M/S BANSAL ALLOYS & METALS PVT. LTD.,MANDI GOBINDGARH vs. ACIT, MANDI GOBINDGARH

Considering the above submissions and Judicial Pronouncements in entirety, it is submitted that, the course of Entrepreneurship and Innovation which appellant pursued would directly benefit the appellant's Business, since Innovative Skills Obtained Would Yield a Competitive advantage and it would help an organization to grow and reach, and, thus should be allowable as a deductible Expensewhile computation of Income under the head "Income from Business or Profession ". Moreover, a Board Resolution [A Copy Enclosed] dated 15.03.2010 was passed by the appellant, wherein, it has been resolved that: "The Company Will Bear all the Expenses Including Tuition and Fees, Living Expenses and all other required expenses and all other required expenses in U.S.A. After Completion of his study, he will Serve the Company at Least for a Period of 2 Years." Furthermore. Sh. Sumit Bansal, a Son of a Director Sh. Viiav Kumar Bansal is working with the appellant since April, 2013. A Proof of Factory Attendance Register and Monthly Salary/Wages Payment Register for the Month of April, 2013 and March, 2014 respectively is enclosed, substantiating the above fact. 3. The ld. Sr.DR, on the other hand, vehemently opposing the said prayer sought to place reliance upon the decision of the Hon'ble Mumbai High Court in the case of Sai Nath Motors. Copy of the said judgement though without citation was filed in the Court, it was his submission that without mentioning the specific qualification; the course or its utility in assessee's business, the education expenditure of the Director’s grand- son cannot be justified by merely filing the Board’s Resolution. It was his submission that the assessee needs to justify that the expenditure was wholly and exclusively for the business of the assessee which is the requirement of the Act. Heavy reliance was placed on the finding of the CIT(A). The same is extracted hereunder for ready reference : “4.2 I have gone through the rival submission . After careful consideration of the facts I am not inclined to agree with the contention of the appellant. This is the case wherein the assessing officer in the course of assessment proceedings interest that the appellant company has incurred expenditure of Rs. 10,39,016/- under the head of education sponsorship expenses. When enquired the appellant company explained that the said expenses were incurred to sponsor the foreign study of Sh. Sumit Bansal S/o Sh. Vijay Kumar Bansal and Grandson of Sh. Prem Chand Bansal, Director and Chairman of the company. At the time of assessment proceedings the assessing officer noticed that the appellant company has not mentioned the name of the course undertaken by Shri Sumit Bansal and its relevance for the business of appellant company. I also find in agreement with the reasoning of the assessing

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officer that in the past also the appellant company has not sponsored any of other states student for pursuing higher education abroad . In view of the fact and the decisions relied upon by the assessing officer during the course of assessment proceedings I am in complete agreement with the view of the assessing officer as the AO held that these expenses were incurred under the head of education sponsorship but are of purely of personal expenditure. The assessee has also, failed to prove that the expenditure was wholly and exclusively for the purpose of business. The reliance is placed on the decision in the case of NATCO exports Private Limited versus CIT 345 ITR 188 by honourable Delhi High Court. Wherein the honourable High Court has held that expenditure under section 37 is admissible only if the same is incurred wholly and exclusively for the purpose of business. Here in this case the appellant the appellant company has failed to discharge its onus to an established that the expenditure has been incurred exclusively and wholly for the purpose of business. Therefore, it is held that the disallowance of expenditure of Rs. 10,39,016/- incurred on the higher studies of Sh. Sumit Bansal u/s 37(1) of the Income Tax Act,1961 has rightly been made by the AO and accordingly sustained. This ground of appeal is dismissed. 4. We have heard the rival submissions and perused the material on record. It is seen that in support of its claim the assessee is found to have advanced the following written submissions before the CIT(A) which are found extracted at pages 2 to 4 of his order : “In this connection, it is respectfully submitted that an Expense amounting Rs. 10,39,016/- was incurred on Foreign Education of Sh. Sumit Bansal, a Son of a Director Sh. Vijay Kumar Bansal. However, this shall be allowable as a Business Expenditure U/s 37(1) of the Income-Tax Act, 1961incurred for the Purposes of a Business while computing Income under the Head "Income, from Business or Profession ".Sh. Sumit Bansal, a son of a Director of Sh. Vijav Kumar Bansal pursued Post Graduate Diploma in Management in "PURDUE UNIVERSITY", and, awarded the Certificated Copy of a Certificate is Enclosed] in Entrepreneurship and Innovation at West Lafayette in the State of Indiana in Management in recognition of the fulfillment of the Requirements of the Certificate Program in Management. The skills in Entrepreneurship, and, to undertake new Innovation were Learnt through the said course, so that Sh. Sumit Bansal could apply the same in creating value of the Organization.”

4.1 On a reading of the finding of the CIT(A) which has been extracted in an earlier part of this order, it is evident that these submissions on facts have not been addressed by the CIT(A). Thus, we find that the conclusion arrived at in the impugned order wherein on facts the submissions are not addressed cannot be upheld. While so holding, we concur with the submissions of the ld. Sr.DR namely that all educational expenses of the children or grand children of the Directors of the companies who ultimately may also join the family business by itself, cannot be said to be an expenditure which can be said to have been incurred wholly or exclusively for the business purposes of the assessee as the expenses for educating the children and grand children of the Directors can very well be personal expenses of the parents etc. We are conscious of the decisions wherein serving employees of the assessee companies who even if related have been sponsored for higher education

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on the undertaking that on their return, they shall join the said concern. Similarly there are decisions wherein loans may have been advanced to the children of the employees/Directors, sent for higher education with an undertaking to return and rejoin the assessee company etc. where the loan advanced is deducted from the salary paid etc., thus there can be no blanket decision that the higher education expenses of the Director’s children necessarily are business expenses. Similarly the argument that similar expenditure has been allowed for the very same relative in the earlier year which though not demonstrated on facts but even if it is correct that no disallowance was made in the earlier year by itself cannot lay down a precedent to be followed that the expenses allowed by oversight necessarily be allowed in the subsequent years. Accordingly, the impugned order is set aside back to the file of the CIT(A) with a direction to address the correct facts and pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. 5. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the Open Court on 03.10. 2018.

Sd/- Sd/-

( Dr.B.R.R.KUMAR) ( DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER

‘Poonam’ Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR Asstt. Registrar ITAT,Chandigarh.