Exp. on partner’s foreign education allowable as firm secured several contracts due to expertise acquired by partner
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Case details: Aswathanarayana & Eswara v. DCIT - [2021] 129 taxmann.com 111 (Madras)
Judiciary and Counsel Details
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- M. Duraiswamy and Mrs. T.V. Thamilselvi, JJ.
- R. Venkat Narayanan for the Appellant.
- T. Ravi Kumar, Sr. Standing Counsel for the Respondent.
Facts of the Case
Assessee was a partnership firm consisting of two brothers and two sons of one brother. All the four partners were duly qualified Engineers and the firm was carrying on Engineering Consultancy Profession for leading Indian Corporate Clients. One of the partners was sent to Australia for higher education. Assessee claimed deduction for expenses incurred on education of partner. Assessing Officer (AO) held that said expenses were personal in nature and hence not allowable as deduction.
Assessee contended that the course underwent was directly related to the profession carried on by the firm. The firm has secured several important contracts which were attributable to the educational qualification and expertise acquired by the partner of the firm abroad.
High Court held
On appeal, Madras High Court held that after completion of the post-graduate degree, the partner continued to work for the firm, and materials were placed to show that several important contracts have been secured by the firm, which they attribute to the educational qualification and expertise acquired by the partner of the firm abroad.
There was no material place by the Revenue to demonstrate that any part or whole of the stand taken by the assessee was either false or untrue. Thus, this was not a case where there was a misuse of the provision of Section 37 of the Act to foist a personal expenditure as business expenditure. Therefore, the expenditure was allowable as deduction.
Case Review
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- Aswathanarayana & Eswara v. Dy. CIT [2018] 97 taxmann.com 572/258 Taxman 210 (Mad.) (para 4) followed.
- Aswathanarayana & Eswara in [IT Appeal no. 550/Mds/2008, dated 21-11-2008] (para 7) reversed.
List of Cases Referred to
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- Aswathanarayana & Eswara v. Dy.CIT [2018] 97 taxmann.com 572/258 Taxman 210 (Mad.) (para 4)
- M. Subramaniam Bros. v. CIT [2001] 119 Taxman 600/250 ITR 769 (Mad.) (para 5)
- CIT v. R.K.K.R. Steels (P.) Ltd. [2003] 131 Taxman 830/[2002] 258 ITR 306 (Mad.) (para 5).
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