TMI Blog2004 (10) TMI 595X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings, the Assessing Officer noticed that the assessee has claimed a deduction of ₹ 11,50,438 on account of study and training expenses. It was also noted that the said expense was incurred for sponsoring cost of management education abroad in respect of Shri Rishav Mehra, son of the Managing Director. The Assessing Officer also took note of agreement dated 17-7-1995 whereby Shri Mehra was under an obligation to serve the company for a minimum period of two years upon completion of his education abroad. The judicial precedents cited before the Assessing Officer, i.e., Jhalani Holding (P.) Ltd. v. ITO (1992) 42 TTJ (Delhi) 116 and Hindustan Hosiery Industries v. First ITO (1983) 5 ITD 349(Bom.) were considered by the Assessing Officer. As for Jhalani Holding (P.) Ltd. s case (supra) the Assessing Officer distinguished the facts of the case by observing that in the said case, son of the Managing Director was already inducted into the assessee-company when he left for foreign studies abroad, whereas in the present case Shri Rishav Mehra had not joined the assessee-company at the point of time of leaving for education abroad. As for Hindustan Hosiery Industries case (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s abroad was such that it would definitely benefit the business carried on by the assessee firm, and, so, the expenditure in acquiring that knowledge had a direct nexus with the business carried on by the firm. This is evident from the increase in sales in the subsequent years. As a matter of fact, the benefit arising out of the acquisition of aforesaid knowledge by the partner ensured to the assessee firm as the partner is still working with the said firm even today. (Paragraph 9 of the Tribunal s order) The stand so taken by the Tribunal was, however, not approved by Their Lordships of Hon ble Bombay High Court, who, in the judgment in CIT v. Hindustan Hosiery Industries (1994) 209 ITR 383 observed as follows : We have carefully gone through the order of the Tribunal. It is not possible to accept the submission of the learned counsel for the assessee that the expenditure in question was incurred in relation to the business of the assessee firm. We have no hesitation in recording our conclusion that to the fact that the expenditure incurred by the assessee has no nexus with the business of the assessee. We agree with the conclusion arrived at by the ITO and the CIT(A). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee since the view we have taken is that the reason given by the Tribunal is not a good reason. Hon ble High Court thus held that merely because there is no agreement between the person, whose education costs are met by the assessee-company, and the assessee-company, this fact per se cannot render an expense, which is otherwise allowable as deduction, into disallowable deduction. Their Lordships were adjudicating on this limited question. 6. It is also noteworthy, as taken note of in the High Court judgment itself, that in this case, Tribunal s unchallenged findings in that case, inter alia, were that the P was not selected for further studies because of the reason of her relationship with the two directors, that the selection could not be attributed to any extra commercial considerations, and that there were no doubts about her qualifications, as also in her abilities, to serve the paper. The ground which appealed to the Tribunal, however, was that the company had not taken any commitment about the service from the trainee, and, according to the Tribunal, it had not behaved in a sensible and businesslike manner. According to the Tribunal, therefore, the spending of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a colour of commercial expediency and was rightly not relied upon by the Tribunal . Their Lordships then referred to, with concurrence, the views of Hon ble jurisdictional High Court in the case of Hindustan Hosiery Industries (supra). We may also add that we are anyway bound by the esteemed views of Hon ble jurisdictional High Court. The assessee thus derives no assistance from this Kohinoor Paper Products case (supra) judgment either. 8. A reference is also made to the SMC order of this Tribunal in the case of Trikaya Grey Advertising India Ltd. v. Dy. CIT [IT Appeal No. 941 (Bom.) of 1993 order dated 7-4-1999]. In the said order, SMC has followed the Tribunal s division Bench decision in the case of Hindustan Hosiery Industries (supra), which has since been reversed by the Hon ble Bombay High Court. The SMC order has also followed the judgment in the case of Sakal Papers (P.) Ltd. (supra), which, as discussed earlier, is not relevant on the facts of this case. We, therefore, regret our inability to follow the SMC decision in the case of Trikaya Grey Advertising India Ltd. (supra), which, in any event, is not a binding precedent for a division Bench of the Tribunal. 9. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in the USA. However, there is no material to support, or even indicate, that Shri Rishav Mehra rendered any services from the USA. We have also noted that the assessee has categorically accepted that Shri Rishav Mehra was not an employee of the assessee-company. 10. Keeping all these factors in mind, as also entirety of the case, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter. The expenses incurred on the foreign education of Shri Rishav Mehra, whose only connection with the assessee-company at the relevant point of time was that he was son of the Managing Director of the company, cannot be allowed as deduction in computing business income of the assessee- company. We see no infirmity in CIT(A) s sustaining the said disallowance. 11. Ground No. 1 is thus dismissed. 12. In ground No. 2, the assessee is aggrieved that the CIT(A) erred in sustaining the disallowance of vehicle expenses of ₹ 76,316. So far as this ground of appeal is concerned, it is sufficient to take note of the fact that the disallowance of 25 per cent of vehicle expenses is made for want of log book of the vehicles and as non-business expenditure. In ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eated as for entertainment expenses. The amount so worked out to ₹ 45,601. After taking into account the amount suo motu offered by the assessee for disallowance, the disallowance made by the Assessing Officer was ₹ 22,800. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. The assessee is not satisfied and is in further appeal before us. 18. We have heard the rival contentions, we have perused the material before us, and we have duly considered factual matrix of the case as also the applicable legal position. 19. We find that it is an undisputed position that the canteen expenses were incurred for the purpose of staff members and managers of the company but the objection is taken by the revenue that the outsiders being provided the tea and snacks from the same canteen cannot be ruled out. The revenue has failed to discharge the onus of demonstrating that the suo motu disallowance offered by the assessee is lesser than what is required. In the earlier years also, no such additional disallowance was made by the Assessing Officer. The CIT(A) has also confirmed the disallowance in a somewhat mechanical manner and without marsh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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