Expenditure on studies of bona fide employee can’t be disallowed merely because he was son of an ex-director
HIGH COURT OF MADHYA PRADESH
Commissioner of Income-tax
Naidunia News and Network Ltd.
IT Appeal NO. 15 OF 2011
JULY 3, 2012
1. This order will govern the disposal of ITA No. 15/2011 and ITA No. 16/2011 which have been filed against the common order of the Income Tax Appellate Tribunal, Bench Indore dated 30.12.2010 passed in ITA No. 9 & 10/Ind/2010 A.Y. 2005-06 & 2006-07 involving the identical issue.
2. Learned counsel for the appellant at the time of argument has raised two issues; firstly that the Tribunal was not justified in allowing the claim of expenditure incurred for foreign education of company’s ex director’s son treating him to be an employee of the Company and that the Tribunal was not justified in allowing the interest on unsecured loan which was disallowed by applying the provisions of Section 14A and S. 36(1)(iii) of the Income Tax Act, 1961.
3. So far as the first issue is concerned, the respondent-assessee is engaged in the business of printing and distribution of newspapers and magazines. The assessee’s claim in respect of the expenses made on foreign traveling and education of Shri Siddharth Chhajlani was disallowed and added to the income of the assessee by the Assessing Officer, and the same was affirmed in appeal by the Commissioner of Income Tax (Appeals). The tribunal has allowed the claim of the assessee finding that Shri Siddharth Chhajlani was an employee of the assessee working as Assistant Manager (Printing) and he was sent by the assessee to have advanced knowledge of latest printing technology which was directly related with the business of the assessee-Company. Such a finding of the Tribunal is a pure finding of fact.
4. While arriving at the aforesaid finding of fact, the Tribunal has noted that Shri Siddharth Chhajlani was a regular employee of the assessee Company since financial year 2003-04 and has taken note of the salary certificate along with the deduction and payment to Employee’s Provident Fund. It has also been noted that Shri Siddharth Chhajlani was sent for higher studies in printing technology, which is the main field of working of the assessee Company and a bond was got executed to ensure that he will work for at least 5 years after return to India. A guarantee in this regard was also taken from his parents. The tribunal has duly taken note of the documents of bond and the guarantee. On the basis of the material placed on record, the Tribunal has recorded a factual finding that Shri Siddharth Chhajlani was in employment with the Company not only before going but even during the period he was undertaking studies in printing technology at London and also on his return from London. The relevant certificates relating to completion of the advanced diploma in Information Technology (Printing) from College of Applied Sciences, London have been taken note of. It has been found that the expenditure in question was incurred wholly and exclusively for the purpose of business of the assessee Company. The orders passed disallowing the claim in respect of another employee Shri Vinit Sethia have been taken note of and it has been found that in his case the factual position was different. The proof of drawing of salary by Shri Siddharth Chhajlani for the assessment year 2004-05 to 2007-08 has been taken note of by the Tribunal. Merely because Shri Siddharth Chhajlani was son of an ex Director of the Company, the same would not furnish a ground for disallowing the said expenditure, when on facts the other conditions are satisfied in this regard.
5. The finding of the Tribunal that the said expenditure was incurred by the assessee wholly and exclusively for the purpose of business of the assessee Company is duly supported by the material on record. The tribunal has assigned due reasons while arriving at the said finding. Learned counsel for the appellant could not point out any error in the finding so arrived at by the Tribunal. Thus the issue which the appellant is raising is concluded by the finding of fact recorded by the Tribunal.
6. The second argument by the learned counsel for the appellant is in respect of the interest on unsecured loan allowed by the Tribunal in view of Section 14A and S. 36(1) (iii) of the Income Tax Act.
7. It is undisputed before this Court that similar claim in respect of the same assessee for the earlier assessment year 2004-05 was allowed, which has attained finality. The tribunal has relied upon the earlier order of the Tribunal for the assessment year 2004-05. The tribunal has recorded a finding that the assessee had properly utilized the amount of interest bearing funds for the purpose of its business only and there was no diversion of such interest bearing funds for non-business purposes while allowing the interest expenditure. This is also a finding of fact. Thus, the second issue raised by the appellant also does not involve any question of law.
8. Accordingly the appeals do not involve any question of law. The issues which the appellant is raising are the issues on facts concluded by the finding of facts recorded by the Tribunal.
9. The appeals are accordingly dismissed.
10. Signed order be kept in the record of ITA No. 15/2011 and a copy of this order be placed in the record of ITA No.16/2011.