TaxTMI 
TaxTMI 
2020 (4) TMI 736
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....of the assessee attended and furnished the details as called from time to time. 3. During the assessment proceeding, AO observed that assessee has claimed training charges amounting to Rs. 49,39,185/- in its financial statement. When the detail was called from the company, assessee has submitted that training expenses were incurred in respect of the following persons:- i) Ms. Priyamvada Bhumjkar-Managing Director ii) Mr. Srinivasa Rao, Head Operations iii) Mr. Jashan Bhumkar, Non Executive Director. 4. Since the expenses were incurred on non-executive director, the same was asked to substantiate. In response, assessee submitted that this training charges are on account of final year of graduation of Mr. Jashan Bhumkar who was then associated in the capacity of Non-Executive Director of the company. He was pursuing graduation in the field of advanced chemical technology and was specializing in the field which is directly relevant to the business of the company. The assessee company felt it necessity to sponsor the same and retain the talent within the organization for better future prospects. Hence, it was unanimously decided by the Board to sponsor ....
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....al technology and was specializing in the field which is directly relevant to the current business of the appellant company. In the AY 2014-15, the appellant company entered into an 'Education Sponsorship Agreement' with Mr. Jashan Bhumkar and agreed to pay the University fee for the final year of graduation and in return Mr. Jashan Bhumkar agreed to join the appellant company for a minimum period of 3 years after completing his graduation from the Berkeley University of California. A board resolution was passed approving the agreement on May 30, 2013. Mr. Jashan Bhumkar, after completing his graduation in 2014, pursued mastered in the same field and on its completion, he started working with the appellant company from September 21, 2015. The effect of his expertise knowledge can be seen in terms of the increase in profits and turnover of the appellant company which shot up from Rs. 74 crore to Rs. 96 crore i.e. an increase by 30%. The product portfolio of the company has expanded by the addition of a product i.e. color composite. The company has also expanded its market to Latin America and these have been taken care of solely by Mr. Jashan Bhumk....
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.... mentioned below:- 11. In the light of the aforesaid discussion on the facts of the case, provision of Section 37(1) of the IT Act as well as decisions cited, I hold that the appellant company"" is a closely held Pvt. Ltd. Company and the resolution can be passed as deemed fit which best suits the interest of the management. In the facts of the present case, resolution was passed at the instance of the MD who happens to be the mother of Mr. Jashan Bhumkar. The post of non-executive director has been given to Mr. Jashan Bhumkar just to camouflage the claim as business expenditure. This is certainly not the intent of the provision of Section 37(1) of the IT Act. It was certainly the personal liability of the mother who happens to be the MD of the appellant company for providing higher education to her son which has been wrongly claimed as business expenditure in the hands of the appellant company. Hence such claim cannot be allowed and therefore, it is held that the claim of Rs. 22,33,843/- on the higher education of Mr. Jashan Bhumkar is not a deductible expenditure u/s 37(1) of the IT Act and same is therefore rightly disallowed by the AO. The disallowance so made is there....
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.... has joined the company. 12. Ld. AR further submitted that the decision of Hon'ble Madras High Court in the case of M. Subramaniam Bros. Vrs. CIT in 250 ITR 769, there was no covenant by the partner serving the firm and further distinguished the case of CIT vrs. R.K.K.R. Steels Pvt. Ltd. in 258 ITR 306, wherein there was no agreement between the company and son of the director who was sent to abroad and also there was no requirement to join the company after completing his education. She submitted that in the given case of the assessee, assessee has entered into an agreement and also there is a condition that son of the director will work for a minimum period of 3 years in the company. She further submitted that Ld. CIT(A) has observed that assessee has not given any opportunity for further studies to any other employees. She further submitted that assessee has given opportunity to other senior officers particularly in this assessment year itself and senior officer was also sent abroad for further studies. Therefore, she prayed that addition made by the AO be deleted. 13. On the other hand, Ld. DR supported the orders passed by the revenue authorities and submitted that it is....
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....id partner is continuing with the firm and specialized knowledge and training acquired by him in the field of Construction of Management is of immense benefit to the firm in its professional activities. 10.At the first blush, the contention advanced by the learned Standing Counsel for the Revenue appears to be impressive. However, we find that on a closer scrutiny into the material papers, what is sought to be challenged before this Court is the perversity in the findings of the CIT(A) as well as the Tribunal by ignoring material facts, which have been placed before the Tribunal as well as before the CIT(A). Therefore, when the grounds canvassed by the assessee by placing materials before the Assessing Officer or for that matter before the CIT(A) were not taken into consideration, then it goes to the root of the matter thereby, the Court would be empowered to test the correctness of the impugned orders as to whether the order suffered from non-application of mind or failure to look into the material information placed before the authorities, which would amount to an error of law. Therefore, after hearing the learned counsel for the parties on the factual aspects, ....
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....ubsequently takes part. 14.In the instant case, we find that substantial factual material was placed before the Assessing Officer as well as before the CIT(A) and the Tribunal. To that extent, the learned counsel for the appellant has filed the copy of the written submissions filed before the CIT(A). From the facts placed, it is seen that the assessees son has completed his B.E. degree in April 2000 and joined as a partner of the firm in the same month. All the partners of the firm, including Mr.H.E.Sriprakash Shastry, who are all qualified engineers, were having plans to take up work with multinationals, who were looking at India for setting up industries. Hence, the partners considered it a professional necessity to send Mr.H.E.Sriprakash Shastry to Australia to specialize in the field of construction management at the University of New South Wales. This specialization was directly connected with profession carried on by the assessee and he was sent to University of New South Wales in February 2001. The assessee firm stated that foreign higher education and training of one of their partners will have an advantage in obtaining professional assignments from industrial proj....
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....in the case of Commissioner of Income Tax vs. Kohinoor Paper Products reported in (1997) 226 ITR 0220 (M.P.). 19.In the said case, the Court after referring to Section 37(1) of the Act held that the expenditure incurred in the training was held to be allowable deduction, as in the said case one Shri Deepak Bhargava was sent to U.S.A. for higher education, but it was obviously for business purposes of the assessee firm and he stayed abroad though for a long period, it is a fact that after completion of his studies, the aforesaid person kept himself engaged in the business of the firm and the experience gained by him proved beneficial to the firm. 20.The aforementioned two decisions, Sakal Papers Pvt.Ltd. (supra) and Kohinoor Paper Products (supra), are clear answers to the contentions advanced by the Revenue. 21.The learned Standing Counsel for the Revenue contended that in the decision in the case of Commissioner of Income Tax and Another vs. RAS Information Technologies (P) Ltd., reported in (2011) 200 taxman 305 (Kar), the material on record disclosed that the son of the Managing Director entered into an agreement with the assessee company, under which ....
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....ourse, he is stated to have been attending the office of the firm and getting acquainted with reinforced concrete design, planning estimates and construction management. After graduation, he was made a working partner of the firm and he has worked on several projects, which have been mentioned by the assessee. In February 2001, he was sent to Australia for higher education. The duration of the course and training is for a period of two semesters and the course underwent was directly related to the profession carried on by the firm and this accrued in favour of the firm, as could be seen from the facts placed before the CIT(A), where the professional fee received by the firm had substantially increased. 25.On return, after completion of the post graduate degree, the partner continued to work for the firm and materials were placed to show that several important contracts have been secured by the firm, which they attribute to the educational qualification and expertise acquired by the partner of the firm abroad. There was no material place by the Revenue to demonstrate that any part or whole of the stand taken by the assessee was either false or untrue. Viewed from this angle....