Foreign education expenses of director allowed as business expenditure u/s 37(1) being incurred in furtherance of assessee’s business interest
ABCAUS Case Law Citation:
ABCAUS 2641 (2018) (11) ITAT
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) in inter alia confirming of disallowance of foreign education expenses of director u/s 37(1) of the Income-tax Act, 1961 ( the Act ) made by the Assessing Officer (AO).
The assessee company had claimed foreign education expenses of its Chairman and Managing Director (CMD). In support of the expenditure, the assessee produced Board Resolution authorizing the expenses. The stated expenditure was claimed to be incurred towards attending the Policy and Business programs of a two Foreign Universities of USA.
As per the arrangement, immediately after completion of the said program, the CMD was to return back to India and serve the company for a minimum period of 5 years after that and no remuneration was payable to him during the tenure of the program.
However, finding no nexus of the said program with the business of the assessee and for want of necessary documentary evidences, the AO disallowed the same.
Aggrieved with the order, the assessee agitated the same before first Appellate Authority. However, the addition was confirmed.
The Tribunal observed that the undisputed facts was that the director in question was first promoter director of the assessee company and was qualified as B.S. in economics from a Foreign University and was in the business for over 10 years during which the assessee company grew considerably.
It was firther observed that the expenses were incurred in relation to attending of for one year programs on Policy and Business which was designed as an executive program for experienced professionals having relevant work experience who wished to develop analytical and leadership skills necessary to formulate and advocate policy on key international issues.
It was also noted that the arrangement between the company and the CMD was duly supported by an agreement having onerous stipulations for the director to return back to India after completion of the program and serve the assessee for a minimum period of 5 years. Also, the director was liable to refund the said expenditure in case of breach of various terms of the agreement. The expenditure was duly authorized by the Board of Directors of the assessee company.
In view of the above facts, the Tribunal held that the aforesaid expenditure was incurred by the assessee fulfilled the conditions of Section 37(1) and was incurred in furtherance of assessee’s business interest and hence allowable.
The Tribunal deleted the addition and allowed the relevant ground of appeal.