Mr. Vishesh Bhatt abroad was in continuation of his studies in normal course after XII standard and had nothing to do with the business of the assessee company. Further, the Resolution of the company cannot override the provisions of section 37 and hence the expenses incurred by the assessee on the education of his son/Director are not allowable as business expenditure and the ld. CIT(A) while upholding the view of the Assessing Officer confirmed the disallowance made by the Assessing Officer 11. At the time of hearing, the ld. counsel for the assessee has also drawn our attention to the date-wise details of foreign visits by Mr. Vishesh Bhatt for study in New York University appearing at page No. 91 of the assessee's paper book which is reproduced as under :- Date Particulars Page No of assessee's paper book 25-8-2003 ....
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....material on record to show as on what basis the assessee has sent the drafts to New York University. From the letter/Certificate of eligibility for Non-immigrant (F-1) student of the New York University appearing at page No. 12 of the assessee's paper book, it is observed that Mr. Vishesh Bhatt has signed the said letter on 3-9-2005 whereas he was asked by the University to report to the School 'No later than 6-9-2005 and complete studies not later than 21-12-2007'. Since the dates in the letter/certificate do not fall in the year under consideration hence the same is not relevant for the year under consideration. The identity card of Mr. Vishesh Bhatt of New York University is dated August, 2007 not relevant for the year under consideration and similarly the other identity card issued to Mr. Vishesh Bhatt by University of Southern California does not help to the assessee as it is not the case of the assessee that Mr. Vishesh Bhatt was allowed to study other than New York University. There is no material on record as to when Mr. Vishesh Bhatt has completed his studies and got Certificate/Degree/Diploma from New York University. In this view of the matter, we are of the view that si....