TMI Blog2018 (12) TMI 1210X X X X Extracts X X X X X X X X Extracts X X X X ..... out of love and affection towards their daughter or it was an expenditure incurred in the course of the business of the assessee. As far as requirement of the filing of the application form, AO has noted that no original application was filed by the assessee before him. CIT(A) has also noted that no copy of application for admission was filed by the assessee before him. He has also noted that no other evidence have been filed related to documents submitted during visa interview before the USA Embassy Authorities. Thus, it is evident that the assessee has not complied with the direction of the Tribunal issued at the time of remanding the matter back to the Assessing Officer. Before us also, only information sheet/medical & physical history of the student has been filed and copy of admission form has not been filed. We find that the assessee has accepted the decision of the Tribunal in first round of proceedings and no appeal has been filed against the said direction of the Tribunal. In such circumstances, not complying with the direction of the Tribunal, itself is sufficient to dismiss the appeal of the assessee. In addition to the above, the documents filed in relation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st and notice for penalty are, therefore, liable to be set aside and quashed as unsustainable, both of facts and in law. 3. Identical grounds have been raised in other assessment year except change of amount. 4. Briefly stated facts of the case are that in the assessment year 2001-02, the assessment under section 143(3) read with section 263 of the Income-tax Act, 1961 (in short the Act ) was completed after making addition of ₹ 29,72,710/- on account of educational expenses incurred by the assessee for overseas education of Ms Esha Arya, who happened to be daughter of one of the directors of the assessee company. On further appeal, the Ld. CIT(A) dismissed the appeal. In assessment year 2002-03; 2003-04 and 2004-05, similar additions of ₹ 16,62,227/-; ₹ 21,51,045/- and ₹ 3,27,837/-per made by the Assessing Officer on account of educational expenses incurred by the assessee on behalf of Ms Esha Arya, daughter of one of the directors of the assessee company, in assessment orders passed under section 143(3) of the Act. The assessee preferred appeal against the said orders; however, appeals of the assessee were dismissed. In all the four assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment orders, sustaining the disallowance mainly on the ground that the assessee did not produce the original application form of Miss Esha Arya for admission to the Boston University. The Assessing Officer also noted that the assessee did not have any scheme for training of the employees and particularly for imparting higher education. 6. On further appeal, the Ld. CIT(A) upheld the disallowance as the assessee failed to produce before him either copy of application form of Ms. Esha Arya or other evidences justifying the expenditure as business expenditure. The relevant finding of the Ld. CIT(A) is reproduced as under: 6.2 I have carefully considered the submissions made on behalf of the appellant, the findings of the Assessing Officer and the facts on record. I have also perused the judgments relied upon by learned counsel of the assessee. I have also perused the directions given by the Hon ble ITAT; New Delhi which were very specific. The appellant was given clear directions by the ITAT to furnish all the facts starting from making the application of admission till making the last payment. However, it is found that no evidence regarding application of admissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is no nexus between education expenses incurred abroad for Miss Esha Arya and the business of the appellant-company. In any case, such expenditure on facts cannot be said to be laid out or expbiTdeTwholly and exclusively for the purpose of business. In view of the foregoing discussion and for the reasons given by the AO, I am of the considered view that the expenditure on education of Miss Esha Arya is in nature of personal expenditure of the Director of the appellant company, which cannot be stated to be laid out or expended wholly and exclusively for the purposes of business of the appellant company. As such, these expenses cannot be considered as allowable expenses under section 37(1) of the Act. Therefore, disallowance made by the AO on account of the educational expenses incurred by the appellant on behalf of Ms Esha Arya, is hereby upheld. As a result, Ground of appeal No. 4 for the assessment years 2001-02, 2002-03, 2003-04 2004-05 is dismissed. 7. Aggrieved with the above finding of the Ld. CIT(A), the assessee is before the Tribunal in 2nd round of proceedings. 8. Before us, the Ld. Counsel of the assessee filed a paper book containing pages 1 to 224 in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee company and allowable under the provisions of the Act, the Ld. counsel relied on following two decisions: 1. Commissioner of Income Tax Anr. Vs. RAS Information Technology (P.) Ltd., (2011) 238 CTR 76 (Ker.) 2. Mallige Medical Centre P. Ltd. Vs. Joint Commissioner of Income Tax, [2015] 375 ITR 522 (Karn.) 9. On the contrary, the Ld DR referred to page 222 to 224 of the assessee s paper book, which was claimed by the assessee as application form for admission to the Boston University and submitted that said pages are only a student information, medical history and physical report submitted to the Boston University at the time of the admission and it was not a admission form submitted to the Boston University and thus, the assessee has failed to comply with the direction of the Tribunal for filing application form for admission to the Boston University. She submitted that the Ld. counsel has misled the Tribunal. She pointed out the date of birth of Ms Esha Arya mentioned in the student information (i.e. 03/06/1982) available on page 222 of the paperbook and submitted that Ms. Esha Arya, barely completed age of 18 years at the time of taking admission to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om India and back and other incidental expenses, have been incurred wholly and exclusively for the purpose of the business and allowable under section 37(1) of the Act or not. The assessee is before us in second round of proceedings. In first round, the Tribunal, questioned the assessee about the fact whether at the time of making application for admission to the MBA program, the company had sponsored Ms. Esha Arya or she had applied independently. The assessee was not able to furnish a copy of application for admission to the Boston University. In view of failure to substantiate the fact of a sponsoring by the assessee company, the Tribunal restored the matter to the file of the AO directing the assessee to file all evidences starting from the making of the application till making the last payment, for determining whether the expenditure was incurred by the directors of the company out of love and affection towards their daughter or it was an expenditure incurred in the course of the business of the assessee. 13. As far as requirement of the filing of the application form, the Assessing Officer has noted that no original application was filed by the assessee before him. The L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of business the onus lies on the assessee to prove that the expenditure was incurred for the purposes of business and was not of a capital nature. If it is to be allowed, the onus is on the assessee to prove the amount of expenditure which can be allowed. In order that an expenditure should qualify for deduction as contemplated by section 37(1), one of the requirements of the provision is that the expenditure must have been laid out wholly and exclusively for the purpose of the business. It cannot be disputed that before an assessee can become entitled to an allowance under that provision, he must satisfy the Department of the purpose for which the amount is spent. It is true that the taxing authorities are not entitled to go into the reasonableness of the expenses, but they are certainly entitled to be satisfied as to the commercial necessity of expending that amount. The question will always be as to the nature of the relation between the expenditure and the business, whether the benefit is remote or near, prospective or immediate, imaginary or real and so forth. The capacity in which the assessee spends will also be relevant. In the instant case, the assessee did not furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X
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