The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the scholarship to student not associated with the company for any commercial or business purpose would not be allowed as deduction.
Assessee- VIC Enterprises Pvt. Ltd. was one of the holding companies of Dabur India Ltd. and was also an NBFC carrying on its business of financing and investment. Assessee had sponsored a meritorious student Miss Vinne Van Dal to study in California University under the Faculty of Economics for the future requirement and expansion of the assessee. Vandal was not a relative of any director of the company and the sponsorship had been made on account of commercial expediency keeping in mind to have such type of person in business would be beneficial for the assessee.
M. P. Rastogi, on behalf of the assessee submitted that the assessee society was a socio-economic society, running on social justice concept and the sponsorship of Vinne Vandal was based on the common interest of the community than the personal interest. He further contended that the deduction should be allowed as the sponsorship expenses by the assessee, though incurred on account of commercial expediency, had been with an intent of helping a meritorious student.
The Delhi Bench of B R R Kumar (Accountant Member) and Yogesh Kumar US (Judicial Member) observed that the incumbent student was neither an employee nor associated with the company for any commercial or business purpose. The bench also observed that the expediency of sponsoring the student had not been brought on record nor the student had contributed in any manner for augmenting, contributing to the business of the assessee.
The bench further held that the sponsorship could be treated as a “charity” or “gratis” could not be treated to be eligible for the deduction. The bench accordingly dismissed the ground.
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