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IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, MUMBAI
BEFORE S/SHRI B.R.BASKARAN (AM) AND SANJAY GARG, (JM)
.. , ,
./I.T.A. No.7826/Mum/2010
( / Assessment Year : 2007-08)
Naina's Apparel Pvt Ltd, / Asst.Commissioner of Income Tax-
13/14, New Majestic Shopping 5(1),
Vs.
Centre, Aayakar Bhavan,
144 J S S Road, M K Road,
Girgaon, Mumbai-400020
Mumbai-400004
( /Appellant) .. ( / Respondent)
. / . /PAN/GIR No. : AABCN1197B
/ Assessee by Shri Mayur Kishnawala/
Keyur Dhami
/ Revenue by Shri Asghar Jain V P
/ Date of Hearing
: 15.1.2015
/Date of Pronouncement : 13..2.2015
/ O R D E R
Per B.R.BASKARAN, Accountant Member:
The assessee has filed this appeal challenging the order dated 01-
09-2010 passed by Ld CIT(A)-9, Mumbai and it relates to the assessment
year 2007-08. The assessee is aggrieved by the decision of Ld CIT(A) in
confirming the disallowance of following expenses:-
(a) Staff Welfare expenses - Rs.3,40,000/-
(b) Donation - Rs. 10,000/-
2. The first issue relates to the disallowance made out of staff welfare
expenses claimed by the assessee. The AO noticed that the assessee has
2 ITA. No 7826/Mum/2010
paid a sum of Rs.3,40,000/- as fees to M/s S.P. Jain Management School
on behalf of one of the directors of the assessee company. The assessee
claimed the same as expenditure under the head "Staff Welfare expenses".
The AO, however, disallowed the said claim and the Ld CIT(A) also
confirmed the same by holding that the education program would only
improve the personal skill of the director and hence the same cannot be
considered to have been incurred for business purposes.
3. We heard the parties on this issue. The Ld A.R submitted that M/s
S.P. Jain Management School has started a course on Management
exclusively for persons carrying on Family business. The assessee-
company is also a family controlled business entity and hence it has
admitted one of the directors in this programme. He further submitted
that one of the condition prescribed for admitting in this course was that
the candidate should be sponsored by a business entity. The ld. AR
accordingly submitted that the assessee, by admitting its director in this
course, has obtained benefit due to the enrichment of knowledge in better
management of family controlled business entities. He further submitted
that the ld. CIT(A) has taken a view that the director was attending the
class whole time, i.e., without attending to the business of the assessee.
The ld. AR submitted that the course was conducted only for one week in
a month and the concerned director was attending to the business for
remaining three weeks. He further submitted that the concerned director
was working with the company and drawing salary for the past one and
half years before getting admission into the course. Accordingly, he
3 ITA. No 7826/Mum/2010
submitted the assessee company has paid the fees on business
considerations and hence, the ld. CIT(A) was not right in observing that
the education programme has actually enriched the personal knowledge of
the director. He also submitted that the assessee has also paid fringe
benefit tax on the above said payment. He submitted that course
curriculum of the above said programme was totally business oriented and
hence there was direct benefit accruing to the assessee. Accordingly, he
submitted that the expenditure should be fully allowed as business
expenditure.
4. On the contrary, the ld. DR submitted that the education program
has only enriched the knowledge of the concerned director and further,
there is no business nexus between the assessee's business and the
expenditure incurred. Accordingly he submitted that the ld. CIT(A) was
justified in confirming the disallowance. In this connection, the ld. DR
placed reliance on the decision of the Bombay High Court rendered in the
case of CIT V/s Hindustan Hosiery Industries [1994] 73 TAXMAN 521
(BOM.), wherein the Hon'ble jurisdictional High Court has confirmed the
disallowance of expenses incurred on education of one of the partners of
the firm.
5. In the rejoinder, the ld. AR submitted that the decision rendered by
the Hon'ble Bombay High Court in the case of Hindustan Hosiery Industries
(supra) is not applicable to the facts of the present case, since the
4 ITA. No 7826/Mum/2010
assessee therein spent money on one of the partners of the assessee firm,
where as in the instant case, the assessee company has paid fees for
admitting one of the directors in the management course and the said
director was already drawing salary from the assessee-company.
6. Having heard rival submissions, we find merit in the submissions of
the ld. DR. Though the course curriculum of the education programme was
related to the "management of the family business", yet, in our view, the
assessee failed to establish the nexus between its business and the
expenditure. The education programme undertaken by the director, in our
view, would benefit the concerned director in enriching his knowledge.
Though the Ld A.R contended that the said knowledge would ultimately
benefit the assessee's business, in our view, it was only a farfetched
reason to substantiate claim. In our view, the decision rendered by the
Hon'ble Jurisdictional High Court in the case of Hindustan Hosiery
Industries (supra) would squarely apply to the facts of the instant case.
The assessee, in the instant case, has failed to show the direct nexus
between the assessee's business and expenditure. Accordingly, we do not
find any infirmity in the decision rendered by the ld. CIT(A) on this issue.
7. The next issue relates to the disallowance of donation payment of
Rs.10,000/-. The AO disallowed the donation claimed by the assessee for
the reason that the assessee failed to furnish any material to support the
said claim. Before the ld.CIT(A) and before us also the assessee has failed
5 ITA. No 7826/Mum/2010
to furnish any proof to support the claim of payment of donation. Even
otherwise, the assessee has failed to show cause as to how the donation is
allowable as business expenditure. Hence, we do not find any infirmity in
the order of ld.CIT(A) in confirming this addition also.
8. In the result, the appeal of the assessee is dismissed.
The above order was pronounced in the open court on 13th Feb, 2015.
13th Feb, 2015
sd sd
( /SANJAY GARG) ( .. / B.R. BASKARAN)
/ JUDICIAL MEMBER / ACCOUNTANT MEMBER
Mumbai: 13th Feb,2015.
. ../ SRL , Sr. PS
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT(A)- concerned
4. / CIT concerned
5. , , /
DR, ITAT, Mumbai concerned
6. / Guard file.
/ BY ORDER,
true copy
(Asstt. Registrar)
, /ITAT, Mumbai
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