The Income Tax Officer, Ward-2(1)(3), Ahmedabad V. M/s.Iris Products Pvt. Limited, Ahmedabad

ITA 1239/AHD/2019

AI Insights

The case involves an appeal by the Income Tax Officer (ITO), Ward-2(1)(3), Ahmedabad against M/s. Iris Products Pvt. Ltd. concerning the assessment year 2013-14. The dispute centered on the disallowance of Rs. 14,18,000 claimed as expenditure towards the education fees of the director's son, which was initially added back to the income by the Assessing Officer. The CIT(A) later deleted this disallowance, leading to the ITO's appeal. The Tribunal's decision emphasized that the director's educational expenses were directly linked to the business's benefit, as the director had taken charge of the company post-MBA and was involved in launching a project for the global market.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131577 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 05-09-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 25-07-2019
• Other Referred Cases: CIT vs. Naidunai News and Networking Pvt. Ltd., CIT vs. Kalvinator India Ltd., AIA Engineering, Sujag Fine Chemicals Pvt. Ltd., PCIT vs. Sun Pharmaceutical Industries Ltd., Dahod Sahkari Kharid Vechan Sangh Ltd., CIT vs. India Cements Ltd., Peter Vaz vs. CIT, CIT v. Commonwealth Trust (India) Ltd., Sanjay Sawhney v. PCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 147; 37; 143(3); 73

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH Before: Ms. Suchitra Kamble, Judicial Member Th e ITO, Ward-2(1 )(3), Ah medabad (Appellant) Vs M/s. Iris Prod ucts Pvt. Ltd. , 53, Shri mali So ciety , Navrang pura, Ah med abad PAN: AABCA594 5J (Resp ondent) Asses see b y : Shri Tushar Hema ni, Sr. Advoca te & Shri Parimalsinh B. Pa rmar, A. R. Revenue by : M s. S aumy a Pa ndey Ja in, Sr. D. R. Date of hearing : 06-09 -2 023 Date of pronouncement : 13-09 -2 023 आदेश/ORDER This is an appeal filed against the order dated 23-05-2019 passed by ld. CIT(A) for assessment year 2013-14. 2. The grounds of appeal are as under:- ITA No. 1239/Ahd/2019 Assessment Year 2013-14 I.T.A No. 1239/Ahd/2019 A.Y. 2013-14 Page No. ITO vs. M/s. Iris Products Pvt. Ltd. 2 “1. The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs 14,18,000/- incurred towards fees for education of Director u/s 37 of IT Act. 2. The appellant craves leave to amend alter any ground or add a new ground, which may be necessary.” 3. The assessee filed original return of income for assessment year 2013-14 on 28-09-2013 declaring total income of Rs. 26,79,105/-. The scrutiny assessment u/s. 143(3) of the Act was completed vide order dated 08-01-2016, determining total income at Rs. 28,76,960/-. On verification of details, the Assessing Officer observed that the assessee claimed an expenditure of Rs. 14,18,000/- towards education fees of director’s son under the head salary and wages revealed in Annexure B of 3CD report. The Assessing Officer further observed that assessee had said vide letter dated 26-11-2015 that the fees was paid to Director Shri Anang Lalbhai for the post graduate course of his son Shri Arjun Lalbhai Rutgers, the State University of New Jersey for assessment year 2013-14. Shri Arjun Lalbhai is a major shareholder in the assessee company having 43.44% shareholding and is director in the company. The Assessing Officer after taking cognizance of the reply made addition of Rs. 14,18,000/- for disallowance of expenditure on education to Director u/s. 37. I.T.A No. 1239/Ahd/2019 A.Y. 2013-14 Page No. ITO vs. M/s. Iris Products Pvt. Ltd. 3 4. Being aggrieved by the assessment order, the assessee filed appeal before the ld. CIT(A). The ld. CIT(A) partly allowed the appeal of the assessee. 5. The ld. Departmental Representative submitted that the education fees of the director has not direct nexus with the business and therefore the deletion by the ld. CIT(A) of the disallowances of expenditure on education is not justified. The ld. Departmental Representative relied upon the order of the assessment order. 6. The ld. Authorized Representative relied upon the order of the ld. CIT(A) and further submitted that it is not the director’s son but it is the director himself has opted for education for the betterment of the business structure and the progress of the company’s business. The ld. Authorized Representative relied upon the decision of CIT vs. Naidunai News and Networking Pvt. Ltd. (2012) 210 Taxman 73 (MP). The ld. Authorized Representative submitted that the assessee immediately joined assessee company after completing MBA and has taken charge of the assessee company. Tortilla Chips project was ready to be commissioned for the global market specially Europe and USA and therefore the completion of the post graduate course has benefited the assessee company substantially. The ld. Authorized Representative submitted reopening is merely based on change of opinion and therefore the assessee as per rule 27 of the Income Tax Appellate I.T.A No. 1239/Ahd/2019 A.Y. 2013-14 Page No. ITO vs. M/s. Iris Products Pvt. Ltd. 4 Tribunal Rules, 1963 challenging the validity of reopening u/s. 147 of the Act. The ld. Authorized Representative relied upon the decision of CIT vs. Kalvinator India Ltd. 320 ITR 569 (SC), AIA Engineering 138 taxman.com 534 (Gujarat), Sujag Fine Chemicals Pvt. Ltd. 77 taxman.com 258 (Guj) as well as following decisions: > PCIT vs. Sun Pharmaceutical Industries Ltd. – 408 ITR 517 (Guj); > Dahod Sahkari Kharid Vechan Sangh Ltd. - 282 ITR 321 (Guj); > CIT vs. India Cements Ltd. - 424 ITR 410 (Madras); > Peter Vaz vs. CIT- 436 ITR 616 (Bom); > CIT v. Commonwealth Trust (India) Ltd. - 221 ITR 474 (Kerala); > Sanjay Sawhney v. PCIT-273 Taxman 332 (Del); 6. Heard both the sides and perused all the relevant material available on record. As relates to application under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963, the reopening itself is not justified as the assessee has given all the details related to the education fees of the director during the assessment proceedings passed u/s. 143(3) of the Act. In fact, it is mere change of opinion. Thus, application filed by the assessee under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963 is allowed. The ld. CIT(A) has given a detailed finding and in fact the assessee company has funded the post graduation studies of its one of the directors who was very much employed and has acquired his post graduate degree qualification for I.T.A No. 1239/Ahd/2019 A.Y. 2013-14 Page No. ITO vs. M/s. Iris Products Pvt. Ltd. 5 the benefit of the business of the company. Thus, the appeal of the Revenue is dismissed. 7. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 13-09-2023 Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER Ahmedabad : Dated 13/09/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद