Case Law Details
HVD Distributors Pvt. Ltd. Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that disallowance of Director’s education expenditure u/s 37(1) of the Income Tax Act sustained as assessee failed to prove such expenditure had direct relationship with the business activity. Accordingly, assessee failed to prove that expenditure were incurred wholly and exclusively for business.
Facts- During the assessment proceedings, the assessee was asked to submit documents in support of its claim of education expenses. On perusal of the details, it was observed that expenses were incurred for the further study of Mr. Harsh Dhami, Director from the Royal Holloway University of London. In support of its claim, the assessee submitted that the course was sponsored with the condition that Mr. Harsh Dhami will work for at least 5 years for the assessee company. Therefore, it was claimed that the expenses are allowable as business expenditure under section 37(1) of the Act.
AO passed u/s. 143(3) of the Act held that the assessee has failed to provide any certificate or details of completion of the course, proof of company’s growth and increase in sales, and the resolution passed in board meeting. The AO also held that the Director has gone abroad for training in general management, which did not pertain to the assessee’s line of business. The AO held that the assessee has failed to prove that the expenses were incurred ‘wholly and exclusively’ for the business purpose to be allowed u/s. 37(1) of the Act. Accordingly, the AO disallowed the education expenses to the tune of Rs.23,43,447/-.
CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed.
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