Appeal details
Counselvise Citation
[2018] 122 COUNSELVISE.COM (IT) 3934 (ITAT-CHANDIGARH)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
5 month(s) 8 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
03-10-2018
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Assessment Year
2013-2014
Appeal Filed On
25-04-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCHES A, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER AND DR. B.R.R.KUMAR, ACCOUNTANT MEMBER ITA NO. 526/CHD/2018 ASSESSMENT YEAR: 2013-14 M/S BANSAL ALLOYS & METALS P.LTD., VS THE ACIT, G.T.ROAD, MANDI GOBINDGARH. CIRCLE, PAN : AACB7472L MANDI GOBINDGARH. (A PPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI KUMAR & MS. KANIKA GUPTA, C.A. RESPONDENT BY : SHRI YOGINDER MITTAL,ADDL. CIT DATE OF HEARING : 12.07.2018 DATE OF PRONOUNCEMENT : 03.10.2018 ORDER PER DIVA SINGH THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE ASS AILING THE CORRECTNESS OF THE ORDER 05.03.2018 OF CIT(A)-3 LUDHIANA PERTAINING TO 2013-14 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS : 1. THAT ORDER PASSED U/S 250(6) OF THE INCOME TAX A CT, 1961 BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-S, LUDHIANA IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS SHE WAS NOT JUSTIFIED TO UPHOLD THE ACTI ON OF THE LD. ASSESSING OFFICER IN MAKING DISALLOWANCE OF RS. 1 0,89,016/- ON ACCOUNT OF EDUCATION SPONSORSHIP EXPENSES. 2. THAT SHE WAS FURTHER NOT JUSTIFIED TO UPHOLD THE ACTION OF THE LD. ASSESSING OFFICER IN MAKING DISALLOWANCE OF RS. 2,69,050/- OUT OF FOR EIGN TRAVELLING. 2. THE LD. AR INVITING ATTENTION TO THE WRITTEN SUBMISSIONS EXTRACTED IN PARA 4.1 BY THE CIT(A) SUBMITTED THAT THE ISSUE HAS BE EN DECIDED WITHOUT REFERRING TO RELEVANT FACTS. READING FROM PARA 4.2 OF THE ORDER, IT WAS HIS SUBMISSION THAT THE CIT(A) HAS IGNORED THE FACT TH AT IN SUPPORT OF THE EXPENDITURE COPY OF THE BOARD RESOLUTION PASSED IN THE MEETING HELD ON 15.03.2010 WAS AVAILABLE AND THE SPECIFIC COURSE FOR WHICH THE GRAND-SON OF THE DIRECTOR OF THE ASSESSEE'S COMPANY HA D BEEN SENT, HAD ALSO BEEN MENTIONED THEREIN. APART FROM THAT, SIMILAR EXPE NDITURE, AMOUNTING TO ALMOST RS. 10 LACS ODD FOR THE EDUCATION OF T HE SAME RELATIVE OF THE DIRECTOR, IT WAS SUBMITTED, HAS BEEN ALLOWED BY THE TAX AUTHORITIES IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR . IT WAS ALSO HIS SUBMISSION THAT IN FACT ON HIS RETURN, THE SAID BOY HAS ASSISTED AND ITA 526/CHD/2018 A.Y. 2013-14 PAGE 2 OF 4 CONTRIBUTED TO THE FUNCTIONING OF THE ASSESSEE'S BUSINES S. IN SUPPORT OF THE SAID CLAIM, PROOF OF FACTORY ATTENDANCE REGISTER ETC. FOR APRIL, 2013 AND MARCH, 2014 WAS MADE AVAILABLE TO THE AO ALSO. RELEV ANT FACTS AT PAPER BOOK PAGES 1 TO 16 WERE RELIED UPON. RELIANCE WAS ALSO PLACED UPON CIT-I VS NAIDUNIA NEWS AND NETWORKING (P) LTD. (2012) 23 TAXMANN.COM 422 (M.P.) AND KOSTUB INVESTMENT LTD. VS CIT (2014) 365 ITR 436 (DEL). JUSTIFICATION FOR THE EXPENSES HAS BEEN RELIED UPON ON THE FOLLOWING REASONING : CONSIDERING THE ABOVE SUBMISSIONS AND JUDICIAL PRON OUNCEMENTS IN ENTIRETY, IT IS SUBMITTED THAT, THE COURSE OF ENTREPRENEURSHIP AND INNOVATION WHICH APPELLANT PURSUED WOULD DIRECTLY BENEFIT THE APPELLANT'S BUSINESS, SI NCE INNOVATIVE SKILLS OBTAINED WOULD YIELD A COMPETITIVE ADVANTAGE AND IT WOULD HELP AN ORGANIZATION TO GROW AND REACH, AND, THUS SHOULD BE ALLOWABLE AS A DEDUCTIBLE EXPEN SEWHILE COMPUTATION OF INCOME UNDER THE HEAD 'INCOME FROM BUSINESS OR PROFESSION '. MOREOVER, A BOARD RESOLUTION [A COPY ENCLOSED] DATE D 15.03.2010 WAS PASSED BY THE APPELLANT, WHEREIN, IT HAS BEEN RESOLVED THAT: 'THE COMPANY WILL BEAR ALL THE EXPENSES INCLUDING T UITION AND FEES, LIVING EXPENSES AND ALL OTHER REQUIRED EXPENSES AND ALL OTHER REQUI RED EXPENSES IN U.S.A. AFTER COMPLETION OF HIS STUDY, HE WILL SERVE THE COMPANY AT LEAST FOR A PERIOD OF 2 YEARS.' FURTHERMORE. SH. SUMIT BANSAL, A SON OF A DIRECTOR SH. VIIAV KUMAR BANSAL IS WORKING WITH THE APPELLANT SINCE APRIL, 2013. A PRO OF OF FACTORY ATTENDANCE REGISTER AND MONTHLY SALARY/WAGES PAYMENT REGISTER FOR THE M ONTH OF APRIL, 2013 AND MARCH, 2014 RESPECTIVELY IS ENCLOSED, SUBSTANTIATING THE A BOVE FACT. 3. THE LD. SR.DR, ON THE OTHER HAND, VEHEMENTLY OPPOSING THE SAID PRAYER SOUGHT TO PLACE RELIANCE UPON THE DECISION OF THE HON'BLE MUMBAI HIGH COURT IN THE CASE OF SAI NATH MOTORS. COPY OF THE SAID JUDGEMENT THOUGH WITHOUT CITATION WAS FILED IN THE COURT, IT WAS HIS SUBMISSION T HAT WITHOUT MENTIONING THE SPECIFIC QUALIFICATION; THE COURSE OR I TS UTILITY IN ASSESSEE'S BUSINESS, THE EDUCATION EXPENDITURE OF THE D IRECTORS GRAND- SON CANNOT BE JUSTIFIED BY MERELY FILING THE BOARDS RESOLU TION. IT WAS HIS SUBMISSION THAT THE ASSESSEE NEEDS TO JUSTIFY THAT THE EXPENDITURE WAS WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSESS EE WHICH IS THE REQUIREMENT OF THE ACT. HEAVY RELIANCE WAS PLACED ON TH E FINDING OF THE CIT(A). THE SAME IS EXTRACTED HEREUNDER FOR READY REFERENCE : 4.2 I HAVE GONE THROUGH THE RIVAL SUBMISSION . A FTER CAREFUL CONSIDERATION OF THE FACTS I AM NOT INCLINED TO AGREE WITH THE CONTENTIO N OF THE APPELLANT. THIS IS THE CASE WHEREIN THE ASSESSING OFFICER IN THE COURSE OF ASSE SSMENT PROCEEDINGS INTEREST THAT THE APPELLANT COMPANY HAS INCURRED EXPENDITURE OF RS. 1 0,39,016/- UNDER THE HEAD OF EDUCATION SPONSORSHIP EXPENSES. WHEN ENQUIRED THE A PPELLANT COMPANY EXPLAINED THAT THE SAID EXPENSES WERE INCURRED TO SPONSOR THE FOREIGN STUDY OF SH. SUMIT BANSAL S/O SH. VIJAY KUMAR BANSAL AND GRANDSON OF SH. PREM CHAND BANSAL, DIRECTOR AND CHAIRMAN OF THE COMPANY. AT THE TIME OF ASSESSM ENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE APPELLANT COMPANY HAS NOT MENTIONED THE NAME OF THE COURSE UNDERTAKEN BY SHRI SUMIT BANSAL AND ITS RELE VANCE FOR THE BUSINESS OF APPELLANT COMPANY. I ALSO FIND IN AGREEMENT WITH TH E REASONING OF THE ASSESSING ITA 526/CHD/2018 A.Y. 2013-14 PAGE 3 OF 4 OFFICER THAT IN THE PAST ALSO THE APPELLANT COMPANY HAS NOT SPONSORED ANY OF OTHER STATES STUDENT FOR PURSUING HIGHER EDUCATION ABROAD . IN VIEW OF THE FACT AND THE DECISIONS RELIED UPON BY THE ASSESSING OFFICER DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS I AM IN COMPLETE AGREEMENT WITH THE VIE W OF THE ASSESSING OFFICER AS THE AO HELD THAT THESE EXPENSES WERE INCURRED UNDER THE HEAD OF EDUCATION SPONSORSHIP BUT ARE OF PURELY OF PERSONAL EXPENDITURE. THE ASSE SSEE HAS ALSO, FAILED TO PROVE THAT THE EXPENDITURE WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE RELIANCE IS PLACED ON THE DECISION IN THE CASE OF NATCO EXPO RTS PRIVATE LIMITED VERSUS CIT 345 ITR 188 BY HONOURABLE DELHI HIGH COURT. WHEREIN THE HONOURABLE HIGH COURT HAS HELD THAT EXPENDITURE UNDER SECTION 37 IS ADMIS SIBLE ONLY IF THE SAME IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. HERE IN THIS CASE THE APPELLANT THE APPELLANT COMPANY HAS FAILED TO DISCHARGE ITS O NUS TO AN ESTABLISHED THAT THE EXPENDITURE HAS BEEN INCURRED EXCLUSIVELY AND WHOLL Y FOR THE PURPOSE OF BUSINESS. THEREFORE, IT IS HELD THAT THE DISALLOWANCE OF EXPE NDITURE OF RS. 10,39,016/- INCURRED ON THE HIGHER STUDIES OF SH. SUMIT BANSAL U/S 37(1) OF THE INCOME TAX ACT,1961 HAS RIGHTLY BEEN MADE BY THE AO AND ACCORDINGLY SUSTAINED. THIS GROUND OF APPEAL IS DISMISSED. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS SEEN THAT IN SUPPORT OF ITS CLAIM THE ASSES SEE IS FOUND TO HAVE ADVANCED THE FOLLOWING WRITTEN SUBMISSIONS BEFORE THE CIT(A) WHICH ARE FOUND EXTRACTED AT PAGES 2 TO 4 OF HIS ORDER : IN THIS CONNECTION, IT IS RESPECTFULLY SUBMITTED T HAT AN EXPENSE AMOUNTING RS. 10,39,016/- WAS INCURRED ON FOREIGN EDUCATION OF SH . SUMIT BANSAL, A SON OF A DIRECTOR SH. VIJAY KUMAR BANSAL. HOWEVER, THIS SHALL BE ALLO WABLE AS A BUSINESS EXPENDITURE U/S 37(1) OF THE INCOME-TAX ACT, 1961INCURRED FOR T HE PURPOSES OF A BUSINESS WHILE COMPUTING INCOME UNDER THE HEAD 'INCOME, FROM BUSIN ESS OR PROFESSION '.SH. SUMIT BANSAL, A SON OF A DIRECTOR OF SH. VIJAV KUMAR BANS AL PURSUED POST GRADUATE DIPLOMA IN MANAGEMENT IN 'PURDUE UNIVERSITY', AND, AWARDED THE CERTIFICATED COPY OF A CERTIFICATE IS ENCLOSED] IN ENTREPRENEURSHIP AND INNOVATION AT WEST LAFAYETTE IN THE STATE OF INDIANA IN MANAGE MENT IN RECOGNITION OF THE FULFILLMENT OF THE REQUIREMENTS OF THE CERTIFICATE PROGRAM IN M ANAGEMENT. THE SKILLS IN ENTREPRENEURSHIP, AND, TO UNDERTAKE NEW INNOVATION WERE LEARNT THROUGH THE SAID COURSE, SO THAT SH. SUMIT BANSAL COULD APPLY THE SA ME IN CREATING VALUE OF THE ORGANIZATION. 4.1 ON A READING OF THE FINDING OF THE CIT(A) WHICH HAS BEEN EXTRACTED IN AN EARLIER PART OF THIS ORDER, IT IS EVIDENT THAT THESE SUBMISSIONS ON FACTS HAVE NOT BEEN ADDRESSED BY THE CIT(A). THUS, WE FIND THAT THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER WHEREIN ON FAC TS THE SUBMISSIONS ARE NOT ADDRESSED CANNOT BE UPHELD. WHILE SO HOLDING, WE CONCUR WITH THE SUBMISSIONS OF THE LD. SR.DR NAMELY THAT A LL EDUCATIONAL EXPENSES OF THE CHILDREN OR GRAND CHILDREN OF THE DIRECTOR S OF THE COMPANIES WHO ULTIMATELY MAY ALSO JOIN THE FAMILY BUSINESS BY ITSELF, CANNOT BE SAID TO BE AN EXPENDITURE WHICH CAN BE SAID T O HAVE BEEN INCURRED WHOLLY OR EXCLUSIVELY FOR THE BUSINESS PURPOSES OF THE ASSESSEE AS THE EXPENSES FOR EDUCATING THE CHILDREN AND GRAND CH ILDREN OF THE DIRECTORS CAN VERY WELL BE PERSONAL EXPENSES OF THE PARE NTS ETC. WE ARE CONSCIOUS OF THE DECISIONS WHEREIN SERVING EMPLOYEES OF THE ASSESSEE COMPANIES WHO EVEN IF RELATED HAVE BEEN SPONSORED FOR HIG HER EDUCATION ITA 526/CHD/2018 A.Y. 2013-14 PAGE 4 OF 4 ON THE UNDERTAKING THAT ON THEIR RETURN, THEY SHALL JOIN THE SAID CONCERN. SIMILARLY THERE ARE DECISIONS WHEREIN LOANS MAY HAVE BEEN ADVANCED TO THE CHILDREN OF THE EMPLOYEES/DIRECTORS, SENT FOR HIGHER ED UCATION WITH AN UNDERTAKING TO RETURN AND REJOIN THE ASSESSEE COMP ANY ETC. WHERE THE LOAN ADVANCED IS DEDUCTED FROM THE SALARY PAID ETC., THU S THERE CAN BE NO BLANKET DECISION THAT THE HIGHER EDUCATION EXPENSES OF THE DIRECTORS CHILDREN NECESSARILY ARE BUSINESS EXPENSES. SIMILARLY THE ARGUMENT THAT SIMILAR EXPENDITURE HAS BEEN ALLOWED FOR THE VERY SAME REL ATIVE IN THE EARLIER YEAR WHICH THOUGH NOT DEMONSTRATED ON FACTS BUT EVEN IF IT IS CORRECT THAT NO DISALLOWANCE WAS MADE IN THE EARLIER YEAR BY ITSELF CANNOT LAY DOWN A PRECEDENT TO BE FOLLOWED THAT THE EXPENSES A LLOWED BY OVERSIGHT NECESSARILY BE ALLOWED IN THE SUBSEQUENT YEARS . ACCORDINGLY, THE IMPUGNED ORDER IS SET ASIDE BACK TO THE FILE OF THE CI T(A) WITH A DIRECTION TO ADDRESS THE CORRECT FACTS AND PASS A SPEA KING ORDER IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REASONAB LE OPPORTUNITY OF BEING HEARD. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STAT ISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 03.10. 2018. SD/- SD/- ( DR.B.R.R.KUMAR) ( DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSTT. REGISTRAR ITAT,CHANDIGARH.
