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
(c) these are all questions of fact that have to be determined by the authorities below.
If the fact finding Tribunal comes to the conclusion on evidence, that would justify allowing the deduction, then it would become an admissible deduction. The decisions on such questions is for the Tribunal to decide and the decision must be sustained if there is evidence upon which the Tribunal could have arrived at such a conclusion. However, as reiterated by the Supreme Court, this would depend on the facts and circumstances of each case. In the present case, we find that the reliance placed on the aforesaid judgments is of no assistance to the Appellant-Assessee. In the facts of the present case, the authorities below have come to a categorical finding
(i) that the expenditure incurred was not for the purpose of business of the Appellant-Assessee and was out of personal consideration and not out of any commercial consideration;
(ii) that the Appellant- Assessee filed no evidence that it had framed any Rules or Regulations for incurring expenditure on the education of the son of the director or any other employee;
(iii) that the Appellant- Assessee had not filed any details which would indicate that the said Mr Krishna Kachalia was under any obligation to serve the Appellant- Assessee after the completion of management studies;
(iv) that the Appellant- Assessee had paid education expenses of Mr Krishna Kachalia only because he happens to be belonging to the family controlling the Appellant- Assessee;
(v) that the expenditure incurred on the education of Mr Krishna Kachalia was not incurred for the purpose of business of the Appellant- Assessee and therefore could not be allowed as deduction in the hands of the Appellant.
In view of these categorical findings of fact, we have no hesitation in holding that the deduction claimed by the Appellant- Assessee has been rightly disallowed by the authorities below and we find no infirmity in the impugned order passed by the ITAT.
On the same parity of reasoning, we find that even the expenses claimed as a deduction by the Appellant- Assessee for the payment of salary to Mr Krishna Kachalia was rightly disallowed by the authorities below. In this regard, the authorities below have come to a finding that the said Mr Krishna Kachalia was doing a management course with S.P. Jain Institute of Management & Research from October 2003 to April 2005 and therefore it was not possible that he was working for the company in the capacity of a Director at the same time when in fact he was a student. The authorities below have come to a finding that during the time Mr Krishna Kachalia was shown to be in-charge of the marketing activities at the Appellant- Assessee’s Borivali Center, another Director of the Appellant-Assessee was also looking after the marketing activities at the very same place and was paid a remuneration of Rs.10,00,000/- per annum for the said work. The authorities below have also found that in no other Center of the Appellant- Assessee was more than one Director assigned and the fact that Mr Krishna Kachalia was assigned to look after the work at Borivali in addition to another Director, his appointment was only for name sake. Despite the fact that it was sought to be urged that Mr Krishna Kachalia was rendering marketing services to the Assessee Company in the year under consideration and that he was instrumental in acquiring the distributorship of VOLVO and thereafter dealing with such distributorship, no evidence was led by the Appellant-Assessee to support and substantiate the same. We therefore find that even on this count the authorities below were fully justified in disallowing the said deduction.
This Judgement is modified/corrected by Speaking to Minutes Order dated 10/07/2014