BABA STEELS PRIVATE LIMITED,MUMBAI vs. INCOME TAX OFFICER WARD 14(1)(2), MUMBAI

The brief facts as emanating from the records are: The assessee is engaged in manufacturing and trading of steel wires and bars. In scrutiny assessment proceedings the Assessing Officer made disallowance in respect of foreign travel expenditure Rs.78,000/-, employees training expenditure Rs.23,28,336/- and mismatch of TDS Rs.24,800/-. Aggrieved against the assessment order dated 27/02/2015 passed under section 143(3) of the Income Tax Act, 1961( in short ‘ the Act’) the assessee filed appeal before the CIT(A). The CIT(A) granted part relief to the assessee. The CIT(A) rejected assessee’s claim of employees training expenses and foreign travel expenses in entirety. The CIT(A) deleted the addition of Rs.24,800/- on account of mismatch of TDS. Against the additions confirmed, the assessee is in further appeal before the Tribunal.

Shri Lal Chand Chaudhary, appearing on behalf of the assessee submitted that the CIT(A) has rejected assessee’s claim of foreign travel expenses and employees training expenses merely on the ground that the expenditure was incurred on the higher studies and travel expenses of son of the director. The ld. Authorized Representative for the assessee contended that merely for the reason that foreign travel expenses and employee training expenses was incurred by the assessee in respect of employee who happens to be son of the director cannot be disallowed. To support his contention, the ld. Authorized Representative for the assessee placed reliance on the decision of Tribunal in the case of J.B.Advani & Co Ltd. vs. JCIT, 1 SOT 830(Mum). The ld. Authorized Representative for the assessee further placed on record agreement for sponsorship of higher education of Mr. Abhishek Sanjay Agrawal and the assessee company. The ld. Authorized Representative submitted that Mr. Abhishek Sanjay Agrawal was on the rolls of assessee company as Marketing Assistant since April,2010 and was drawing monthly salary of Rs.15,000/-. After his foreign education and training he rejoined the assessee company and there was increase in the annual turnover of the assessee company.

On the other hand, Shri Kumar Padampani Bora, representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee. The ld. Departmental Representative submitted that assessee had incurred expenditure on the education and foreign travel expenditure of the son of director. The expenditure is not allowable in the hands of the assessee company, hence, the same was added back.

We have heard the submissions made by rival sides and have perused the orders of authorities below. It is an undisputed fact that foreign travel expenses and employees training expenses was in respect of Mr. Abhishek Sanjay Agrawal son of one of the directors of the assessee company. The ld. Authorized Representative for the assessee has placed on record various documents to show that Mr. Abhishek Sanjay Agrawal was on the rolls of the company and was drawing salary prior to his foreign training/education sponsored by the assessee. After completing completion foreign training/education, Shri Abhishek Sanjay Agrawal joined the assessee company in accordance with sponsorship agreement dated 05/01/2011.

The assessee has placed heavy reliance on the decision rendered in the case of J.B.Advani & Co. Ltd.(supra) to contend that such training and foreign travel expenditure is allowable under section 37(1) of the Act. The relevant extract of the findings of the Tribunal on this issue are as under:-