TMI Blog2010 (6) TMI 764X X X X Extracts X X X X X X X X Extracts X X X X ..... A. Whether the learned Tribunal was justified in law in disallowing 50% of the total expenditure incurred on foreign travel wholly and exclusively for promotion of export business by K.K. Kalyani, the President of the assessee and Shri S. Kalyani, a trainee, without any cogent reasons and rational basis, although the learned Tribunal held that the expenditure incurred on foreign travel by the President may be a genuine business expenditure and its purported findings that the expenditure incurred towards foreign travel of Shri S. Kalyani cannot be treated as business expenditure and it should be treated as personal expenditure is perverse based on surmise and conjecture and otherwise contrary to the materials on record ? B. Whether the expenditure incurred in sending an employee of the assessee to foreign countries for higher studies for training and experience in running the business of the assessee is wholly and exclusively for the purpose of business and as such an allowable deduction under Section 37(1) of the Act ? C. Whether the learned Tribunal was justified in law in considering irrelevant facts and not considering the relevant materials on record and disallowing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce by the Commissioner of Income Tax (Appeal) should not have been interfered with and indeed it has been done without any cogent reason whatsoever. No one had challgned the correctness, validity and veracity of those documents. According to him that the Commissioner has allowed the prayer of his client basing on principles of law and in fact with the aid of decision of the three High Court and, therefore, there was no infirmity and illegality in the said decision for which interference by the Learned Tribunal was called for. He submits further that in spite of the material documents over again being drawn to the attention of the Learned Tribunal, the Learned Tribunal did not correct such mistake subsequently on his client s Miscellaneous application. While deciding the matter the Learned Tribunal should not have questioned the genuineness, validity and legality of the engagement of the trainee who happens to be the son of the President and on that basis the matter should not have been dealt with. He has drawn our attention to the resolution of the board of the company which is limited one and submits that the Board of Directors has unanimously appointed Srivardhan Kalyani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and order passed by the Tribunal on the miscellaneous application filed subsequent to filing the present appeal. He has drawn our attention to the said judgment and order rendered on the miscellaneous application. According to him same points were urged before the Tribunal who has reiterated the same principle and retained the impugned order as such this appeal has become infructuous. On merit he submits that the Learned Tribunal has examined the fact in this case. On fact it was found that the so called engagement is absurd and how a son of a President without having undergone a selection procedure could be appointed a trainee at a tender age and subsequently being a trainee could go for foreign trip and travel for promotion and development of the business. Incidentally the son had accompanied his father at the time of travel and tour. Even after travel tour there was no business with that country in the same financial year or subsequent financial year. Hence, the said travel tour of the son of the President in the guise of a trainee is absolutely personal and it has nothing to do with the business of the company. As far as the incurring of expenditure on account of studi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 37 of the said Act. In this context, Madhya Pradesh High Court in case of Commisisoner of Income-Tax Vs.Kohinoor Paper Pdocuts (reported in 226 ITR 220) has held that any expenditure or any expenses incurred for education and training of a partner of a partnership firm is a business expenditure and this can be considered as allowable deduction under Section 37 of the said Act. In that case one of the three partners of the assessee firm at the time of constitution of the firm was a student of the B.Sc. course. After obtaining M.Sc. decree later on he proceeded to USA for higher studies and for the assessment years 1983-84, 1984-85 and 1985-86 the firm claimed deduction of expenses incurred in education as business expenditure. The High Court of Madhya Pradesh upheld the concerned Tribunal s view that the foreign tour expenses of the partner in question for higher study for the purpose of business and allowed the necessary deduction. In the case of Sakal Papers Pvt. Ltd. V. Commissioner of Income-Tax, Poona (reported in 114 ITR 256) the Bombay High Court has viewed that the relation of the directors of a private limited company who was serving in the company had unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod of five years. The Board unanimously adopted that entire expenditure has to be borne by the company at the first instance, however, if the said S. Kalyani on coming back after completion of the education from abroad will be obliged to resume service in the company as a technical executive at least for ten years. In case of default of the said condition the said S. Kalyani has to pay back the entire expenses borne by the company with interest @18 per cent per annum. It appears that a written agreement was signed and executed to this effect and the same was produced before the assessing officer, Commissioner of Income Tax(Appeal) as well as before the Tribunal. The Commissioner of Income Tax (Appeal) had duly noted the aforesaid documents and accepted the same. Unfortunately the Learned Tribunal did not discuss legality and validity of those documents nor discarded the same expressly and the Learned Tribunal went on presuming adversely that a son of a President cannot become a trainee or expenditure for his higher education could not be treated to be relatable to the expenditure of the company. We are unable to accept the logic of the Learned Tribunal particularly when we not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the benefit of the business. However, expenditure incurred by the company for the President for foreign trip can certainly be said to be the business expenditure. It is not necessary that result of the foreign trip for promotion of the business would be immediate, it may be felt at any point of time subsequently or it may not be felt at all. We can take judicial notice of the fact that in the Government Sector undertaking the Hon ble Ministers, higher officials more often than not undertake foreign tour and travel for inviting foreign investment for promotion of trade and export, and this expenditure always is relatable to the business expenditure whether actually there is a positive impact of such tour or not. However, in this case we find that subsequently the result of the said tour could be felt. We, therefore, uphold that the expenditure 50 per cent incurred by the company for travel and tour of the President as being a business expenditure and the expenditure incurred for the trainee who happens to be the son of the President, at that stage cannot be accepted as business expenditure for the simple reason that he was a trainee and during traineeship he was learning the art ..... X X X X Extracts X X X X X X X X Extracts X X X X
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