M/S. SHOE CRAFTERS, MUMBAI V. THE ADDL CIT RG 17(2), MUMBAI

ITA 979/MUM/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7815 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 24-02-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 11-02-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUM EET KUMAR
• Assessee Lawyers: DEEPAK C KHANNA
• Keywords: Business income; Business expenditure; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH, MUMBAI BEFORE SHRI R.V. EASWAR, PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 979/MUM/2008 (ASSESSMENT YEAR: 2004-05) M/S. SHOE CRAFTERS ADDL. CIT, RANGE 17(2) 203/204, WADALA UDYOG BHAVAN PIRAMAL CHAMBERS, 2ND FLOOR NALGON CROSS ROAD, WADALA VS. LALBAUG, PAREL, MUMBAI 400012 MUMBAI 400031 PAN - AAIFS 5140 H APPELLANT RESPONDENT APPELLANT BY: SHRI DEEPAK C. KHANNA RESPONDENT BY: SHRI SUMEET KUMAR O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- XVII, MUMBAI DATED 16.11.2007 UPHOLDING THE DISALLOWANCE OF ` 3,78,250/- PAID ON ACCOUNT OF COMMISSION TO SHRI ABHIR D. KHANNA, S ON OF ASSESSEES PARTNER AND THE AMOUNT OF ` 7,12,281/- PAID FOR SHORT DIPLOMA COURSE IN FOOTWEAR DESIGN AND MODELLING IN MILANO TO SAME PER SON AND ` 2,56,708/- TOWARDS FOREIGN TRAVELLING EXPENSES FOR ATTENDING T HE COURSE, WHICH WERE DISALLOWED AND ARE CONTESTED IN THE THREE GROUNDS R AISED BY THE ASSESSEE. 2. BRIEFLY STATED, THE ASSESSEE IS A PARTNERSHIP FIRM HAVING THREE PARTNERS SHARING PROFIT AND LOSS IN THE FOLLOWING RATIO: - I) SMT KAILASH KHANNA 40% II) SHRI DEEPAK KHANNA 30% III) SHRI SANJAV KHANNA 30% ASSESSEES BUSINESS IS OF MANUFACTURING OF FOOTWEA R IN INDIA AND EXPORTING THE SAME TO EUROPEAN COUNTRIES. SHRI ABHIR D. KHANN A IS THE SON OF THE PARTNER SHRI DEEPAK C. KHANNA. IT WAS SUBMITTED THA T HE WAS APPOINTED AS ITA NO. 979/MUM/2008 M/S. SHOE CRAFTERS 2 A TRAINEE IN JANUARY 2003. DURING THE YEAR, SHRI AB HIR D. KHANNA WAS STATED TO BE EMPLOYED WITH M/S. SHOE CRAFTERS ON FU LL TIME BASIS WHEREIN HIS SALARY WAS FIXED ON COMMISSION BASIS. THE PARTNERS OF THE FIRM DECIDED THAT SHRI ABHIR D. KHANNA SHOULD UNDERTAKE TRAINING IN F OOTWEAR DESIGN AND MODELLING FOR 3 MONTHS IN MILAN, ITALY. SHRI ABHIR D. KHANNA LEFT FOR ARS ARPEL IN MIDDLE OF MARCH 2004, THE COURSE WAS COMPL ETED IN JUNE 2004. ASSESSEE FIRM CLAIMED DEDUCTION OF AS COMMISSION OF ` 3,78,250/- STATED TO BE AT ` 1 PER PAIR SOLD BY THE ASSESSEE FIRM TO SHRI ABHIR D. KHANNA, FOR THE SERVICES RENDERED TO THE FIRM AND THE BALANCE EXPEN DITURE OF ` 7,12,281/- IS TOWARD TUITION FEES PAID AND ` 2,56,708/- FOR THE FOREIGN TRAVEL OF THE SAME PERSON INCURRED FOR HIS FOREIGN COURSE. 3. A.O., AFTER EXAMINATION OF ASSESSEES CLAM WAS OF T HE OPINION THAT THERE IS NO MATERIAL TO SUPPORT THAT SHRI ABHIR D. KHANNA HAS RENDERED ANY SERVICE AND ASSESSEE IS NOT IN A POSITION TO EXPLAI N THE EXTRA BUSINESS BROUGHT BECAUSE OF WHICH COMMISSION WAS PAID AND FU RTHER ASSESSEE ALSO PAID COMMISSION TO FOREIGN AGENTS AND SO CLAIMING D OMESTIC COMMISSION IS NOT CORRECT. WITH REFERENCE TO REIMBURSEMENT OF EXP ENDITURE FOR COURSE IN MILAN AND FOREIGN TRAVEL EXPENSES THE A.O. WAS OF T HE OPINION THAT IT IS AN ARRANGEMENT BETWEEN THE FIRM AND SHRI ABHIR D. KHAN NA TO GIVE A COLOUR OF COMMERCIAL EXPEDIENCY AND THERE IS NO NECESSITY OF DEPUTING ABHIR D. KHANNA FOR THE FOREIGN COURSE AS A BUSINESS EXPEDIE NCY AND THEREFORE, THE EXPENDITURE CANNOT BE ALLOWED. FOR THE DETAILED REA SONS DISCUSSED BY THE A.O. HE DISALLOWED THE EXPENDITURE PERTAINING TO TH E COMMISSION PAID AND COURSE EXPENDITURE CLAIMED AS BUSINESS PROMOTION EX PENSES AND FOREIGN TRAVEL EXPENSES CLAIMED UNDER THE HEAD TRAVELLING EXPENSES. BEFORE THE CIT(A) ASSESSEE REITERATED THE SAME SUBMISSIONS AND AFTER CONSIDERING THE SUBMISSION THE CIT(A) HELD THAT THE ASSESSEE FAILED TO ESTABLISH ANY DIRECT NEXUS BETWEEN COMMISSION PAID AND THE SPECIFIC NATU RE OF SERVICES PROVIDED BY ABHIR D. KHANNA. ACCORDINGLY HE UPHELD THE DISAL LOWANCE OF ` 3,78,250/- COMMISSION. WITH REFERENCE TO THE CLAIM OF ` 7,12,281/- UNDER THE HEAD ITA NO. 979/MUM/2008 M/S. SHOE CRAFTERS 3 BUSINESS PROMOTION EXPENSES THE CIT(A) WAS OF THE OPINION THAT THERE WAS NO IMMEDIATE BUSINESS PURPOSES FOR WHICH THE EXPENS ES WERE INCURRED BY THE ASSESSEE AND IF THERE WERE ANY BENEFITS IT SHOU LD BE ENDURING AND THE EXPENDITURE WOULD BECOME CAPITAL IN NATURE AND CANN OT BE ALLOWED AS REVENUE CLAIM. ACCORDINGLY HE UPHELD THE CLAIM OF D ISALLOWANCE. ON THE SAME BASIS THE CLAIM OF FOREIGN TRAVEL EXPENSES WER E ALSO DISALLOWED. IN THIS REGARD ASSESSEE HAS RAISED THE FOLLOWING THREE GROU NDS: - 1. THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE D ISALLOWANCE OF RS.3,78,250/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF COMMISSION PAID TO MR. ABHIR KHANNA WHO IS THE SON OF ONE OF THE PARTNERS OF THE FIRM. 2. THE LEARNED CIT(A) HAS ALSO ERRED IN UPHOLDING T HE DISALLOWANCE OF RS.7,12,281/- MADE BY THE ASSESSING OFFICER UNDE R THE HEAD BUSINESS PROMOTION EXPENSES TO SEND SHRI ABHIR KHAN NA FOR A SHORT DIPLOMA COURSE IN FOOTWEAR DESIGNING AND MODE LLING IN MILAN, ITALY. 3. THE LEARNED CIT(A) HAS ALSO ERRED IN UPHOLDING T HE DISALLOWANCE OF RS.2,56,708/- MADE BY THE ASSESSING OFFICER, WHI CH WAS SPENT ON FOREIGN TRAVELLING EXPENSES MADE BY SHRI A BHIR KHANNA FOR ATTENDING THE DIPLOMA COURSE IN MILAN, ITALY. 4. REFERRING TO THE PAPER BOOK FILED IN THIS REGARD, T HE LEARNED COUNSEL SUBMITTED THAT SHRI ABHIR KHANNA WAS TAKEN AS A TRA INEE EXECUTIVE VIDE LETTER DATED 2 ND JANUARY 2003 AND HE WAS NOT GIVEN ANY REMUNERATION UPTO 31 ST MARCH 2003. SUBSEQUENTLY HE WAS TREATED AS EXPORT EXECUTIVE ON THE BASIS OF COMMISSION OF ` 1 PER PAIR FROM 1 ST APRIL 2003 ONWARDS AND THE PAYMENT WAS FOR A PERIOD OF 3 YEARS FROM THE DATE O F APPOINTMENT. ACCORDINGLY, IT WAS SUBMITTED THAT, THE SAID PERSON WAS PAID COMMISSION DURING THE YEAR. IT WAS ALSO HIS SUBMISSION THAT SI MILAR COMMISSION WAS PAID IN LATER YEARS AND THE A.O. HAS ALLOWED THE SA ME AMOUNTS. HE FURTHER SUBMITTED THAT SHRI ABHIR KHANNA HAS FILED HIS RETU RN OF INCOME AND PAID TAX, THE DETAILS OF WHICH WAS PLACED IN THE PAPER B OOK FROM PAGE 84 ONWARDS TO SUBMIT THAT SHRI ABHIR KHANNA HAS PAID TAX ON TH E COMMISSION RECEIVED. HE FURTHER REFERRED TO THE COPY OF THE EMAIL PLACED IN THE PAPER BOOK PG 174 ITA NO. 979/MUM/2008 M/S. SHOE CRAFTERS 4 TO SUBMIT THAT SHRI ABHIR KHANNA ATTENDED TO THE BU SINESS AND THE CLAIM OF COMMISSION ON THE SERVICES RENDERED SHOULD BE ALLOW ED. HE FURTHER REFERRED TO THE LOCAL TRIPS UNDERTAKEN BY THE SAID ABHIR KHA NNA TO SUBMIT THAT ABHIR KHANNA HAS ATTENDED TO THE BUSINESS OF THE ASSESSEE AND ACCORDINGLY THE COMMISSION WAS PAID. WITH REFERENCE TO THE FOREIGN TRAINING AND FOREIGN TRAVEL EXPENSES IT WAS HIS SUBMISSION THAT SHRI ABH IR KHANNA WAS A MANAGEMENT GRADUATE HAVING STUDIED IN USA AND HE WA S FULLY QUALIFIED TO BE SENT FOR THE ABOVE TRAINING FROM 17.03.2004 FOR A PERIOD OF 4 MONTHS. IT WAS HIS SUBMISSION THAT THE ASSESSEE FIRM GOT BENEF IT FROM HIS EXPERTISE AND LATER ON HE HAS BECOME A PARTNER AND AT PRESENT HE IS THE MANAGING/ WORKING PARTNER OF THE FIRM. IT WAS HIS SUBMISSION THAT THE UNDERTAKING OF THE COURSE BY SHRI ABHIR KHANNA HAS BENEFITED THE F IRM AND THE EXPENDITURE IS AN ALLOWABLE BUSINESS EXPENDITURE. 5. THE LEARNED D.R., HOWEVER, CONTESTED THE ABOVE TO S UBMIT THAT EVEN THOUGH IT IS TERMED AS REMUNERATION THE AMOUNT PAID IS ONLY A COMMISSION AND REFERED TO PAGE NO. 84, I.E. THE RETURN FILED B Y THE SAID ABHIR KHANNA, TO SUBMIT THAT HE HAS SHOWN THE AMOUNT AS BUSINESS INC OME AND CLAIMED EXPENDITURE INCLUDING CONVEYANCE AND TRAVEL. IT WAS HIS SUBMISSION THAT THERE IS NO REMUNERATION PAID AS AN EMPLOYEE TO THE SAID ABHIR KHANNA. ACCORDINGLY THE EXPENDITURE INCURRED FOR FOREIGN TR AVEL AND FOREIGN TRAINING COURSE CANNOT BE CONSIDERED AS BUSINESS EXPENDITURE AS THE SAID ABHIR KHANNA IS NOT AN EMPLOYEE OF THE ASSESSEE. EVEN FOR THE SERVICES RENDERED FOR WHICH THE COMMISSION WAS PAID THE ASSESSEE HAS FAILED TO FILE ANY EVIDENCE OF SERVICES RENDERED AND THE EMAIL AND OTH ER DETAILS PLACED ON RECORD PERTAIN TO NOVEMBER 2005, OF LATER YEAR AND NOT OF THIS YEAR. IT WAS FURTHER SUBMITTED THAT AFTER HIS RETURN FROM ABROAD THE SAID ABHIR KHANNA COULD HAVE RENDERED SERVICES TO THE FIRM AND NOW AS A PARTNER ALSO HE IS INVOLVED IN THE DAY-TO-DAY BUSINESS OF THE FIRM, TH EREFORE, THE A.O. HAS ALLOWED COMMISSION/REMUNERATION AND OTHER EXPENSES INCURRED ON THE SAID PERSON SUBSEQUENTLY, BUT THAT DOES NOT PROVE THAT THE COMMISSION WAS PAID ITA NO. 979/MUM/2008 M/S. SHOE CRAFTERS 5 FOR THE SERVICES RENDERED DURING THE YEAR. THE RELI ANCE ON THE AFFIDAVIT FILED BY SHRI ABHIR KHANNA IN SUPPORTING THE EVIDENCE CAN NOT BE TAKEN AS A PROOF OF SERVICES RENDERED. FURTHER THERE IS NO REASON WH Y ONLY SHRI ABHIR KHANNA COULD BE SELECTED AND SENT ABROAD AND WHY OTHER PE OPLE ARE NOT ALLOWED IF ASSESSEE REQUIRES IT AS A COMMERCIAL EXPEDIENCY. MO REOVER THE COURSE INVOLVED IN ITALY IS OF GENERAL TRAINING AND NOT A SPECIAL TRAINING AND RELIED ON THE DECISION IN THE CASE OF CIT VS. HINDUSTAN HO SIERY INDUSTRIES 209 ITR 383 (BOM) TO SUBMIT THAT THE EXPENDITURE INCURRED F OR TRAINING OF SHRI ABHIR KHANNA CANNOT BE ALLOWED AS BUSINESS EXPENDITURE AS THERE IS NO NEXUS BETWEEN THE SAID EXPENDITURE AND THE BUSINESS OF TH E ASSESSEE. HE FURTHER RELIED ON THE DECISION OF THE ITAT MUMBAI D BENCH IN THE CASE OF INTERSIL INDIA LTD. VS. ADDL. CIT 101 ITD 85 TO SUBMIT THAT THE EXPENSES INCURRED BY THE ASSESSEE FIRM ON FOREIGN EDUCATION OF MANAGING PARTNERS SON, WHO WAS NOT ITS EMPLOYEE AT THE RELEVANT TIME, CANNOT BE AL LOWED AS DEDUCTION IN COMPUTING BUSINESS PROFIT OF THE ASSESSEE. 6. THE LEARNED COUNSEL IN REPLY SUBMITTED THAT THE SAI D ABHIR KHANNA, AFTER HIS COURSE, HAS JOINED THE FIRM AND RENDERING SERVICES SUBSEQUENTLY AND PLACED ON RECORD THE ALLOWANCE OF COMMISSION AN D OTHER EXPENDITURE IN LATER YEARS. 7. WE HAVE CONSIDERED THE ISSUE. ALL THE THREE ISSUES CONTESTED BY THE ASSESSEE ARE WITH REFERENCE TO THE EXPENDITURE INCU RRED ON SHRI ABHIR KHANNA TOWARDS COMMISSION AND FOR DEPUTING HIM FOR COURSE IN ITALY FOR WHICH THE COURSE FEE AND TRAVEL EXPENDITURE WERE IN CURRED BY THE FIRM. AS THE FACTS INDICATE THERE IS NO DISPUTE WITH REFEREN CE TO ABHIR KHANNA BEING SON OF SHRI DEEPAK C. KHANNA. AS SEEN FROM THE LETT ER OF APPOINTMENT PLACED IN THE PAPER BOOK AT PAGE 78 THE PARTNER HAS ADDRESSED THE LETTER TO SHRI ABHIR KHANNA DATED 2 ND JANUARY 2003 THAT HE WILL BE WORKING AS TRAINEE INITIALLY FOR A PERIOD OF 3 MONTHS AND WAS NOT ELIGIBLE FOR REMUNERATION AND WOULD BE REQUIRED TO UNDERGO TRAIN ING IN ALL SECTIONS AND DEPARTMENTS AND WOULD BE EMPLOYED AS EXPORT EXECUTI VE ON THE BASIS OF ITA NO. 979/MUM/2008 M/S. SHOE CRAFTERS 6 COMMISSION OF ` 1 PER PAIR FROM 1 ST APRIL 2003 ON WARDS AND THE EMPLOYMENT IS ON CONTRACT BASIS ON PAYMENT OF COMMISSION. AT T HE SAME TIME, PARA 9 IS INTERESTING, WHICH IS AS UNDER: - 9. DEPENDING ON YOUR PERFORMANCE, THE COMPANY WOUL D LIKE TO SEND YOU TO ITALY TO DO A SHORT COURSE IN FOOTWEAR DESIG NING TO LEARN MORE ABOUT THE LINE. THE COMPANY WILL BEAR ALL THE EXPENSES OF AIR FARE, STAY, TUITION FEES, INSURANCE AND OTHER I NCIDENTAL EXPENSES. THIS INDICATES THAT AT THE TIME OF INITIAL APPOINTM ENT ON 2 ND JANUARY 2003, THE FIRM HAS DECIDED TO SEND THE SAID PERSON TO ITA LY TO DO A SHORT COURSE IN FOOTWEAR DESIGNING TO LEARN ABOUT THE LINE AS A PRE MEDITATED SCHEME OF CLAIMING THE EXPENDITURE AND COMMISSION AS A BUSINE SS EXPENDITURE. IT IS ALSO NOTICED THAT THERE IS NO EVIDENCE OF ANY SERVI CE RENDERED DURING THE IMPUGNED PERIOD. ALL THE SO CALLED CORRESPONDENCE W ITH VARIOUS CLIENTS AND HIS DESIGN PAPERS PLACED ON RECORD ARE SUBSEQUENT T O THE ASSESSMENT YEAR WHICH DOES NOT INDICATE THAT DURING THE YEAR UNDER CONSIDERATION THE SAID SHRI ABHIR KHANNA HAS RENDERED ANY SERVICE. FURTHER IT IS NOTICED THAT EVEN THOUGH THE LETTER INDICATES THAT HE WAS EMPLOYED AS EXPORT EXECUTIVE THE RETURN FILED BY SHRI ABHIR KHANNA SHOWS COMMISSION PAYMENT UNDER THE HEAD BUSINESS INCOME AND CLAIMED LOCAL CONVEYANCE AND TRAVELLING UNDER THE EXPENDITURE TO THE EXTENT OF ` 38,743/- WHICH CONFIRMS THAT THERE IS NO EMPLOYEE - EMPLOYER RELATIONSHIP BUT ONLY PROFESSIO NAL RELATIONSHIP. IT IS ALSO INTERESTING TO NOTE THAT THIS COMMISSION WAS N OT PAID PERIODICALLY ON THE BASIS OF MANUFACTURING BUT WAS PAID BY WAY OF J OURNAL ENTRY ON 30.03.2004, I.E. AT THE END OF THE FINANCIAL YEAR A ND PAID SUBSEQUENTLY. THE WHOLE SEQUENCE OF EVENTS DO INDICATE THAT IN THE PR ETEXT OF CLAIMING AS A BUSINESS EXIGENCY, THE EXPENDITURE INCURRED FOR TRA INING OF SHRI ABHIR KHANNA IN THE SHOE LINE DIPLOMA, THE WHOLE ARRANGEM ENT SEEMS TO HAVE BEEN MADE. NO COMMISSION WAS PAID FOR THE PERIOD JA N TO MARCH 2003 WHICH HAPPENS TO BE IN EARLIER FINANCIAL YEAR. THE CLAIM SEEMS TO BE PREMEDITATED SO AS TO GIVE IT A COLOUR OF LEGITIMAC Y. EVEN DURING THE YEAR THE ITA NO. 979/MUM/2008 M/S. SHOE CRAFTERS 7 COMMISSION WAS NOT PAID PERIODICALLY AND IT WAS PAI D BY WAY OF JOURNAL ENTRY AT ` 1 PER PAIR OF SHOES AT THE END OF THE YEAR, BOTH DO MESTIC AND EXPORT WITHOUT ASSESSING THE SERVICES THAT ARE BEING RENDE RED IN INCREASING THE BUSINESS. THE ASSESSEE IS ALSO HAVING FOREIGN COMMI SSION AGENTS ON WHICH A SEPARATE CLAIM WAS MADE AND THERE IS NO SPECIFIC SE RVICE RENDERED BY SHRI ABHIR KHANNA IN INCREASING THE EXPORTS. THE COMMISS ION WAS PAID EVEN FOR THE PERIOD HE WAS ABROAD AND NOT RENDERING ANY SERV ICES. IN VIEW OF THIS, WE ARE OF THE OPINION THAT SINCE SHRI ABHIR KHANNA WAS NOT AN EMPLOYEE OF THE ASSESSEE FIRM AND NO EVIDENCE OF SERVICES HAVE BEE N PROVIDED SO AS TO CLAIM THE COMMISSION AND FOREIGN TUITION FEES AND FOREIG N TRAVEL EXPENSES BY THE ASSESSEE FIRM. THEREFORE THE CLAIM UNDER THESE HEAD S CANNOT BE ALLOWED AS EXPENDITURE WHOLLY AND NECESSARILY FOR THE PURPOSE OF BUSINESS. 8. IT MAY BE TRUE THAT SHRI ABHIR KHANNA JOINED THE F IRM SUBSEQUENTLY BEING FAMILY CONCERN AND IS ALSO INCHARGE OF THE BU SINESS. IT IS ALSO NOTICED THAT THE A.O. DISALLOWED CERTAIN COMMISSION BUT THE CIT(A) ALLOWED THE SAME IN LATER YEARS. HOWEVER, THAT DOES NOT PROVE THAT T HE SAID ABHIR KHANNA RENDERED ANY SERVICE DURING THE YEAR UNDER CONSIDER ATION. IN THE CASE OF SAKAL PAPERS PVT. LTD. VS. CIT 114 ITR 256 THE HON' BLE BOMBAY HIGH COURT HAS CONSIDERED THAT MERELY BECAUSE THERE IS APPOINT MENT AND CONTACT OR BOND TAKEN FROM THE TRAINEE THE EXPENDITURE WHICH W AS OTHERWISE PROPER CANNOT BE DISALLOWED. IN THIS CASE SHRI ABHIR KHANN A IS NOT AN EMPLOYEE AND THERE IS NO SPECIFIC REASON WHY HE HAS BEEN SEL ECTED AND SENT ABROAD EXCEPT THAT HE IS SON OF THE PARTNER. THEREFORE, TH E FACTS MORE OR LESS FALL UNDER THE JUDGEMENT OF THE HON'BLE BOMBAY HIGH COUR T IN THE CASE CIT VS. HINDUSTAN HOSIERY INDUSTRIES 209 ITR 383. IN THE AB OVE SAID CASE THE ASSESSEE FIRM WAS A FAMILY CONCERN OF MOTHER AND HE R FOUR SONS. AMONG WHOM V WAS ONE OF THE SONS. ASSESSEE FIRM CARRIED O N THE BUSINESS OF HOSIERY. DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 1976-77 V, WHO WAS 21 YEARS OF AGE WAS SENT TO USA FOR HIGHER STUDIES AND HAD OBTAINED A DEGREE OF BUSINESS MANAGEMENT FROM AN AMERICAN UNIVERSITY. AS SESSEE CLAIMED AN ITA NO. 979/MUM/2008 M/S. SHOE CRAFTERS 8 EXPENDITURE OF ` 60,678/- INCURRED FOR THE TRAINING OF V TO BE ALLOW ED AS BUSINESS EXPENDITURE. THE INCOME TAX OFFICER REJECT ED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE EXPENDITURE WAS PER SON IN NATURE AND NOT A BUSINESS EXPENDITURE. THE CIT(A) CONFIRMED THE ORDE R ON THE GROUND THAT THERE WAS NO NEXUS BETWEEN THE BUSINESS OF THE ASSE SSEE AND THE EXPENDITURE INCURRED. THE TRIBUNAL ALLOWED THE CLAI M OF THE ASSESSEE AND ON A REFERENCE REVERSING THE DECISION OF THE TRIBUNAL THE HON'BLE BOMBAY HIGH COURT HELD THAT THE EXPENDITURE INCURRED BY THE ASS ESSEE HAD NO NEXUS WITH THE BUSINESS OF THE ASSESSEE AND NOT ALLOWABLE AS B USINESS EXPENDITURE. THE FACTS ARE SIMILAR TO THE PRESENT CASE. 9. SIMILAR ISSUE WAS ALSO CONSIDERED BY THE ITAT MUMBA I BENCH IN THE CASE OF INTERSIL INDIA LTD. VS. ADDL. CIT 101 ITD 8 5 WHEREIN THE FACTS ARE THAT THE A.O. NOTICED THAT THE ASSESSEE COMPANY CLAIMED DEDUCTION ON ACCOUNT OF STUDY AND TRAINING EXPENSES INCURRED FOR SPONSORING COST OF MANAGEMENT EDUCATION ABROAD IN RESPECT OF R SON OF THE MANAG ING DIRECTOR. THE A.O. HELD THAT THE EXPENDITURE IS PERSONAL IN NATURE AND ACCORDINGLY DISALLOWED THE SAME. THE CIT(A) CONFIRMED THE DISALLOWANCE. ON SECOND APPEAL THE ITAT HELD AS UNDER: - THE EXPENDITURE COULD NOT BE SAID TO BE ENTIRELY W ITHOUT EXTRA COMMERCIAL CONSIDERATIONS. R WAS NOT AN EMPLOYEE OF THE COMPANY AT THE MATERIAL POINT OF TIME AND THERE WS NO MATER IAL THAT HIS SELECTION WAS ON PURE COMMERCIAL CONSIDERATIONS. TH E ASSESSEE SUBMITTED THAT THOUGH NOT AN EMPLOYEE, R WAS REND ERING SERVICES TO THE ASSESSEE-COMPANY FROM THE USA. HOWEVER, THERE W AS NO MATERIAL TO SUPPORT OR EVEN INDICATE THAT HE RENDERED SERVIC ES FROM THE USA. THE ASSESSEE HAD ALSO CATEGORICALLY ACCEPTED THAT R WAS NOT AN EMPLOYEE OF THE ASSESSEE COMPANY. THEREFORE, THE CONCLUSIONS ARRIVED AT BY THE COMMIS SIONER (APPEALS) WERE TO BE APPROVED AND NO INTERFERENCE WAS REQUIRE D IN THE MATTER. THE EXPENSES INCURRED ON THE FOREIGN EDUCATION OF R WHOSE ONLY CONNECTION WITH THE ASSESSEE-COMPANY AT THE RELEVAN T POINT OF TIME WAS THAT HE WAS SON OF THE MANAGING DIRECTOR OF THE COMPANY, COULD NOT BE ALLOWED AS DEDUCTION IN COMPUTING BUSINESS I NCOME OF THE ASSESSEE-COMPANY. THERE WAS NO INFIRMITY IN THE COM MISSIONER (APPEALS) CONFIRMING THE DISALLOWANCE. ITA NO. 979/MUM/2008 M/S. SHOE CRAFTERS 9 RELYING OF THE ABOVE PRINCIPLES, IN CAN BE CONCLUDE D THAT THE EXPENSES INCURRED ON PAYMENT OF COMMISSION AS WELL AS SPONSO RING THE FOREIGN EDUCATION, FOREIGN TRAVEL WHOSE CONNECTION WITH THE ASSESSEE FIRM AT THE RELEVANT POINT OF TIME WAS THAT HE WAS THE SON OF T HE PARTNER OF THE FIRM CANNOT BE ALLOWED AS DEDUCTION IN COMPUTING BUSINES S INCOME OF THE ASSESSEE COMPANY. FEW OF THE TRAVEL VOUCHERS STATED TO BE CLAIM FOR TRAVELLING COULD NOT ESTABLISH THAT THE TRAVEL IS F OR THE PURPOSE OF ASSESSEES BUSINESS AND SHRI ABHIR KHANNA RENDERED SERVICES TO THE FIRM DURING THE YEAR UNDER CONSIDERATION. KEEPING ALL THESE FACTS I N MIND, WE AGREE WITH THE CONCLUSIONS ARRIVED AT BY THE AO AND DECLINE TO IN TERFERE IN THE MATER. WE SEE NO INFIRMITY IN THE CIT(A) SUSTAINING THE SAID DISALLOWANCES. ACCORDINGLY THE GROUNDS ARE REJECTED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH MARCH 2011. SD/- SD/- (R.V. EASWAR) (B. RAMAKOTAIAH) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 29 TH MARCH 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XVII, MUMBAI 4. THE CIT X, MUMBAI CITY 5. THE DR, J BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.