The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) held that the deletion of the disallowance of Education Expenditure under Section 37 of the Income Tax Act,1961 is justified because the assessee provided detailed information regarding Director’s Education Fees.
The assessee M/s. Iris Products filed original return of income for assessment year 2013-14 declaring total income of Rs. 26,79,105/-. The scrutiny assessment under Section 143(3) of the Income Tax Act was completed determining total income at Rs. 28,76,960/-.
On verification of details, the Assessing Officer (AO) observed that the assessee claimed an expenditure of Rs. 14,18,000/- towards education fees of director’s son under the head salary and wages revealed in Annexure B of 3CD report.
The AO further observed that assessee had said that the fees was paid to Director Anang Lalbhai for the post graduate course of his son Arjun Lalbhai Rutgers, the State University of New Jersey for assessment year 2013-14. Arjun Lalbhai is a major shareholder in the assessee company having 43.44% shareholding and is director in the company. The AO after taking cognizance of the reply made addition of Rs. 14,18,000/- for disallowance of expenditure on education to Director under Section 37 of the Income Tax Act.
Aggrieved by the order the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], which partly allowed the appeal of the assessee.
The Revenue being aggrieved filed an appeal before the Tribunal.
Departmental Representative (DR) submitted that the education fees of the director has not direct nexus with the business and therefore the deletion by the CIT(A) of the disallowances of expenditure on education is not justified.
Authorized Representative of the assessee (AR) relied upon the order of the CIT(A) and further submitted that it is not the director’s son but it is the director himself has opted for education for the betterment of the business structure and the progress of the company’s business.
Further he submitted that the assessee immediately joined assessee company after completing MBA and has taken charge of the assessee company.
The Single Member Bench comprising of Ms. Suchitra Kamble, Judicial Member observed that the reopening itself is not justified as the assessee has given all the details related to the education fees of the director during the assessment proceedings passed under Section 143(3) of the Income Tax Act. In fact, it is mere change of opinion. Thus, application filed by the assessee under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963 was allowed.
Thus, the appeal of the Revenue was dismissed.
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