TMI Blog2008 (10) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... seventh floor under an agreement dated October 8, 1992 ; M/s. R.J. Wood and Co. Ltd. leased a portion measuring 1770 square feet out of the extent of 6350 square feet owned by it to the assessee. The assessee under an agreement dated November 16, 2000 styled as leave and licences agreement granted a licence to M/s. American Express Bank Ltd. to use the premises of which it was a lessee. The licencee was to pay a sum of Rs.13,66,875 as quarterly licence fee. The licence deed also mentions that the licence is together with fixtures and fittings that existed in the licenced premises. The licence was for a period of three years commencing from January 1, 2001 and expiring on December 31, 2003. In the return of income filed by the assessee for the assessment year 2003-04, the licence fee received by the assessee was offered to tax under the head "Income from business or profession". The Assessing Officer called upon the assessee to explain as to how the licence fee received can be business income and also show-cause as to why the same should not be treated as income from other sources. In reply, the assessee pointed out that under clauses 53, 109, 129 and 131 of the object clause (oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the main entrance door, which indicates that the control and possession of the premises was always with the assessee. It was therefore submitted by him that it was not a case of sub-letting by the assessee ; but mere licence granted for use of the premises. It was queried by the Bench as to how this will make a difference regarding treatment of head of income under which income in question has to be assessed. Learned counsel for the assessee could not give answer to the query of the Bench. Learned counsel for the assessee, however, relied on the decision of the hon'ble Supreme Court in the case of S. G. Mercantile Corporation P. Ltd. v. CIT [1972] 83 ITR 700. In the aforesaid decision, the question before the hon'ble Supreme Court was as to whether the income from sub-letting of the property was to be construed as income from business or as income from other sources. The hon'ble Supreme Court noticed that the assessee was a company formed with object of taking on lease properties and dealing with the same commercially. The court further found that the assessee was doing the said activity systematically and in an organised manner with the object of doing the same as business. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esolved as follows : "The board discussed various electronics, computer related and telecommunications related businesses. Keeping in view investment outlay, gestation period, it was considered appropriate to pursue electronic media/computer related activity for printing for its wide applications and good scope. It was proposed that adequate knowledge and training in this field would be essential to pursue this. The board then decided to select someone for training in this field. There were further discussions in this matter and it was resolved that Mr. Ravinder Dhalla may consider and suggest some suitable candidate and select someone to be trained in this field." In the board meeting held on July 27, 2000, the board resolved that Mr.Naval Kumar, who was presently working with the company should be sent for training in computer related study in printing. The board resolved that the company will bear all his travelling, maintenance and training expenses, which was estimated to cost around US dollar 30,000 per annum. The employee was to pursue education for five years and during this period of five years, he was also to be paid monthly salary of Rs. 5,000 per month over and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax (Appeals) giving rise to the grounds of appeal by the assessee before the Tribunal. Learned counsel for the assessee submitted that Mr. Naval Kumar was an employee of the company prior to his departure to America for higher studies. It was further explained by him that the study undertaken by Mr. Naval Kumar abroad was in relation to the business of the company. It was also submitted by him that as per the agreement between the assessee and Mr. Naval Kumar, he was obliged to serve the assessee for a period of four years after his return from USA and in case of default, he was bound to reimburse the expenses incurred by the assessee. It was also brought to the notice by learned counsel for the assessee that in the assessment year 2001-02, the assessee had claimed expenses on account of staff training and those expenses included expenses for training of Mr. Naval Kumar abroad. The Assessing Officer made a specific query in the assessment year 2001-02 regarding the aforesaid expenses and the assessee submitted all the details. The Assessing Officer accepted the explanation of the assessee and allowed the expense as one in relation to the business of the assessee. It was further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business was not established, the expenses were rightly disallowed by the Revenue authorities as one personal in nature. We have considered the rival submissions. Mr. Naval Kumar was sent abroad for education in November, 2000. As early as June 19, 2000, the board considered the falling and competitive industry of textile business and decided to diversify into electronic media and computer related activity for printing. In this board resolution, there is no mention with regard to carrying out any printing with regard to towels exported by the assessee. The board resolution clearly indicates that the assessee wanted to pursue a new line of business with no indication of its relevance to the existing line of business. It was pursuant to this board resolution that Mr. Naval Kumar was sent to USA to pursue his education. As rightly contended by the learned Departmental representative that there was no evidence as to show what was the nature of course that was to be pursued by Mr. Naval Kumar in USA. The certificate for eligibility for non-immigrant student status mentions that Mr. Naval Kumar was to pursue a course in Rochester Institute of Technology, USA with computer science a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we notice that the explanation given by the assessee before the Assessing Officer does not highlight all the aspects which have been brought out by the Assessing Officer in the order of the assessment in the present assessment year. It is well-settled that principles of res judicata do not apply in income-tax proceedings. The assessee has to establish that the expenditure claimed by him is wholly and exclusively for the business which it was carrying on. The decision in the case of Sakal Papers P. Ltd. [1978] 114 ITR 256 is on different facts and the submissions of the learned Departmental representative in this regard have to be accepted. On an overall appreciation of the evidence and explanation submitted on behalf of the assessee, we are of the view that the assessee has failed to explain and substantiate that the expenditure on staff training and salary paid to Mr. Naval Kumar was wholly and exclusively for the purpose of business of the assessee. We, therefore, confirm the orders of the Revenue authorities and dismiss Ground Nos. 2 and 3 of the assessee. In the result, appeal by the assessee is dismissed. The order has been pronounced on 31st Day of October, 2008. - - T ..... 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