TaxTMI 
TaxTMI 
2014 (7) TMI 217
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.... law arises in both the appeals and reads as under :- "(A) Whether on the facts and in the circumstances of the case of the appellant and in law the Tribunal has erred in holding that the expenditure on remuneration and training of working Director is not allowable under section 37 of the Income Tax Act 1961 ?" 3. According to Mr. Tiwari, the ITAT had erred in confirming the disallowance of expenditure on remuneration and training of a working Director of the Appellant-Assessee that was incurred legitimately for the efficient management and conduct of the Appellant-Assessee's business. He submitted that the expenditure was not only legitimate but had a direct nexus with the business of the Appellant-Assessee and was therefore allowable as a deduction under section 37 of the Income Tax Act, 1961. It is in this light that the learned counsel has questioned the correctness of the impugned order of the ITAT. 4. For the sake of convenience, we shall refer to the facts in Income Tax Appeal No.324 of 2012. The brief facts are that for the Assessment Year 2005-06, the Appellant-Assessee filed its return of income declaring a total income of Rs. 1,31,88,558/- accompanied with the A....
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.... stationed at Borivali, looking after Used Car Division as well as the workshop activities and was therefore appointed as a Director of the Appellant-Assessee sometime in 2003 and was paid a salary of Rs. 3,12,500/-. He submitted that these expenses have a direct nexus with the growth of the business of the Appellant-Assessee and therefore all the authorities below had wrongly disallowed the claim of the Appellant- Assessee for the fees paid to S.P. Jain Institute of Management & Research on behalf of Mr Krishna Kachalia as well as the payment of salary to him. 8. On the other hand, Mr Ahuja, the learned counsel appearing on behalf of the Revenue relied upon the observations and findings in the Assessment Order passed under section 143(3) of the Act as well as the order of the Commissioner of Income Tax (Appeals) dated 9th July 2009 to support the the impugned order. He submitted that these Appeals raise no substantial questions of law as the findings given by the Assessing Officer, the CIT (Appeals) as well as the ITAT are all based on the peculiar facts and circumstances of the present case. He submitted that the authorities below, after carefully considering the entire factua....
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....sion that the said Mr Krishna Kachalia was assigned to look after the work at Borivali only in name. Examining the order of the Assessing Officer we do not find that in the peculiar facts and circumstances of the present case the Assessing Officer had, in any way, misdirected himself in coming to the findings that he did. The view taken by the Assessing Officer is not only a possible view, but in our opinion a correct view, requiring no interference. 10. Similarly, the CIT (Appeals) also in paragraph 5.3 of his order dated 9th July 2009 has reaffirmed the findings of the Assessing officer. The CIT(Appeals) came to a finding that it could not be said that the expenditure incurred on the education of Mr Krishna Kachalia who was a Director of the Appellant-Assessee was a legitimate expenditure incurred for the purpose of the business of the Appellant-Assessee, especially in view of the fact that the Appellant-Assessee had not filed any evidence that it had framed any Rules and Regulations for incurring expenditure on education for the son of a Director or any other employee of the Appellant-Assessee. The Appellant- Assessee further had not filed any details which showed that Mr Kri....
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....atter and in the peculiar facts of the present case and noting the findings given by the ITAT which are based on the facts and circumstances of the case, we are not required to decide any larger question in these Appeals. We find that the dispute in the present case being purely of a factual nature, does not raise any substantial question of law and the orders passed by the authorities below can in no way be said to be vitiated on the ground of perversity or any error apparent on the face of the record. 13. The reliance placed by Mr. Tiwari on a Division Bench judgment of this Court in the case of Sakal Papers Pvt.Ltd. v/s Commissioner of Income Tax, reported in (1978) 114 ITR 256 (Bom) is wholly misplaced. In the facts of that case, this Court found that Ms Leela Parulekar, a daughter of the two Directors of the Assessee Company had gone to USA for education after completing her Masters of Arts from Poona University. The Assessee Company was in the business of publishing a leading Marathi daily newspaper in Poona. Ms Leela Parulekar worked in the Editorial Department of the newspaper from September 1955, starting as an apprentice, on a salary of Rs. 50/- p.m. and on 24th March ....
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....nded. In the facts of that case, the Assessee, Mr. D. C. Mehta, was a Advocate by profession. In the return of income filed by the Assessee, the Assessing Officer noticed a deduction of Rs. 22,25,614/- claimed by the Assessee as expenditure incurred for higher education for his daughter, Hemali. The justification for the said deduction was that she joined the Appellant's firm of Advocates and gave an undertaking that on attaining higher qualification and degree from the University abroad, she would join the firm for a minimum period of five years and thus, the said expenditure was incurred for the business of the Assessee and was allowable as a deduction. This Court had the occasion to consider the judgment in the case of Sakal Papers Pvt.Ltd. (supra) when it held that the facts were different and distinct from the facts in Sakal Papers Pvt.Ltd.'s case. It was found that the daughter Hemali joined the Assessee and immediately was sent for education abroad. The Assessee had not been able to bring on record anything and particularly the scheme for higher education abroad for employees and associates. Despite other associate Advocates working in the firm of the Assessee, none ....
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....that it is a question of fact in each case whether the amount which is claimed as a deductible allowance under s. 10(2)(xv) of the IT Act was laid out wholly and exclusively for the purpose of such business and if the fact finding tribunal comes to the conclusion on evidence which would justify that conclusion it being for them to find the evidence and to give the finding then it will become an admissible deduction. The decision of such questions is for the Tribunal and the decision must be sustained if there is evidence upon which the Tribunal could have arrived at such a conclusion. Another fact that emerges from these cases is that if the expense is incurred for fostering the business of another only or was made by way of distribution of profits or was wholly gratuitous or for some improper or oblique purpose outside the course of business then the expense is not deductible. In deciding whether a payment of money is a deductible expenditure one has to take into consideration questions of commercial expediency and the principles of ordinary commercial trading." (emphasis supplied). 16. Similarly, in the case of S.A. Builders Ltd. (supra), the Supreme Court has held as un....
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....at it had framed any Rules or Regulations for incurring expenditure on the education of the son of the director or any other employee; (iii) that the Appellant-Assessee had not filed any details which would indicate that the said Mr Krishna Kachalia was under any obligation to serve the Appellant-Assessee after the completion of management studies; (iv) that the Appellant-Assessee had paid education expenses of Mr Krishna Kachalia only because he happens to be belonging to the family controlling the Appellant-Assessee; (v) that the expenditure incurred on the education of Mr Krishna Kachalia was not incurred for the purpose of business of the Appellant-Assessee and therefore could not be allowed as deduction in the hands of the Appellant. In view of these categorical findings of fact, we have no hesitation in holding that the deduction claimed by the Appellant-Assessee has been rightly disallowed by the authorities below and we find no infirmity in the impugned order passed by the ITAT. 17. On the same parity of reasoning, we find that even the expenses claimed as a deduction by the Appellant-Assessee for the payment of salary to Mr Krishna Kachalia was rightly disallowed by the....