TaxTMI 
TaxTMI 
TaxTMI 
2014 (9) TMI 509
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.... the AO on the plea that this expenditure was in respect of study of Mr. Tushar Khanna, who is son of one of the Directors of the assessee company, he held that expenditure so incurred was not for the purpose of business. The AO asked the assessee as to why these expenditure should not be disallowed, in reply the assessee filed a copy of agreement dated 1-8-2000 between the assessee company and Mr. Tushar Khanna claiming that Mr. Tushar Khanna is an employee, who left on 10-8-2000 for New York, USA to undergo the course of Hotel Management at the Colonel University, USA. The assessee company has sponsored the total programme under which Tushar Khanna was provided Air Passage, tuition fee, maintenance and other expenses relating to the said course. As per terms of agreement, on completing the above course, Shri Tushar Khanna shall return to India and join the assessee company for a minimum period of three years from the date of his return. It was submitted that on joining of Mr. Tushar Khanna in assessee's company as an employee, assessee was benefitted by lot of knowledge of Hotel Management etc. of Mr. Tushar Khanna and his knowledge benefited the company immensely. For this purpo....
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...., Shri Tushar Dinesh Khanna is bound to work as an employee of the company atleast for a period of three years from the date of his return to India. AR has informed that on return back to India, Shri Tushar Dinesh Khanna continues to be in whole time employment with the company and is offering his international experience, expertise and knowledge towards the growth and development of the company's business. There exists a employer-employee relationship between appellant company and Shri Tushar Dinesh Khanna. It follows from the above that appellant company is very keen to promote its business and bring the same at international level by providing high quality of services. The appellant's case is, therefore, directly covered by the decision of Hon'ble Mumbai High Court in the case of Sakal Papers Pvt. Ltd. vs. CIT [114 ITR 256 (Born)]. Reliance placed by the AO on various decisions is misplaced in as much and as also explained by the AR in his submission that in these cases the educational expenses were spent and claimed to acquire degree in the Business Management and MBA whereas assessees in those cases were dealing in different line of business. However, in the case o....
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....e facts and in the circumstances of the case and in law the Tribunal was justified in not allowing the appellant's claim of expenditure of Rs. 29,27,748/- incurred for the purpose of business by the appellant on the training of Mr. Tushar Khanna? ii) Whether on the facts and in the circumstances of the case and in law the Tribunal erred in not adjudicating the alternate plea, regarding the fact that there cannot be disallowance of expenditure on the ground of personal use in the case of the appellant being a company, which was specifically raised by the appellant's representative in the course appellate proceedings ?" In all the years under consideration, the Hon'ble High Court has duly accepted substantial question of law with regard to claim of expenditure on foreign education of Tushar Khanna. Learned AR placed on record the latest decision of Hon'ble Bombay High Court in the case of Nayan Builders & Developers Pvt. Ltd., 24th July, 2014, wherein it was held that mere admission of appeal by High Court is sufficient to debar the penalty levied u/s.Section 271(1)(c) of the IT Act. In this case the Hon'ble Bombay High Court observed that in the quantum proceedings, the Tribunal u....
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....Hon'ble High Court of Bombay vide order dated 22.07.2011 in Income Tax Appeal No. 4611 of 2010 under section 260 A of the Income Tax Act as the issue involves substantial question of law. Where the High Court has accepted the appeal as the subject matter of addition involves substantial question of law u/s 260A, it is needless to emphasis that the issue is debatable and accordingly no penalty is imposable u/s 271(1)(c) of Act. The Hon'ble Delhi High Court in CIT v. Liquid Investment & Trading Co. [in ITA No.240/2009] vide its judgment dated 5.10.2010 has held that an issue becomes debatable on the admission of substantial question of law against the Tribunal order by the High Court. In such a case also penalty has been held to be not imposable u/s 271(1)(c) of the Act. The Mumbai Bench of the Tribunal in Nayan Builders & Developers Pvt. Ltd. v. ITO [ITA No.2379/Mum/2009], vide order dated 18.03.2011, has also held that where substantial question of law has been admitted by the Hon'ble High Court against the additions sustained by the Tribunal, there cannot be any question of penalty u/s.271(1)(c). Similar view has been taken by the Third Member of the Tribunal in the case of Rapam ....
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....nd, learned DR relied on the order of lower authorities and contended that assessee has claimed personal expenditure under the garb of business expenditure with respect to education of son of one of the directors, therefore, the AO was justified in levying penalty u/s.271(1)(c) for furnishing inaccurate particulars with respect to this expenditure. Accordingly, it was pleaded that order of the CIT(A) confirming the penalty is justified. 7. Rival contentions have been considered and record perused. We have deliberated on the judicial pronouncements cited at bar by learned AR and DR as well as judicial pronouncements discussed by lower authorities in their respective orders with reference to levy of penalty u/s.2171(1)(c) of the I.T. Act. From the record we found that assessee company is engaged in the business of food and catering services. During the years under consideration, assessee company has claimed expenditure on foreign education and foreign travelling in respect of Tushar Khanna, who is son of one of the Directors of the assessee company. The expenditures were disallowed by the AO on the plea that these expenditures were in respect of study of Tushar Khanna, who is son of....
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....any sponsoring such training. Intact, it was only because of such relationship that the Board of Directors decided to send 'such employee for acquiring international training and education. After completion of training, Mr. Tushar Khanna was under a specific obligation to be in employment with the employer for a period of three years. Thus, it is clear that to implement International Hotel Business practices and systems, the assessee Company has spent monies on employing foreign nationals. During the previous year 2000-01, the Company had employed an internationally acclaimed foreign cook, Mr Somdet Kesoraprom from Bangkok. Similarly, it sponsored one of its employees to acquire hotel management education and training at Cornell University, USA. 8. From the record, we also found that on returning back to India, Tushar Khanna continued to be in whole-time employment of the assessee company and is offering his international experience and expertise and knowledge towards the growth and development of the assessee company's business. Mr. Tushar Khanna was in employment with the Company, before being sent abroad to acquire specific training and education in Hotel Management. While ....
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....High Court is squarely covered by the decision of Hon'ble jurisdictional High Court in the case of M/s Nayan Builders & Developers Pvt. Ltd. dated 24-7-2014 (supra), wherein it was categorically held that mere admission of appeal by the High Court is sufficient to debar the penalty levied u/s.271(1)(c) of the Act. In the instant case also, the Hon'ble High Court vide order dated 9-1-2013 had accepted the substantial question of law for all the years under consideration. Relevant observation of the Hon'ble High Court in the A.Y.2001-02 was as under :- "Heard. Admit on the following substantial questions of law. i) Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in not allowing the appellant's claim of expenditure of Rs. 29,27,748/- incurred for the purpose of business by the appellant on the training of Mr. Tushar Khanna? ii) Whether on the facts and in the circumstances of the case and in law the Tribunal erred in not adjudicating the alternate plea, regarding the fact that there cannot be disallowance of expenditure on the ground of personal use in the case of the appellant being a company, which was specifically raised by the app....