In Aswathanarayana & Eswara v. Deputy Commissioner of Income-tax, Circle-I, Chennai [Tax Case Appeal No. 409 of 2009 dated March 30, 2021], Aswathanarayana & Eswara (“the Appellant”) has filed the current appeal challenging the Order No. No. 550/Mds/2008 dated November 21, 2008 passed by the Hon’ble Income Tax Appellate Tribunal (“ITAT”) regarding confirmation of disallowance of expenses incurred under Section 37 of the Income Tax Act, 1961 (“the IT Act”).
One of the partners of the Appellant firm was sent to Australia for higher education. The Appellant claimed deduction for expenses incurred on education of the partner. The Assessing Officer (“AO”) held that said expenses were personal in nature and hence not allowable as deduction.
The Appellants contended that the course which the partner attended had a direct relation with the profession carried on by the Appellants and because of which, the Appellants had secured several important contracts.
The Hon’ble Madras High Court noted that there was no material placed by the Revenue to prove that the contentions put forth by the Appellant about the contracts being secured because of the educational qualification and course as attended by the partner was either false or untrue.
Further relying on the judgments of M. Subramaniam Bros. v. Commissioner of Income Tax [TAX CASE NOS. 202 AND 203 OF 1987 dated December 13, 2000] and Commissioner of Income-tax v. R.K.K.R. Steels (P.) Ltd. [TAX CASE NO. 217 OF 1988 dated November 26, 2001], held that it is not a case of misuse of provisions of Section 37 of the IT Act to impose personal expenditure under the head of Business expenditure.
Held that the expenditure incurred by the Appellant is allowed as deductions, the Order passed by the ITAT is set aside and the question of law is decided in favour of the Appellant.
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