Asian Mills Pvt. Ltd., Ahmedabad V. The Dy.CIT.,Circle-1., Ahmedabad

ITA 3235/AHD/2010

• Counselvise Citation: 323520514 RSA 2010
• Duration Of Justice: 2 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 06-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: GAURAV NAHATA
• Keywords: Business expenditure; Opportunity of being heard; Revenue expenditure; Capital expenditure
• Section: 43B; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE SHRI D. K. TYAGI, JM AND SHRI T. R. MEENA, AM) ITA NO.3235/AHD/2010 (AY: 2006-07) ASIAN MILLS PVT. LTD. 104, SAKAR III, NEAR I.T. CIRCLE, ASHRAM ROAD, AHMEDABAD 14 P. A. NO. AABCA 8236 G VS THE D. C. I. T., CIRCLE-1, 1 ST FLOOR, JITENDRA CHAMBER, NR. R. B. I. AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY SHRI GAURAV NAHATA RESPONDENT BY SHRI P. L. KUREEL, SR. DR DATE OF HEARING: 08-07-2013 DATE OF PRONOUNCEMENT: 23-08-2013 ORDER PER T. R. MEENA : THE ASSESSEES APPEAL IS EMANATING FROM THE ORDER OF THE LEARNED CIT(A)-VI, AHMEDABAD DATED 23-09-2010, FOR THE ASSESSMENT YEAR 2006-07. THE EFFECTIVE GROUNDS RAISED BY THE ASSESS EE ARE AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN PASSING APPELLATE ORDER DATED 23/09/2010 FOR A. Y. 2006-07 IN THE CAS E OF APPELLANT BY CONFIRMING THE DISALLOWANCE OF RS.42013/- ON ACC OUNT OF LATE PAYMENT OF P. F. E. S. I. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.2,65,000/- ON ACCOUNT OF EXPENSE S ON AUTHORIZED SHARE CAPITAL. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.19,16,049/- OUT OF BUSINESS DEVE LOPMENT EXPENSES. 2. THE FIRST GROUND OF ASSESSEES APPEAL IS AGAINST CONFIRMING DISALLOWANCE OF RS.42,013/- ON ACCOUNT OF LATE PAYMENT OF P. F. AND E. S. I.. THE LEARNED AO IT A NO.3235/AHD/2010 (AY: 2006-07) ASIAN MILLS PVT. LTD. VS DCIT, CIR-1, AHMEDABAD 2 OBSERVED THAT ANNEXURE ATTACHED WITH AUDIT REPORT S HOWED THAT THE PAYMENT TOWARDS CONTRIBUTION OF EMPLOYEES P. F. OF RS.20,1 63/- FOR THE MONTH OF APRIL, 2005 AND ESI OF RS.10,921/- FOR THE MONTH OF APRIL, 2005 AND NOVEMBER, 2005 RESPECTIVELY WERE NOT MADE WITHIN THE DUE DATE AS P ER SECTION 36(1) (VA) OF THE ACT. THE DELAYED PAYMENT HAS NOT BEEN ACCEPTED BY T HE LEARNED AO. THE LEARNED AO GAVE REASONABLE OPPORTUNITY OF BEING HEA RD ON THIS ISSUE WHICH WAS REPLIED BY THE ASSESSEE VIDE HIS LETTER DATED 23-04 -2008. THE LEARNED AO BY APPLYING SECTION 2 (24) AND 36(1) (VA) OF THE ACT T REATED THE ASSESSEES INCOME AND ADDITION OF RS.42,013/- WAS MADE IN THE INCOME OF THE ASSESSEE. THE ASSESSEE BEING AGGRIEVED BY THE ORDER OF THE LEARNE D AO CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) WHO HAD CONFIRMED THE ADDITION BY OBSERVING AS UNDER IN PARA 3.3 OF HIS ORDER:- 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSES SMENT ORDER AND APPELLANTS SUBMISSION. A. O. MADE ADDITION OF EMPL OYEES CONTRIBUTION AMOUNTING TO RS.42013 TO P. F. AND ESI NOT PAID WITHIN DUE DATES PRESCRIBED IN PF AND ESI ACT. EMPLOYEES CONTRIBUTION IS ALLOWABLE U/S 36(1) (VA). THE AMENDMENT IN SEC. 43B ON WHICH VARIOUS JUDICIAL DECISIONS AS REFERRED BY THE APPEL LANT, IS NOT APPLICABLE TO EMPLOYEES CONTRIBUTION. ON A PLAIN READING OF SEC. 43B IT CAN BE SEEN THAT IT RESTRICTS THE ALLOWANCE OF EXPENSES WHICH ARE OTHERWISE ALLOWABLE UNDER THE ACT. THE ITEMS COVERED U/S 43B ARE LISTED FROM CLAUSE A TO F. EMPLOYEES CONTRIBUTION TO PF OR OTHER EMPLOYEES WELFARE FUND IS NOT COVERED IN ANY OF THE CLAUSE MENTIONED IN SEC. 43B . EMPLOYERS CONTRIBUTION IS MENTIONED IN CLAUSE B AND THEREFOR E, EMPLOYERS CONTRIBUTION IS ONLY SUBJECT TO SEC. 43B. SINCE, IT IS OTHERWISE ALLOWABLE U/S 37(1) OF IT. ACT. SINCE, PROVISION OF SEC. 43B IS NOT AT ALL RELEVANT FOR EMPLOYEES CONTRIBUTION; THE DECIS IONS BASED ON AMENDMENT TO SEC. 43B CANNOT BE APPLIED TO EMPLOYEE S CONTRIBUTION. IT IS NOT IN DISPUTE THAT FOR EMPLOYE ES WELFARE, BOTH EMPLOYEE AND EMPLOYER CONTRIBUTE. EMPLOYERS CONTRI BUTION IS ALLOWABLE AS DEDUCTION ONLY IF THE SAME IS PAID BEF ORE THE DUE DATE OF FILLING THE RETURN. HOWEVER, EMPLOYEES CONTRIBU TION IS TREATED AS INCOME U/S 2 (24) (X) AND THE SAME IS ALLOWED AS EX PENSE IF IT IS PAID WITHIN DUE DATE PROVIDED IN PF. ACT. IF THE PAYMENT IS NOT MADE WITHIN DUE DATE THEN THE EXPENSES IS NOT ALLOWABLE U/S 36 (1) (VA). SINCE, THE EMPLOYEES CONTRIBUTION IS ALLOWABLE ONL Y WHEN THE PAYMENT IS MADE WITHIN THE DUE DATE MENTIONED IN PF . ACT, THE SAME BECOMES DISALLOWABLE IF PAYMENT IS MADE AFTER DUE DATE AND IT A NO.3235/AHD/2010 (AY: 2006-07) ASIAN MILLS PVT. LTD. VS DCIT, CIR-1, AHMEDABAD 3 ACCORDINGLY, THE SEC. 43B CANNOT BE APPLIED. THEREFORE, MIXING EMPLOYEES CONTRIBUTION TO PF ALONG WITH EMPLOYERS CONTRIBUTION IS DISREGARDING HT CLEAR AND UNAMBIGUO US PROVISIONS OF IT. ACT. EVEN OTHERWISE, IF PROVISIONS OF SEC. 43B ARE APPLI ED TO EMPLOYEES CONTRIBUTION, IT WILL MAKE SEC. 36(1)(V) REDUNDANT. FOR EXAMPLE U/S 36(1) (VA) ANY PAYMENT MADE AFTER 2 0 DAYS FROM THE END OF THE MONTH IS NOT ALLOWABLE, WHICH MEANS PAYMENT OF EMPLOYEES CONTRIBUTION TO PF AFTER 20 TH APRIL FOLLOWING THE END OF PREVIOUS YEAR WILL NOT BE ALLOWABLE, WHEREAS IF THE EMPLOYEES CONTRIBUTION IS CONSIDERED U/S 43B THEN THE SAME IS ALLOWABLE TILL THE DUE DATE OF FILING THE RETURN. IN VIEW OF THIS, IF SEC. 43B IS APPLIED TO EMPLOYEES CONTRIBUTION, IT WILL MAKE PR OVISIONS OF SEC. 36(1) (VA) REDUNDANT. THE RULE OF HARMONIOUS CONSTRUCTION REQUIRES THAT INTERPRETATION TO THE STATUTE BE SUCH THAT IT SHOULD NOT RENDER ANY PROVISION REDUNDANT. SINCE, THERE IS A C LEAR PROVISION FOR DISALLOWANCE OF EMPLOYEES CONTRIBUTION; THE SAME C ANNOT BE MADE REDUNDANT BY LINKING IT WITH SEC. 43B. IN VIEW OF T HIS IT IS CLEAR THAT ALL THE DECISIONS INTERPRETING THE APPLICABILITY OF SEC. 43B WHERE EMPLOYEES CONTRIBUTION IS ALSO LOOSELY MENTIONED, DO NOT APPLY TO EMPLOYEES CONTRIBUTION COVERED U/S 36(1) (VA). IT IS TRUE THAT THERE ARE CONFLICTING DECISIONS WHEREIN EMPLOYEES CONTRI BUTION IS ALSO CLUBBED WITH THE EMPLOYERS CONTRIBUTION. HOWEVER T HERE IS NO JURISDICTIONAL HIGH COURT DECISION ON THIS ISSUE AF TER AMENDMENT TO SECTION 43 B. ON THE ISSUE OF RULE OF INTERPRETATIO N OF STATUTE, THERE ARE SEVERAL DECISIONS HOLDING THE VIEW THAT THERE S HOULD BE HARMONIOUS CONSTRUCTION WHILE INTERPRETING STATUTE. SOME OF THESE ARE 1- ASSAM CO. LTD. VS STAT OF ASSAM AND OTHERS, 248 ITR 567(SC) 2- LIC OF INDIA VS CIT, 219 ITR 410 (SC) 3- CIT VS S E UPPER SILERU, 152 ITR 752 (AP) IF THE ABOVE RATIONAL AND LOGIC IS FOLLOWED, THERE IS NO CONFUSION OVER APPLICABILITY OF THE CORRECT PROVISION TO EMPLOYEE S CONTRIBUTION. IN VIEW OF THE CLEAR PROVISIONS AND LEGISLATIVE INTENT , THE EMPLOYEES CONTRIBUTION IS ALLOWABLE ONLY IF THE SAME IS PAID WITHIN DUE DATES UNDER PF. ACT OR OTHER RELEVANT ACT. SINCE, THERE H AS BEEN DELAY IN PAYMENT FOR THE EMPLOYEES CONTRIBUTION TO PF AND E SI THE SAME IS NOT ALLOWABLE U/S 36(1) (VA). ADDITION MADE BY THE AO IS THEREFORE, CONFIRMED. IT A NO.3235/AHD/2010 (AY: 2006-07) ASIAN MILLS PVT. LTD. VS DCIT, CIR-1, AHMEDABAD 4 3. NOW, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED A PAPER BOOK AND CLAIMED THAT THE EMPLOYEES CONTRIBUTION OUT OF SAL ARY WAS DEPOSITED ALONG WITH EMPLOYERS CONTRIBUTION UNDER THE RELEVANT ACTS AND CANNOT BE TREATED AS INCOME OF THE ASSESSEE COMPANY. THE ASSESSEE PAID SALARY A ND WAGES ON THE 7 TH DAY OF THE NEXT MONTH. DEDUCTION MADE FROM THE SALARY AND WAGES WAS DEPOSITED WITHIN THE PRESCRIBED TIME. SALARY/WAGES PAYMENT FOR THE M ONTH OF APRIL, 2005 WAS MADE ON 07 TH MAY,2005 AND ACCORDINGLY DUE DATE COMES TO 20-05-2 005 BEING 15 DAYS PLUS 5 DAYS OF GRACE FROM THE CLOSE OF THE MON TH IN WHICH PAYMENT TOWARDS SALARY/WAGES WAS MADE. THE ASSESSEE DEPOSITED THE P F AND ESI ON 30-05-2005 WHICH IS WITHIN THE STIPULATED TIME. SIMILARLY, SAL ARY/WAGES FOR NOVEMBER,2005 WAS PAID ON 07-12-2005 AND ACCORDINGLY ESI PAID ON 22-12-2005 WAS WITHIN THE STIPULATED TIME. THE LEARNED COUNSEL FOR THE ASSESS EE RELIED ON THE DECISION IN THE CASE OF FLUID AIR (INDIA) LTD. VS. DCIT (1997) 63 ITD 182 (MUMBAI). THE ASSESSEE ALSO FILED COPY OF THE CHALLANS AND CLAIME D THAT PAYMENT OF RS.10,921/- OF ESI WAS MADE ON 22-12-2005 FOR THE MONTH OF NOVE MBER,2005 AND PF FOR THE MONTH OF APRIL, 2005 WAS PAID ON 30-05-2005. HE FUR THER RELIED ON VARIOUS CASE LAWS BEFORE US AT THE TIME OF ARGUMENT AND CLAIMED THAT IT IS ALLOWABLE DEDUCTION. 5. AT THE OUTSET, THE LEARNED DR VEHEMENTLY RELIED ON THE ORDER OF THE LEARNED CIT(A) AND CLAIMED THAT THE ASSESSEE HAD NO T PAID BOTH THE PAYMENTS IN STIPULATED TIME PRESCRIBED U/S 36 (1) (VA) OF THE A CT. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS ON RECORD. IT IS EVIDENT THAT THE ASSESSEE HAD NOT PAID THE EM PLOYEES CONTRIBUTION WITHIN THE DUE DATE UNDER THE PF ACT OR OTHER RELEVANT ACTS. T HE CASE LAW CITED BY THE ASSESSEE IN THE CASE OF CIT VS P. M. ELECTRONICS LT D. (2009) 313 ITR 161 IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. IN THIS CAS E, THE ISSUE WAS INVOLVING PAYMENT MADE U/S 43B OF THE ACT ON ASSESSEES CONTR IBUTION, NOT CONTRIBUTION OF THE EMPLOYEE. THUS, WE UPHOLD THE ORDER OF THE LEAR NED CIT(A). ACCORDINGLY, ASSESSEES GROUND NO.1 STANDS DISMISSED. IT A NO.3235/AHD/2010 (AY: 2006-07) ASIAN MILLS PVT. LTD. VS DCIT, CIR-1, AHMEDABAD 5 7. GROUND NO.2 IS AGAINST CONFIRMATION OF DISALLOW ANCE OF RS.2,65,000/- ON ACCOUNT OF AUTHORIZED SHARE CAPITAL. THE LEARNED AO OBSERVED THAT THE ASSESSEE HAD PAID RS.2,05,000/- AS ROC FEES AND RS.60,000/- BEING STAMP CHARGES RESPECTIVELY TOWARDS FORM NO.5 FOR INCREASING AUTHO RIZED SHARE CAPITAL OF RS.3 CRORES TO RS.7 CRORES. THE AO FOUND THIS EXPENDITUR E AS CAPITAL IN NATURE. THE LEARNED AO GAVE REASONABLE OPPORTUNITY OF BEING HEA RD ON THIS ISSUE TO THE ASSESSEE. AFTER RELYING UPON VARIOUS CASE LAWS HE M ADE ADDITION OF RS.2,65,000/- BY HOLDING IT AS CAPITAL EXPENDITURE. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT (A) WHO HAS CONFIRMED THE ADDITION BY OBSERVING AS UNDER IN PARA 4.3 OF HIS O RDER:- 4.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSES SMENT ORDER AND APPELLANTS SUBMISSION. THE EXPENSES RELATING TO IN CREASE IN CAPITAL ARE NOT ALLOWABLE SINCE THESE ARE CAPITAL IN NATURE . THIS IS AS PER VARIOUS SUPREME COURT DECISIONS, SOME OF WHICH ARE REFERRED BY THE ASSESSING OFFICER. HOWEVER, APPELLANT SUBMITTED THA T SUPREME COURT DECISION IN THE CASE OF GIC ALLOWS EXPENSES FOR INC REASE IN CAPITAL IF THE SAME RELATES TO ISSUE OF BONUS SHARE. THE SAID DECISION WAS REFERRED AND DISCUSSED WITH THE APPELLANTS REPRESE NTATIVE AND IT WAS CLEARLY EXPLAINED THAT ONLY EXPENSES REL ATING TO ISSUE OF BONUS SHARES WERE ALLOWED CONSIDERING THE SAME AS REVENUE. EXPENSES IN THE NATURE OF ROC FEES AND OTHER EXPENS ES FOR INCREASE OF THE CAPITAL ARE NOT ALLOWED IN THE SAID DECISION. APPELLANTS COUNSEL WAS CONVINCED AND AGREED THAT S UPREME COURT DECISION IN THE CASE OF GIC WILL NOT HELP APPELLANT IN ALLOWING SUCH CLAIM. THIS GROUND IS THEREFORE REJECTED. APPELLANTS CLAIM FOR ALLOWANCE OF 1/5 EXPENSES OUT OF THIS IS NOT ALLOWA BLE SINCE THE EXPENSES ARE NOT COVERED UNDER SECT IN 35D. THE ADD ITION MADE BY THE AO IS THEREFORE CONFIRMED. 8. NOW, THE ASSESSEE IS IN APPEAL BEFORE US. THE LE ARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT IT WAS FEE PAID TO ROC FOR INCREASING AUTHORIZED SHARE CAPITAL. THE AUTHORIZED SHARE CAPITAL WAS INCREASED TO ISSUE BONUS SHARE. IT WAS SUBMITTED THAT BY ISSUING BONUS SHARE, NO CAPITAL H AD BEEN INCREASED IN THE ASSESSEE COMPANY. THE CAPITAL BASE REMAINED THE SAM E EVEN AFTER ISSUING BONUS SHARE. THE BONUS SHARES MAINLY ARE ALLOCATED TO ACCUMULATE PROFITS OF BUSINESS. THE ASSESSEE RELIED IN THE CASE OF CIT VS GENERAL INSURANCE CO. LTD. (2006) 286 ITR 232 WHEREIN THE EXPENDITURE TOWARDS FEES FOR INCREASE OF IT A NO.3235/AHD/2010 (AY: 2006-07) ASIAN MILLS PVT. LTD. VS DCIT, CIR-1, AHMEDABAD 6 AUTHORIZED SHARE CAPITAL WAS HELD AS ALLOWABLE REVE NUE EXPENDITURE. ALTERNATIVELY, THE ASSESSEE CLAIMED THAT ONE FIFTH OF THE TOTAL EXPENSES MAY BE ALLOWED U/S 35D OF THE ACT. 9. AT THE OUTSET, THE LEARNED DR VEHEMENTLY RELIED ON THE ORDER OF THE LEARNED CIT(A). 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. THE PAYMENT MADE TO ROC FOR INCREASE OF AUTHORIZED SHARE CAPITAL IS A CAPITAL EXPENDITURE. IT WAS INCURRED BY THE ASSESSEE COMPAN Y TO EXPAND THE CAPITAL BASE OF THE COMPANY. THE CHARACTER OF THE EXPENSES IS CAPITAL EXPENSES. THE CASE LAWS CITED BY THE ASSESSEE ARE NOT APPLICABLE AS THE EXPENSES DIRECTLY RELATED TO BONUS SHARE AS HELD BY THE HONBLE APEX COURT AS REVENUE EXPENDITURE. HOWEVER, THE NATURE OF PAYMENT I.E. PA YMENT TO ROC FOR INCREASE OF SHARE CAPITAL IS CAPITAL EXPENDITURE. SECTION 35D O F THE ACT IS ALSO NOT APPLICABLE IN THE CASE OF THE ASSESSEE AS IT PERTAINED TO EXPE NDITURE INCURRED BEFORE COMMENCING OF THE BUSINESS, IT DOES NOT COVER THE R OC FEES. THUS, WE UPHOLD THE ORDER OF THE LEARNED CIT(A). RESULTANTLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 11. GROUND NO.3 OF THE APPEAL IS AGAINST CONFIRMATI ON OF DISALLOWANCE OF RS.19,16,049/- OUT OF BUSINESS DEVELOPMENT EXPENSES . THE AO OBSERVED THAT THE ASSESSEE HAD DEBITED RS.19,16,049/- UNDER THE H EAD BUSINESS DEVELOPMENT EXPENSES IN THE PROFIT & LOSS ACCOUNT. THE LEARNED AO GAVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND CONS IDERED THE REPLY FURNISHED BY THE ASSESSEE ON 05-12-2008. THE LEARNED AO FOUND TH AT THE ASSESSEE HAD FAILED TO FURNISH THE DETAILS OF EXPENSES AND ITS RELATION WITH THE BUSINESS ACTIVITIES. THE ASSESSEE DID NOT FURNISH ANY DETAILS OF THE TRAININ G ACTIVITIES AT LONDON, FOR WHOM IT WAS AVAILING SUCH FACILITIES WAS ALSO NOT FURNIS HED. MOREOVER, THE PURPOSE OF TRAINING AND ITS NEXUS OF BUSINESS OF THE ASSESSEE COMPANY WERE NOT ESTABLISHED. THE EXPENSES WERE INCURRED BY THE DIRE CTOR WHICH WAS NOT RELATED TO EARNING OF INCOME. THUS, HE ADDED RS.19,16,049/- TO THE INCOME OF THE IT A NO.3235/AHD/2010 (AY: 2006-07) ASIAN MILLS PVT. LTD. VS DCIT, CIR-1, AHMEDABAD 7 ASSESSEE. AGGRIEVED BY THE ORDER OF THE LEARNED AO , THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) WHO CONF IRMED THE ADDITION BY OBSERVING AS UNDER IN PARA 5.3 OF HIS ORDER:- 5.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSES SMENT ORDER AND APPELLANTS SUBMISSION. APPELLANT DID NOT SUBMIT DETAILS OF THE EXPENSES CLAIMED IN THE NAME OF BUSINESS DEVELOPMEN T EXPENSES HENCE ASSESSING OFFICER DISALLOWED THE SAM E. DURING APPEAL THESE EXPENSES WERE CLAIMED TO HAVE BEEN INC URRED ON THE FOREIGN STUDY OF SON OF A DIRECTOR. WHY THE DET AILS OF EXPENSES AND THE CLAIM THAT THESE RELATE TO EDUCATI ON EXPENSES OF DIRECTORS SON WERE NOT SUBMITTED TO THE ASSESSING OFFICER IS NOT EXPLAINED . IN THIS BACKGROUND THE EXPENSES CLAIMED IN THE NAME OF BUSINESS DEVELOPMENT ARE FOREIGN STU DY EXPENSES OF THE SON OF A DIRECTOR. THE SON IS NOT AN EMPLOYEE O F THE COMPANY AND THE SAID FOREIGN STUDY EXPENSES ARE THE PERSONAL EX PENSES OF THE DIRECTOR. EDUCATION AND STUDY EXPENSES FOR CHILDREN ARE THE RESPONSIBILITY OF PARENTS . DIRECTOR OF THE APPELLANT COMPANY WAS SUPPOSED TO SPEND FOR THE EDUCATION OF HIS SON. SIN CE THE SAID DIRECTOR CONTROLS THE AFFAIRS OF THE COMPANY, HE HA S CLAIMED THE STUDY EXPENSES OF HIS SON OUT OF APPELLANTS BUSINE SS INCOME. BY NO STRETCH OF IMAGINATION SUCH PERSONAL EXPENSES OF TH E DIRECTORS CAN BECOME BUSINESS DEVELOPMENT EXPENSE O F THE COMPANY. IT IS VERY FARFETCHED TO CLAIM THAT THE DIRECTORS SON WILL JOIN COMPANY AND RENDER PROFESSIONAL SERVICES WITHO UT CHARGING SALARY. IT IS NOT IN DISPUTE THAT THE DIRECTORS SON IS NOT AN EMPLOYEE OF THE APPELLANT COMPANY AND THERE WAS NO BUSINESS PURPOSE FOR SPENDING SUCH HUGE SUM ON THE FAMILY MEMBER OF A DIRECTOR . SINCE APPELLANT COULD NOT ESTABLISH ANY BUSINESS PURPOSE OUT OF SUCH PERSONAL EXPENSE OF TH E DIRECTOR, CLAIMING SUCH EXPENSE IN THE GARB OF BUSINESS DEVEL OPMENT EXPENSES IS MISREPRESENTING THE FACTS BEFORE IT AUTHORITIES. SINCE THE SAID EXPENSE IS NOT FOR ANY BUSINESS PURP OSE AND THEREFORE NOT ALLOWABLE AS BUSINESS EXPENSES, THE A DDITION MADE BY THE ASSESSING OFFICER IS CONFIRMED. 12. NOW, THE ASSESSEE IS IN APPEAL BEFORE US. IT IS ARGUED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE COMPANY WAS AUDITED AND THE AUDITOR HAD NOT POINTED OUT ANY DISCREPANCY WHICH IMPLY THAT THE BOOKS OF A CCOUNT WAS KEPT AND MAINTAINED IN ACCORDANCE WITH NORMALLY ACCEPTED ACC OUNTING PRACTICE AND POLICY. THE EXPENSES INCURRED UNDER THE HEAD BUSINESS DEVE LOPMENT EXPENSES WERE IT A NO.3235/AHD/2010 (AY: 2006-07) ASIAN MILLS PVT. LTD. VS DCIT, CIR-1, AHMEDABAD 8 IN RELATION TO STUDY OF MR. ADITYA AGARWAL WHICH W AS AUTHORIZED BY THE COMPANY AND, THEREFORE, SAME ARE ALLOWABLE BUSINESS EXPENSE S. IT IS FURTHER ARGUED THAT MR. ADITYA AGARWAL WAS SUPPOSED TO RENDER HIS SERVI CES TO THE ASSESSEE COMPANY. AS PER CONDITION, HE HAD SERVED THE COMPAN Y WITHOUT ANY REMUNERATION FOR THE YEAR 2008-09. THE COMPANY HAD BENEFITED FROM THIS EXPENSE WHICH WAS INCURRED DURING HIS STAY IN UK. H E FURTHER RELIED IN THE CASE OF CIT VS U. P. ASBESTOS LTD. WHEREIN IT WAS HELD BY T HE HONBLE ALLAHABAD HIGH COURT THAT IN PUBLIC LIMITED COMPANY BEING A LEGAL ENTITY, THE COMPANY CAN TAKE A DECISION TO SECURE ITS INTEREST BY SENDING ANY ONE ON CONTRACT BASIS FOR HIGHER EDUCATION AND TRAINING TO ABROAD AND AFTER COMPLETI ON OF TRAINING RETURN BACK TO THE COUNTRY AND THE PERSON MAY JOIN THE COMPANY ITS ELF. THERE SHOULD BE DIVIDING LINE BETWEEN PERSONAL INTEREST AND THE INTEREST OF THE ASSESSEE COMPANY. IF THE EXPENDITURE IS INCURRED ON A SON OF THE DIRECTOR ON CONTRACTUAL BASIS THAT AFTER COMPLETING TRAINING HE WILL JOIN THE COMPANY AND GI VE BENEFIT OF TRAINING AND HIGHER EDUCATION, THUS IT IS ALLOWABLE EXPENDITURE. HE FURTHER RELIED IN THE CASE OF CIT & ANR. VS RAS INFORMATION TECHNOLOGIES (P) LTD. , (KAR), 238 CTR 76 WHEREIN EXPENDITURE ON FOREIGN EXPENSES OF THE MANA GING DIRECTORS SON HELD ALLOWABLE. 13. AT THE OUTSET, THE LEARNED DR RELIED UPON THE O RDER OF THE LEARNED CIT(A) AND PRAYED TO CONFIRM THE ORDER OF THE LEARNED CIT( A). 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS ON RECORD. THE ASSESSEE INCURRED THE EXPENSES ON TRAINING OF M R. ADITYA AGARWAL, SON OF THE DIRECTOR OF THE ASSESSEE COMPANY. THE ASSESSEE HAD ONLY ARGUED THE CASE ON THE BASIS OF LEGAL ASPECT BUT DETAILS OF BUSINES S DEVELOPMENT ACCOUNT SHOWS THAT THE ASSESSEE HAD PAID FEES OF UK UNIVERSITY OF SOUNTHAMTION, TRAVELING EXPENSES AND CREDIT CARD EXPENSES. THE SON OF THE D IRECTOR WAS NOT EMPLOYEE OF THE ASSESSEE COMPANY AND THE SAID FOREIGN STAY EXPE NSES WERE PERSONAL EXPENSES. THE ASSESSEE COULD NOT ESTABLISH ANY BUSI NESS PURPOSES OUT OF SUCH PERSONAL EXPENSES OF THE DIRECTOR. THE BURDEN OF PR OOF LIES UPON THE ASSESSEE THAT THE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIV ELY FOR THE PURPOSE OF THE IT A NO.3235/AHD/2010 (AY: 2006-07) ASIAN MILLS PVT. LTD. VS DCIT, CIR-1, AHMEDABAD 9 ASSESSEES BUSINESS. THE HONBLE KARNATAKA HIGH CO URT IN THE CASE OF MAC EXPLOTEE P. LTD. VS CIT (KAR), 286 ITR 378, THE HON BLE MADRAS HIGH COURT IN THE CASE OF SILICON (INDIA) LTD. VS DCIT (MAD), 295 ITR 422, THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ECHJAY FORGINGS LTD. VS A CIT (BOM), 328 ITR 286 AND THE HONBLE DELHI HIGH COURT IN THE CASE OF ENKAY ( INDIA) RUBBER CO. PVT. LTD. VS CIT(DEL), 263 ITR 521 HELD THAT EDUCATION EXPENSES OF A SON OF THE DIRECTOR WAS INCURRED FOR PERSONAL GAIN AND NOT FOR THE BUSINESS PURPOSE. KEEPING IN VIEW OF THE FACTUAL POSITION AS WELL AS LEGAL POSITION ON T HIS ISSUE, WE UPHOLD THE ORDER OF THE LEARNED CIT(A) AND DISMISS THIS GROUND OF APPEA L OF THE ASSESSEE. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23-08-2013 SD/- SD/- (D. K. TYAGI) JUDICIAL MEMBER (T. R. MEENA) ACCOUNTANT MEMBER LAKSHMIKANT LAKSHMIKANT LAKSHMIKANT LAKSHMIKANTA AA A DEKA/ DEKA/ DEKA/ DEKA/- -- - COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 19-08-12/20-08-13 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 20-08-13 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: