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Case Law Details

Case Name : Shreenath Motors Pvt. Ltd Vs CIT (Bombay High Court)
Appeal Number : Income Tax Appeal No. 324 of 2012
Date of Judgement/Order : 03/07/2014
Related Assessment Year :
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Cousel fo the Assessee submits that , the ITAT had erred in confirming the disallowance of expenditure on remuneration and training of a working Director of the Appellant-Assessee that was incurred legitimately for the efficient management and conduct of the Appellant-Assessee’s business. He submitted that the expenditure was not only legitimate but had a direct nexus with the business of the Appellant-Assessee and was therefore allowable as a deduction under section 37 of the Income Tax Act, 1961. It is in this light that the learned counsel has questioned the correctness of the impugned order of the ITAT.

We find that the facts in the present case as narrated earlier in this judgement are totally different. In the present case, the authorities have found that the expenditure incurred for the education of the Director of the Appellant-Assessee viz. Mr Krishna Kachalia was out of personal consideration and not commercial consideration. The authorities below, being fact finding authorities, have come to the aforesaid conclusion after taking into consideration the totality of the facts and circumstances of the case.

16. What can be discerned from the Supreme Court judgments in the case of ‘S.A. Builders Ltd. v/s Commissioner of Income Tax (Appeals) and anr., reported in (2007) 288 ITR 1’  is that

(a) the amount which is claimed as a deductible allowance  was wholly and exclusively for the purpose of the business of the Assessee;

(b) there has to be a nexus between the expenditure incurred and the purpose of the business; and

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  1. Nem Singh says:

    Points for consideration:-
    -The expenditure incurred in the interest of business.
    -The expenditure not in personal nature.
    -Decision taken for meet out education expenses should be taken by the management through under taking.
    -Business of the company and feild of education should be the same.
    -Higher education in the related field would prove beneficial for the company
    -Principle laid down in these judgments also should be considered: Jhalani Holding Pvt. Ltd. Vs ITO 42 TTJ 116 (Delhi), Karnataka High Court in Mac Explotec (P) Ltd v CIT (2006) 155 Taxman 247), Bombay High Court considered this point in Sakal Papers (P) Ltd v CIT (114 ITR 256), Madhya Pradesh High Court in CIT v Kohinoor Paper Products (226 ITR 220)

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