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2014 (9) TMI 509 - AT - Income TaxImposition of penalty u/s 271(1)(c) – Expenses on foreign education and foreign travelling expenses - Held that:- Assessee company is engaged in the business of food and catering services - assessee company has claimed expenditure on foreign education and foreign travelling in respect of Tushar Khanna, who is son of one of the Directors of the assessee company - assessee company decided to send Mr. Tushar Khanna, son of the director for specialization in food industries and selected Cornell University to impart the required training and education - in the opinion of the Board of directors of assessee company would benefit the Company substantially in broadening its business horizon - the entire training and education was in Hotel Management, being the specific line of business the Company is engaged in - the employer-employee relationship is in place prior to the assessee Company sponsoring such training - it is clear that to implement International Hotel Business practices and systems, the assessee Company has spent monies on employing foreign nationals - During the previous year 2000-01, the Company had employed an internationally acclaimed foreign cook, Mr Somdet Kesoraprom from Bangkok - it sponsored one of its employees to acquire hotel management education and training at Cornell University, USA. Assessment proceedings and penalty proceedings are separate and distinct and assessee has all the liberty to put his case in the penalty proceedings to prove that there was no concealment of particulars of income or no intention to furnish any inaccurate particulars - in quantum proceedings, assessee’s claim of expenses was declined by Tribunal on the plea that before passing Board resolution, there was all intention to send Mr. Tushar Khanna abroad for higher education - the expenses so incurred were not for the purpose of the business - it was demonstrated that after coming from training Mr. Tushar Khanna is continuously rendering his services to the assessee company with the help of his specialized education in hotel management - the agreement entered with Tushar Khanna, before leaving India for higher education was being acted upon and there is nothing adverse found by the departmental authority to show that after returning back to India, Tushar Khanna has not rendered the services as per terms of agreement dated 1-8-2000 as agreed by him with the assessee company. The entire expenditure was intended to be incurred wholly and exclusively for the purpose of assessee’s hotel business - it is not a fit case for levy of penalty for the disallowance of expenses so made - the penalty imposed for disallowing claim of expenditure on foreign education and foreign travelling cannot be upheld – mere admission of appeal by the High Court is sufficient to debar the penalty levied u/s.271(1)(c) of the Act – penalty u/s 271(1)(c) cannot be levied – Decided in favour of assessee.
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