Educational Expenses of Daughter of Assessee not to be Considered as Incurred for Purpose of Business by Assessee’s firm: ITAT denies Claim [Read Order]

The Ahmedabad Bench of the Income Tax Appellate Tribunal(ITAT), in a recent ruling in favour of the Revenue has held that, the educational expenses incurred for the daughter of the assessee’s firm shall not be considered as incurred for purposes of business.

The Tribunal comprising Annapurna Gupta and Suchitra R Kamble had identified the issue to be adjudicated as, is whether the expenditure incurred by the assessee on the education of his daughter in the field in which the assessee was in business i.e. in the field of architecture, could be claimed as expenditure incurred for the purpose of the assessee.

The counsel for the appellant Snehal Mahendrakumar Shah contended that, said expenses had been incurred wholly and exclusively for the purpose of the business of the assessee, and had not been incurred for the reason that Ms.Sunaina Shah was the daughter of the assessee.

The emphasis of the argument of the counsel for the assessee before the Tribunal was that the primary intention behind incurring the expenditure was to utilise the advanced knowledge and experience of the daughter of the assessee for advancing the business of the assessee.

The appellate authority, however, pointed out that “What is not to be lost sight of is the very pertinent fact of the relationship between the assessee and Ms.Sunaina Shah – that of father and daughter (parent-daughter)” and observed that “the expenditure incurred by the assessee on the daughter’s education in the present case before us is primarily on account of personal relationship of father and daughter”.

The contract entered with the daughter to work with the assessee firm lacked authenticity, according to the view of the bench, and appeared to be an after-thought since, the contract mentioned the daughter to be a citizen of America and she was contracted to work with the assessee firm for five years, that too after completing all her studies which she intends to do in USA.

Deciding the appeal against the assessee and dismissing it on the merits, observing that “It was merely because these expenses were in relation to the daughter of the assessee that they were incurred by the assessee, and not dominantly because they were for the purpose of business of the assessee firm”, the tribunal held as, “we have no iota of doubt in holding the impugned expenditure as personal and not allowable therefore as business expenditure.”

To Read the full text of the Order CLICK HERE

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