ITO, Ward - 12(2), Kolkata, Kolkata V. M/s. Premier Nirman Pvt. Ltd., Kolkata

ITA 546/KOL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9307 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2004-2005
• Appeal Filed On: 16-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K PRAMANIK
• Section: 143(3); 142(1); 37

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA () BEFORE , , , , , /AND , . ! . '# ) [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE SRI C. D. RAO, AM] $ $ $ $ / I.T.A NO. 546/KOL/2010 %& '( %& '( %& '( %& '(/ // / ASSESSMENT YEAR : 2004-05 INCOME-TAX OFFICER, WD-12(2),KOLKATA. -VS- M/S. P REMIER NIRMAN PVT. LTD. (PA NO.AABCP 8645 C) ( *+ /APPELLANT ) (,-*+/ RESPONDENT ) FOR THE APPELLANT: SRI A. K. PRAMANIK FOR THE RESPONDENT: SRI RAVI TULSIYAN '. / ORDER PER MAHAVIR SINGH, JM ( , , , , ) THIS APPEAL FILED BY REVENUE IS ARISING OUT OF THE ORDER OF CIT(A)-XXIV, KOLKATA IN APPEAL NO. 483/CIT(A)-XXIV/12(2)/08-09 ORDER DAT ED 16.12.2009. THE ASSESSMENT WAS FRAMED BY ITO, WD-12(2), KOLKATA U/S. 143(3) OF THE I. T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2004- 05 VIDE ORDER DATED 29.12.2006. 2. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE OF HIGHER STUDIES EXPENSE S MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT, IN REGARD TO MANAGEMENT STUDIES OF SON OF DIRECTOR OF ASSESSEE COMPANY. FO R THIS, THE REVENUE HAS RAISED THE FOLLOWING TWO GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE U/S. 40A(2)(B) OF THE I . T. ACT THOUGH THE SON OF THE DIRECTOR HAS NOT FULFILLED THE CONTRACT OF MEMORAN DUM OF UNDERSTANDING DATED 10.05.2001. 2 2. THE EXPENDITURE INCURRED BY THE ASSESSEE COMPAN Y FOR THE HIGHER EDUCATION OF THE SON OF ONE OF THE DIRECTORS OF THE COMPANY CANNOT BE CONSIDERED AS AN EXPENDITURE WHOLLY AND EXCLUSIVELY INCURRED FOR T HE BUSINESS PURPOSES OF THE ASSESSEE INSPITE OF THE AGREEMENT BETWEEN THE COMP ANY AND THE SON OF THE DIRECTOR AS THE COMPANY AN RECRUIT PERSONS HAVING SUCH QUALIFICATION. 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 1.11.2004 AND SAME WAS PROCESSE D U/S. 143(1) OF THE ACT. SUBSEQUENTLY, NOTICES U/S. 143(2) AND 142(1) WERE I SSUED. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRANSPORT CONTRACTOR, DI STRIBUTOR OF RELIANCE INDIA PREPAID CELLULAR SERVICE AND C&F AGENT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER NOTICED THAT ASSESSEE COMPANY HAS DEBITED A SUM OF RS.10,24,768/- ON ACCOUNT OF TRAINING EXPENSES OF SON OF ONE OF TH E DIRECTORS OF ASSESSEE COMPANY I.E. SRI ABHISEKH AGARWAL SON OF SRI RAMESH CHANDRA AGAR WAL. THE ASSESSING OFFICER REQUIRED ASSESSEE, AS TO WHY TRAINING EXPENSES INCU RRED ON THE SON OF THE DIRECTOR OF THE COMPANY BE NOT DISALLOWED AS THE ASSESSEE COMPANY H AS NOT GAINED ANY BENEFIT BY INCURRING SUCH TRAINING EXPENSES. THE ASSESSEE CONT ENDED BEFORE ASSESSING OFFICER THAT SRI ABHISEKH AGARWAL SON OF SRI RAMESH CHANDRA AGAR WAL HAS SECURED ADMISSION IN PURDUE UNIVERSITY FOR A COURSE ON MANAGEMENT AND TH E COMPANY BY SPONSORING SRI ABHISEKH AGARWAL FOR HIGHER STUDIES AND BY PROVIDI NG FINANCIAL RESOURCES, THE COMPANY WILL BE BENEFITED IN FUTURE AND WILL MAKE GROWTH IN TURNOVER AND PROFIT DUE TO THE EFFORTS OF SRI ABHISEKH AGARWAL WHO MAY BE ENGA GED WITH THE SERVICES OF THE COMPANY AFTER COMPLETION OF HIS STUDIES. HOWEVER, T HE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT MADE DISALLOWANCE OF THIS TRAINING EXPENSES OF SON OF ONE OF THE DIRECTORS OF THE ASS ESSEE COMPANY. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) AND HE ALLOWED T HE CLAIM OF THE ASSESSEE BY GIVING FOLLOWING FINDING IN PARA 3.3 OF HIS APPELLATE ORDE R : DURING THE COURSE OF APPELLATE PROCEEDINGS THE AO WAS ALSO ASKED TO ENQUIRE ABOUT THE DURATION OF THE COURSE AND PRESENT STAT US OF THE EMPLOYMENT OF SHRI ABHISHEK AGARWAL. REPORT WAS RECEIVED FROM THE AO BY WAY OF HIS LETTER NO.12(2)/PREMIER/09-10/1229 DATED 27.11.09. ACCORD ING TO THIS REPORT SHRI ABHISHEK AGARWAL HAD JOINED A 3-YEAR COURSE CALLED MASTER OF SCIENCE IN 3 ACCOUNTING AT PURDUE UNIVERSITY. AFTER COMPLETION OF THE SAID COURSE SHRI ABHISHEK AGARWAL CONTINUED TO REMAIN IN USA FOR CO MPLETING A 2-YEAR MBA COURSE WHICH WAS BEING DONE BY HIM AT HIS OWN COST . THE COURSE WOULD BE COMPLETING IN DECEMBER, 2009 AND SHRI ABHISHEK AG ARWAL WILL BE RETURNING TO INDIA IN DECEMBER 2009. PRESENTLY HE WAS DOING PA RT-TIME JOB IN USA FOR FINANCING HIS MBA COURSE. FROM THE ABOVE IT IS SEEN THAT SHRI ABHISHEK AGARW AL HAS NOT YET RETURNED TO INDIA. THE EXPENDITURE OF RS.10,24,768/- WAS INCU RRED ON HIS EDUCATION IN PURDUE UNIVERSITY. AS PER THE AGREEMENT ON HIS RET URN TO INDIA HE WILL BE WORKING FOR THE APPELLANT COMPANY. AS CONTENDED BY THE APPELLANT PROVISIONS OF SECTION 40A(2)(B) ARE NOT ATTRACTED IN THIS CASE AS NO MATERIAL HAVE BEEN BROUGHT ON RECORD TO SHOW THAT THE EXPENDITURE OF RS. 10,2 4,768/- WAS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALU E OF THE SERVICES OR FACILITIES OR GOODS FOR WHICH THE PAYMENT WAS MADE. FURTHER AS CONTENDED BY THE APPELLANT THE EXPENDITURE IS INCURRED ON THE TRAIN ING EXPENSES OF SHRI ABHISHEK AGARWAL WHO WAS APPOINTED AS A MANAGEMENT TRAINED W.E.F.,10.05.2001. ON SIMILAR FACTS IN THE CASE OF THE M/S ARCUTTIPORE T EA CO. LTD VS ACIT THE ITAT, D BENCH KOLKATA IN ITS ORDER IN ITA NO. 65/KOL/2 003 DATED 4.9.03 HAS HELD THAT THE EXPENDITURE INCURRED BY THE APPELLANT-COMPANY ON HIGHER STUDIES OF EMPLOYEE IS TO BE ALLOWED AS A BUSINESS EXPENDITU RE U/S 37 OF THE ACT. IN VIEW OF THE FACTS OF THE CASE AND THE ABOVE DECISION OF TH E JURISDICTIONAL ITAT AND THE JURISDICTIONAL HIGH COURT, THE ADDITION OF RS 10, 24,768/- IS DIRECTED TO BE DELETED. THE APPELLANT GETS RELIEF OF RS.10,24,768/-. THESE GROUNDS OF THE APPELLANT ARE THEREFORE ALLOWED. AGGRIEVED, NOW REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE ASSESSMENT ORDER THAT THE A SSESSING OFFICER HAS NO WHERE GIVEN A FINDING THAT THE EXPENSES INCURRED ARE EXCESSIVE OR UNREASONABLE AS IS THE MANDATE OF THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. TH E ASSESSEE COMPANY ALSO FILED A CERTIFICATE THAT SRI ABHISEKH AGARWAL HAS JOINED TH IS COMPANY AFTER COMPLETING HIGHER STUDIES WITH THE ASSESSEE AND HE IS ON REGULAR ROST ER OF THE ASSESSEE AND ALSO PROVIDING SERVICES. THE ASSESSING OFFICER HAS NOT INVOKED TH E PROVISIONS OF SECTION 37 OR 36, AS THE CASE MAY BE, FOR MAKING THIS DISALLOWANCE. THER E ARE NO FINDINGS BY THE REVENUE THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS NOT GEN UINE OR IT IS BOGUS. ONCE EXPENDITURE IS NOT DISALLOWED BY INVOKING THE PROVI SIONS OF SECTION 37 OR 36 OF THE ACT, THE ASSESSING OFFICER HAS TO RECORD A FINDING THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS EXCESSIVE OR UNREASONABLE FOR INVOKING THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. THIS IS NOT THE CASE HERE AND ACCORDIN GLY, WE ARE OF THE VIEW THAT CIT(A) 4 HAS RIGHTLY DELETED THE ADDITION AND WE CONFIRM THE SAME. THIS ISSUE OF THE REVENUES APPEAL IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. 6. ORDER IS PRONOUNCED IN THE OPEN COURT ON 09-03-2 011. SD/- SD/- . ! . , '# , (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( !# !# !# !#) )) ) DATED 9 TH DAY OF MARCH, 2011 /0 %12 3 JD.(SR.P.S.) '. 4 ,5 6'5'7- COPY OF THE ORDER FORWARDED TO: 1 . *+ / APPELLANT ITO, WARD-12(2), KOLKATA. 2 ,-*+ / RESPONDENT, M/S. PREMIER NIRMAN PVT. LTD., 11, SA TYEN DUTTA ROAD, KOLKATA-29. 3 . .% / THE CIT(A), KOLKATA 4. .% ( )/ CIT, KOLKATA. 5 . >? ,% / DR, KOLKATA BENCHES, KOLKATA -5 ,/ TRUE COPY, '.%@/ BY ORDER, 2 /ASSTT. REGISTRAR .