Company Eligible to Claim Deduction of Educational Expenses of Director: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the education expenses incurred by a company for its Director are eligible for deduction under the Income Tax Act, 1961.

The Company claimed that the director was first promoter director of the assessee company and was qualified as B.S. in economics from Wharton School of the University of Pennsylvania and was in the business for over 10 years during which the assessee company grew considerably. According to them, the expenses were incurred in relation to attending of Policy and Business programs of John Hopkins University, Washington DC and of Stanford University, California covering the period from January, 2011 to December, 2011. The program 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. Further, the said arrangement was duly supported by an agreement dated 13/01/2011 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.

However, the Assessing Officer rejected the deduction claim under Section 37(1) of the Income Tax Act.

On the second appeal, the Tribunal found that the same has been incurred in relation to knowledge enhancement of the key personnel of Assessee Company namely Nakul Toshnival aged around 36 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. The offer letters of the concerned universities offering the aforesaid course to the director has also been placed on record. The above factual matrix lead us to conclude that the aforesaid expenditure as 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 said.