Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, B Bench, Mumbai
O R D E R
Per Sandeep Gosain, JM
This appeal has been filed by the assessee against the order of the CIT(A)-24, Mumbai dated 11.11.2013 for A.Y. 2010-11.
The assessee has raised the following grounds of appeal: - “1.0 The order passed by the learned Commissioner of Income-tax (Appeals)-24, Mumbai confirming the assessment order passed u/s 143(3) of the Income-tax Act, 1961 by the assessing officer, is both bad-in-law and bad-in-facts. DISALLOWANCE OF MANAGEMENT TRAINING & DEVELOPMENT EXPENSES: Rs. 17,86,032/- 2.0 The learned Commissioner of Income-tax (Appeals) erred in - (a) confirming the disallowance made by the assessing officer, of Management training and Development expenses of Rs.17, 86,032/- and (b) confirming the finding of the assessing officer that these expenses were personal expenses of partner and were not incurred for the purpose of business of the assessee.
M/s. Belim Electromac Industries 3.0 The assessee may be allowed to add, amend, alter or raise additional grounds of appeal
.”
3. The brief facts of the case are that the assessee firm is engaged in the business of re-rolling steel and purchase and sale of steel. The return of income was filed by the assessee on 23.09.2010 declaring total income of `11,65,120/- The case was selected for scrutiny and requisite statutory notices were issued. The AO, during course of assessment proceedings noticed that the assessee has incurred an expenditure of `17,86,032/- on travelling expenses of Shri Himanshu Parihar, son of one of the partners, an electrical engineer by qualification and an employee of the assessee firm. Therefore, the AO called for details and documents and explanation from the assessee for incurring the same and claiming the above amount as revenue deduction. The AO did not accept the submissions of the assessee and disallowed the said expenditure.
4. Aggrieved by the order of the AO, the assessee preferred appeal before the CIT(A) and the CIT(A), after considering the facts of the case, dismissed appeal filed by the assessee. Against the order of the learned CIT(A) the assessee preferred the present appeal before us raising the above mentioned grounds.
5. The solitary ground raised by the assessee before us is challenging the order of the CIT(A) in confirming the disallowance made by the AO on management training and development expenses of `17,86,032/- and confirming the findings of the AO to the effect that the expenses were personal expenses of the partner and were not incurred for the purpose of business of the assessee.
6. From the facts of the present case we noticed that the AO disallowed the claim of the assessee by holding that the expenses in question, i.e. `17,86,032/- were incurred on Shri Himanshu Parihar, a management trainee, for his education was not a training expenditure and it was not a M/s. Belim Electromac Industries genuine business expenditure. It was further held that the said expenditure incurred by the assessee on higher education of the son of the partner in a university in USA was not for the business purpose and is thus not allowable as deduction while computing business income of the assessee firm and therefore added the same to the income of the assessee. The learned CIT(A) also sustained the said addition whereas in the contrary the assessee submitted that sponsoring higher education and training of Shri Himanshu Parihar with Institute of Technology at Chicago was not personal expenses of the partners and were incurred wholly and exclusively for the purpose of assessee’s business. It was also submitted that there was clear nexus between the expenditure on foreign higher education and training of Shri Himanshu Parihar with the business of the assessee. At this stage the learned A.R. also drawn our attention to the application filed by the assessee for admission of additional evidences under Rule 29 of the Appellate Tribunal Rules, 1963.
7. On the other hand, the learned D.R. strongly contested the said application moved by the assessee for admission of additional evidences.
We have heard both the parties at length on this application moved by the assessee for seeking admission of additional evidence. As per the facts contained in the application, it is submitted by learned A.R. that Shri Himanshu Parihar prior to his studies and training was working with the assessee as an employee for a salary of `10,000/- per month. It is further submitted looking at his calibre and intelligence, a sponsorship agreement was entered into with him and as per the agreement he was sent for higher education and training to USA and therefore these expenses were borne by the firm provided that on completion of his training he would return to India and work with the assessee for a minimum period of five years. It is further submitted in the application that Shri Himanshu Parihar, after his training, as per the terms of agreement has joined the assessee firm. It was also submitted that taking into account his qualifications, skills and experience acquired by him subsequent his higher education and training
M/s. Belim Electromac Industries he has been in employment at remuneration which is much lower than remuneration that he would have fetched otherwise from other employers. A chart showing comparison of remuneration that he would have fetched from other employers and actual salary drawn from the assessee is enclosed at page No. 5 of the paper book. The remuneration that he would have fetched from other employers is duly supported by offer letters from e-Pace Technologies (enclosed at page Nos. 6 & 7 of paper book) and HGST Inc (pages 8 to 10 of paper book). In order to support the contentions contained in the application, the learned A.R. submitted that admission of the aforesaid additional evidences would not, in any way prejudice the Revenue, rather it would render assistance to the Tribunal to dispose off the appeal in accordance with law. The learned A.R. also relied upon certain judgements mentioned in the application.
Having gone through the facts of the present case as well as the contentions contained in the application and after hearing the rival contentions, we are of the view that the documents now being relied upon by the assessee by way of additional evidences go to the root of the case and in any case no prejudice is caused to the Revenue. Therefore the additional evidences filed by the assessee are admitted.
Since we have already admitted the additional evidences filed by the assessee and admittedly these evidences were not before the AO at the time of framing the assessment, therefore the matter is restored back to the file of the AO to verify the additional evidences and decide the issue afresh after providing reasonable opportunity of hearing to the assessee.
In the result, the appeal filed by the assessee is allowed for statistical purposes.