The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) has held that the sole proprietor cannot be eligible for a tax deduction for his own education expenses as the same cannot be treated as business expenses under the Income Tax Act, 1961.
The assessee, an individual engaged in the business of trading in bullion and base metal through his sole proprietorship concern, incurred expenditure on his own education whereby he pursues graduate i.e, B.SC (Hons) course in management and claimed a deduction for the said expenses in his tax return. The amount of deduction he claimed for his education expenses was around one crore.
However, the Assessing Officer disallowed the same by holding that the expenses were in the nature of personal expenditure, which is not allowable while computing taxable business income from such sole proprietorship concern, in terms of provisions of section 37 of the Income Tax Act.
Before the Income Tax Appellate Tribunal, the assessee relied on a case wherein the assessee company claimed a sum of Rs. 5,00,000/- spent on the education of the daughter of the managing director of the company.
Diving deeply into the facts of the case, the Tribunal noted that the above case law is not applicable in the instant case since the assessee pursued the graduation course when even the business has not started and what to speak about an intimate connection with the business.
While dismissing the second appeal filed by the assessee, the Tribunal said that “What is relevant is not just the ultimate benefit or utilization of such expenditure for business purposes but what is equally relevant is that the point in time when the expenditure was incurred, the business of the assessee should have been set up which, however, is not the case in the instant case.”
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