NAINAS APPAREL P. LTD, MUMBAI V. ACIT 5(1), MUMBAI

ITA 7826/MUM/2010

• Counselvise Citation: 782619914 RSA 2010
• Duration Of Justice: 4 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 12-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASGHAR JAIN VP
• Assessee Lawyers: MAYUR KISHNAWALA KEYUR DHAMI
• Keywords: Business expenditure
• Section: 144

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, M UMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND SANJAY GARG, (JM) . . , , ./I.T.A. NO.7826/MUM/2010 ( / ASSESSMENT YEAR : 2007-08) NAINAS APPAREL PVT LTD, 13/14, NEW MAJESTIC SHOPPING CENTRE, 144 J S S ROAD, GIRGAON, MUMBAI-400004 / VS. ASST.COMMISSIONER OF INCOME TAX- 5(1), AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 ( / APPELLANT) .. ( / RESPONDENT) ./ ./PAN/GIR NO. : AABCN1197B ! / ASSESSEE BY SHRI MAYUR KISHNAWALA/ KEYUR DHAMI ' ! / REVENUE BY SHRI ASGHAR JAIN V P # $ ' %& / DATE OF HEARING : 15.1.2015 '( ' %& /DATE OF PRONOUNCEMENT : 13..2.2015 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 01- 09-2010 PASSED BY LD CIT(A)-9, MUMBAI AND IT RELATE S TO THE ASSESSMENT YEAR 2007-08. THE ASSESSEE IS AGGRIEVED BY THE DEC ISION OF LD CIT(A) IN CONFIRMING THE DISALLOWANCE OF FOLLOWING EXPENSES:- (A) STAFF WELFARE EXPENSES - RS.3,40,000/- (B) DONATION - RS. 10,000/- 2. THE FIRST ISSUE RELATES TO THE DISALLOWANCE M ADE OUT OF STAFF WELFARE EXPENSES CLAIMED BY THE ASSESSEE. THE AO NOTICED T HAT THE ASSESSEE HAS ITA. NO 7826/MUM/2010 2 PAID A SUM OF RS.3,40,000/- AS FEES TO M/S S.P. JAI N MANAGEMENT SCHOOL ON BEHALF OF ONE OF THE DIRECTORS OF THE ASSESSEE C OMPANY. THE ASSESSEE CLAIMED THE SAME AS EXPENDITURE UNDER THE HEAD STA FF WELFARE EXPENSES. THE AO, HOWEVER, DISALLOWED THE SAID CLAIM AND THE LD CIT(A) ALSO CONFIRMED THE SAME BY HOLDING THAT THE EDUCATION PR OGRAM WOULD ONLY IMPROVE THE PERSONAL SKILL OF THE DIRECTOR AND HENC E THE SAME CANNOT BE CONSIDERED TO HAVE BEEN INCURRED FOR BUSINESS PURPO SES. 3. WE HEARD THE PARTIES ON THIS ISSUE. THE LD A.R SUBMITTED THAT M/S S.P. JAIN MANAGEMENT SCHOOL HAS STARTED A COURSE ON MANAGEMENT EXCLUSIVELY FOR PERSONS CARRYING ON FAMILY BUSINESS . THE ASSESSEE- COMPANY IS ALSO A FAMILY CONTROLLED BUSINESS ENTITY AND HENCE IT HAS ADMITTED ONE OF THE DIRECTORS IN THIS PROGRAMME. H E FURTHER SUBMITTED THAT ONE OF THE CONDITION PRESCRIBED FOR ADMITTING IN THIS COURSE WAS THAT THE CANDIDATE SHOULD BE SPONSORED BY A BUSINESS ENT ITY. THE LD. AR ACCORDINGLY SUBMITTED THAT THE ASSESSEE, BY ADMITTI NG ITS DIRECTOR IN THIS COURSE, HAS OBTAINED BENEFIT DUE TO THE ENRICHMENT OF KNOWLEDGE IN BETTER MANAGEMENT OF FAMILY CONTROLLED BUSINESS ENTITIES. HE FURTHER SUBMITTED THAT THE LD. CIT(A) HAS TAKEN A VIEW THAT THE DIRE CTOR WAS ATTENDING THE CLASS WHOLE TIME, I.E., WITHOUT ATTENDING TO THE BU SINESS OF THE ASSESSEE. THE LD. AR SUBMITTED THAT THE COURSE WAS CONDUCTED ONLY FOR ONE WEEK IN A MONTH AND THE CONCERNED DIRECTOR WAS ATTENDING TO THE BUSINESS FOR REMAINING THREE WEEKS. HE FURTHER SUBMITTED THAT T HE CONCERNED DIRECTOR WAS WORKING WITH THE COMPANY AND DRAWING SALARY FOR THE PAST ONE AND HALF YEARS BEFORE GETTING ADMISSION INTO THE COURSE . ACCORDINGLY, HE ITA. NO 7826/MUM/2010 3 SUBMITTED THE ASSESSEE COMPANY HAS PAID THE FEES ON BUSINESS CONSIDERATIONS AND HENCE, THE LD. CIT(A) WAS NOT RI GHT IN OBSERVING THAT THE EDUCATION PROGRAMME HAS ACTUALLY ENRICHED THE P ERSONAL KNOWLEDGE OF THE DIRECTOR. HE ALSO SUBMITTED THAT THE ASSESSEE H AS ALSO PAID FRINGE BENEFIT TAX ON THE ABOVE SAID PAYMENT. HE SUBMITTED THAT COURSE CURRICULUM OF THE ABOVE SAID PROGRAMME WAS TOTALLY BUSINESS ORIENTED AND HENCE THERE WAS DIRECT BENEFIT ACCRUING TO THE ASSE SSEE. ACCORDINGLY, HE SUBMITTED THAT THE EXPENDITURE SHOULD BE FULLY ALLO WED AS BUSINESS EXPENDITURE. 4. ON THE CONTRARY, THE LD. DR SUBMITTED THAT THE EDUCATION PROGRAM HAS ONLY ENRICHED THE KNOWLEDGE OF THE CONCERNED DI RECTOR AND FURTHER, THERE IS NO BUSINESS NEXUS BETWEEN THE ASSESSEES B USINESS AND THE EXPENDITURE INCURRED. ACCORDINGLY HE SUBMITTED THA T THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE DISALLOWANCE. IN THIS CONNECTION, THE LD. DR PLACED RELIANCE ON THE DECISION OF THE BOMBAY HIGH COURT RENDERED IN THE CASE OF CIT V/S HINDUSTAN HOSIERY INDUSTRIES [19 94] 73 TAXMAN 521 (BOM.), WHEREIN THE HONBLE JURISDICTIONAL HIGH COU RT HAS CONFIRMED THE DISALLOWANCE OF EXPENSES INCURRED ON EDUCATION OF O NE OF THE PARTNERS OF THE FIRM. 5. IN THE REJOINDER, THE LD. AR SUBMITTED THAT THE DECISION RENDERED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HINDUS TAN HOSIERY INDUSTRIES (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESE NT CASE, SINCE THE ITA. NO 7826/MUM/2010 4 ASSESSEE THEREIN SPENT MONEY ON ONE OF THE PARTNERS OF THE ASSESSEE FIRM, WHERE AS IN THE INSTANT CASE, THE ASSESSEE COMPANY HAS PAID FEES FOR ADMITTING ONE OF THE DIRECTORS IN THE MANAGEMENT CO URSE AND THE SAID DIRECTOR WAS ALREADY DRAWING SALARY FROM THE ASSES SEE-COMPANY. 6. HAVING HEARD RIVAL SUBMISSIONS, WE FIND MERIT IN THE SUBMISSIONS OF THE LD. DR. THOUGH THE COURSE CURRICULUM OF THE EDU CATION PROGRAMME WAS RELATED TO THE MANAGEMENT OF THE FAMILY BUSINESS, YET, IN OUR VIEW, THE ASSESSEE FAILED TO ESTABLISH THE NEXUS BETWEEN ITS BUSINESS AND THE EXPENDITURE. THE EDUCATION PROGRAMME UNDERTAKEN BY THE DIRECTOR, IN OUR VIEW, WOULD BENEFIT THE CONCERNED DIRECTOR IN ENRIC HING HIS KNOWLEDGE. THOUGH THE LD A.R CONTENDED THAT THE SAID KNOWLEDGE WOULD ULTIMATELY BENEFIT THE ASSESSEES BUSINESS, IN OUR VIEW, IT WA S ONLY A FARFETCHED REASON TO SUBSTANTIATE CLAIM. IN OUR VIEW, THE DEC ISION RENDERED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF HI NDUSTAN HOSIERY INDUSTRIES (SUPRA) WOULD SQUARELY APPLY TO THE FACT S OF THE INSTANT CASE. THE ASSESSEE, IN THE INSTANT CASE, HAS FAILED TO SH OW THE DIRECT NEXUS BETWEEN THE ASSESSEES BUSINESS AND EXPENDITURE. A CCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE DECISION RENDERED BY THE LD. CIT(A) ON THIS ISSUE. 7. THE NEXT ISSUE RELATES TO THE DISALLOWANCE OF DO NATION PAYMENT OF RS.10,000/-. THE AO DISALLOWED THE DONATION CLAIME D BY THE ASSESSEE FOR THE REASON THAT THE ASSESSEE FAILED TO FURNISH ANY MATERIAL TO SUPPORT THE SAID CLAIM. BEFORE THE LD.CIT(A) AND BEFORE US ALS O THE ASSESSEE HAS FAILED ITA. NO 7826/MUM/2010 5 TO FURNISH ANY PROOF TO SUPPORT THE CLAIM OF PAYMEN T OF DONATION. EVEN OTHERWISE, THE ASSESSEE HAS FAILED TO SHOW CAUSE AS TO HOW THE DONATION IS ALLOWABLE AS BUSINESS EXPENDITURE. HENCE, WE DO NO T FIND ANY INFIRMITY IN THE ORDER OF LD.CIT(A) IN CONFIRMING THIS ADDITION ALSO. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 13TH FEB, 2015 . '( # )* + ,13TH FEB, 2015 ( ' $ 1 SD SD ( /SANJAY GARG) ( . . / B.R. BASKARAN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ) # $ MUMBAI: 13TH FEB,2015. . . ./ SRL , SR. PS !'#$ %$&' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. # 3% ( ) / THE CIT(A)- CONCERNED 4. # 3% / CIT CONCERNED 5. 45 %6 , & 6 , ) # $ / DR, ITAT, MUMBAI CONCERNED 6. 7 8$ / GUARD FILE. 9 # / BY ORDER, TRUE COPY : (ASSTT. REGISTRAR) & 6 , ) # $ /ITAT, MUMBAI