A division bench of the Bombay High Court recently held that the expenses incurred by a Company towards sending the son of its director to the USA for higher studies cannot be deducted from the taxable income as the same would not amount to ‘ Business Expenditure ’ under the provisions of the Income Tax Act, 1961.
Appellants-Assessee is a company manufacturing copper foils. The Company sent, one Mr Harsh Kumar, the son of one of the directors, to the USA for completing the course in Business Administration and claimed the deduction in respect of the same from the taxable income treating the same as ‘business expenditure’. The Company claimed that he was an employee of the Company and as per an agreement with the concerned employee, he had committed to serving the Company for ten years.
However, the Revenue denied the same.
When the matter travelled to the High Court, Justice M S Sanklecha and Justice Sandeep K Shinde observed that the expenditure was ‘general’ in nature and had no direct nexus with the business activities of the Appellant-Assessee.
“Appellants did not place better particulars on the record like, basic qualification of Mr Harsh Kumar; subjects in which he did his administration course; how such subjects has-had nexus to business activities of Appellant and so on. Though a contract was placed on record whereby Mr Harsh Kumar had agreed to render his services after completing his education and training, but that itself was not sufficient to hold that the Appellants-Assessee has proved the nexus between the expenditure and its business activities, the bench said.
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