TMI Blog2006 (3) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... d amount was in respect of fees paid for his education. The explanation submitted before the Assessing Officer was rejected due to following reasons, firstly, the expenditure was not for the purpose of business but as a matter of parental duty towards his son to meet education expense. The second reason for rejection was that the son was not a partner in the business of the assessee, hence not related with the business activity of the assessee. Due to this disallowance, the issue was carried before the first appellate authority. 2. Before the Learned CIT(A), it was explained that the fees was paid by the assessee for the admission of his son in MBBS. The claim of the assessee was that his son had joined him in the medical profession after completion of MBBS Course and in this manner helped in the profession of the assessee. It was also explained that the assessee at that time was running a small hospital known as "Naik Hospital" and earning professional income as a doctor. For smooth and efficient running, a professional from the family was a business necessity because the outside doctors employed hardly remained with the hospital for a month or so. Those doctors termed as "house ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed a compilation consisting several submissions made before the authorities below, copy of agreement between son and father, details of expenditure claimed, few cited decisions and the evidences pertaining to compensation paid on account of medical negligence and correspondence of Medical Council. He has emphasized that the appellant was facing great difficulty in conducting his medical profession because of two reasons, firstly there was a charge against him of medical negligence by the Maharashtra Medical Council, resulting into suspension of licence for six months and compensation payment of Rs. 1,50,000 and consequently, for running his hospital as "Naik Hospital", he has to employ doctors termed as "houseman". These doctors generally remain with the hospital for few months and after getting better opportunity and desired training from this hospital, preferred to leave the job. Due to these reasons, the assessee wanted a member of his family to look after the well established hospital and medical profession which was created by him after a long persuation and sacrifice. To preserve his medical practice and the medical business, he has persuaded his son to join MBBS Course an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concluded that since the expenditure incurred had a direct nexus with the profession of the assessee and the same was spent for the preservation of the existing medical profession, which was wholly and exclusively laid out for the purpose of the running business activity, hence on the basis of factum of the case, expenditure deserves to be allowed. 5. From the side of the revenue, Mr. Abhay Damle, the Ld. D.R. has appeared and vehemently opposed the arguments of the opposite side and relied upon the findings of the authorities below. It was stated at the outset that the expenditure was very much personal in nature being incurred by a father on the studies of his son. The law cannot permit such type of an expenditure, and if this type of relaxation is granted, then the scope of admissible expenditure shall have no limit and even for basic education of children, any businessman can start claiming the deduction having utility of such education in future in the existing business. The scope of the admissibility of expenditure as prescribed under section 37(1) cannot be enlarged to this extent. Relying upon the decision of M. Subramaniam Bros. v. CIT [2001] 250 ITR 769 (Mad.) and anoth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present example such type of expenditure was not generally incurred by medical professionals to provide education to any student unconnected with the family. It is not the general practice in this medical profession to nurture and engage medical students at the stage of medical study and to enroll them while in the medical colleges, definitely not a private practitioner. For eligibility of an allowance under section 37(1), there should be an existence of nexus between the expenditure and the purpose of the business. The nexus should be with the existing business needs and the nexus should not be between the persons. It is quite a far-fetched preposition that after the completion of education, the services of the son shall be utilized by the assessee. This cannot be termed as a nexus with the current medical profession. The nexus should be established with the day-to-day running of current business or profession. Next is the question that whether an expenditure had the effect of reducing the assessee's taxable income and the sole purpose was to claim the expenditure at the cost of the exchequer without considering whether it was a prudent or judicious transaction or even without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of obtaining the benefit of their exports service after they acquired proficiency in the field in which they had been sent for training. Such expenditure does not become business expenditure merely because the father was in a position to debit the expenditure to the accounts of the business. Even the jurisdictional High Court in the case of CIT v. Hindustan Hosiery Industries [1994] 209 ITR 383 (Bom.) has opined that the expenditure in question which was incurred for sending the son to USA for higher studies was in fact the expenditure having no nexus with the business of the assessee and not deductible as business expenditure. 7. As far as the decisions cited from the side of the appellant is concerned, the same cannot be applied being distinguishable on facts as well as on the ratio laid down therein by the Hon'ble Courts. In this regard, the decision in the case Sasson J David Co. (P.) Ltd. v. CIT [1979] 118 ITR 261 (SC), the view was that the expression wholly and exclusively does not mean "necessarily". Here in the present case, the assessee has even not established that the expenditure was wholly and exclusively required for the running of medical profession at the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... result of that expenditure, the trainee had secured both a degree and training which would be of assistance to the assessee company. Further, a finding was also given that she had in fact served the company on her return to India. In those circumstances, it was held that the expenditure incurred on the foreign education of the daughter was allowable as a deduction. The distinguishing feature of this precedent is that the daughter had not gone for higher education as a relation of the director but through a resolution of the company, she was allowed to go abroad for education being an employee of the company, because admittedly, she was working in the Editorial Department of the paper. Otherwise also, a company is entitled for claim of a genuine expenditure incurred on the employees and merely because of relationship, it should not have been disallowed if proved to be wholly and exclusively for the purpose of the business. In this case, the admitted position is that her education abroad was directly going to improve the business of the assessee and in fact, after her return, she had joined the company. Contrary to this, in this appeal, the son of the assessee was not working in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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