Case: Divyakant C. Mehta Vs. Income-Tax Officer, 11(2) (2)

1. The appellant has questioned the concurrent orders of the Income Tax Appellate Tribunal dated 29.2.2012 and that of Commissioner of Income Tax (Appeals) dated 20.4.2010.2. Mr. Chatterjee, learned Senior Advocate appearing on behalf of the Appellant - assessee would submit that this appeal raises substantial question of law. He submits that the Appellant - assessee is an Advocate by profession. He filed returns for the year under consideration viz. Assessment year 2005-20006 on 29.12.2005, declaring total income at Rs.3,70,230/-. Perusal of the details alongwith the Returns, the Assessing officer noted that deduction of Rs.22,25,614/- was claimed by the assessee as expenditure incurred for higher education expenses for his daughter Hemali. The justification was that she joined the Appellants firm of Advocates. She gave an undertaking that on attaining higher qualification and degrees from the University abroad, she would come back and join the firm for a minimum period of five years, and therefore, as a part of the firm, being an employee, she was encouraged to go abroad to obtain higher educational qualification, such expenditure coupled with her undertaking would thus said to be an expenditure incurred for business of the assessee and was allowable as deduction.3. The Assessing Officer held that the Appellant was not entitled to claim deduction on account of expenses incurred for education of his daughter. The Commissioner of Income Tax (Appeals) upheld this order and even the Income Tax Tribunal dismissed the Assessees appeal. Mr.Chatterjee would submit that each one of them were bound by the judgment and order of this Court in the case of Sakal Papers (P.)Ltd. v. CIT [1978] 114 ITR 256. Mr. Chatterjee submits that merely because the assessee had sent his daughter abroad for higher education, it does not mean that the deduction cannot be claimed. The relationship has nothing to do in this case when the daughter was serving in the firm of the appellant -assessee.4. We have, with the assistance of Mr.Chatterjee, perused the concurrent findings and conclusions. We are not in agreement with him that this appeal raises substantial question of law. Each of the Authorities found that this matter was distinct from Sakal Papers (P.)Ltd. (supra). It may be that both the cases involved were of daughter being sent abroad for higher education. However, in the present case what has been found is that the appellant - assessee is a firm of Advocates. The daughter joined him and immediately was sent for education abroad. The assessee has not been able to bring on record anything and particularly the scheme so as to provide higher education abroad to the employees or associates. The Commissioner of Income Tax (Appeals) has observed that in the firm of the appellant - assessee, there were at least 14 associate advocates and none were given an opportunity to go abroad prior for higher education. Some of them have worked with him for at least 15 years. In the present case within a period of 2 to 3 months after the daughter became an Advocate and joined the firm as Associate, she went abroad. The Appellant may have then stated that there was an undertaking signed or bond given to serve the firm for five years after return. But the Authorities found that not only she was allowed to continue and stay abroad, but permitted to join any firm after completing the higher education. Thus, this was not the decision taken in the interest of the activities and profession of the firm of Advocates but for furthering the career prospects of the child/ daughter. In such circumstances, neither of the Authorities committed any error or perversity in disallowing the deduction.5. The judgment in the case of Sakal Papers (P.) Ltd. (supra) must be seen in the peculiar facts and background. There, it was a closely-held company with two shareholders (Husband and wife), both directors. They are publishing a leading Marathi newspaper. Their daughter who was Master of Arts with English and French as special subjects, worked in the editorial department of the paper from September,1955, started as an apprentice. In pursuance of a resolution of the directors dated 24.3.1960, the daughter was sent to U.S.A. in September,1960, for specialised education in journalism and business administration, which the directors believed would be good for progress of the paper. She attended several top ranking schools of Journalism abroad and had returned and joined the editorial department and was working with the company. There was no agreement with the company binding her or committing to serve the company for a specified period of years. But the cumulative impact of all these events and circumstances led this Court to hold that the deduction could not have been disallowed. It was disallowed only because of the relationship with the Directors of the Company. It was disallowed on two other reasons which are not found to be germane and relevant for such dis-allowance. It is in these circumstances that this Court laid down the principle that merely because there was no commitment or contract or bond taken from the trainee, the expenditure which was otherwise proper, cannot be disallowed to the company, particularly when as a result of that expenditure the trainee had secured both a degree and training which would be of assistance to the company. She was, in fact, found to be serving the company on her return to India. These peculiar facts and circumstances must be seen while applying the ratio or principle laid down in the case of Sakal Papers (P.) Ltd. (supra). All those were completely absent in the present case. This was nothing but a desperate attempt to avoiding tax liability and by taking resort to departure of the daughter who incidentally happened to be an Advocate. The departure was for higher education and for the prospects of daughter herself. In such circumstances, this decision cannot be of any assistance to the assessee.6. The second submission also does not deserve to be accepted and which is based on the judgment of the Tribunal in the case of J.B. Advani & Co. Ltd. v. Jt. CIT [2005] 1 SOT 830 (Mum.).7. The submission is that when the Tribunals own judgment bound the Tribunal, it could not have discarded that. In that also daughter of one of the directors of assessee company, who worked as an employee of the company, was sent abroad. Not only that she was to return to India and to work for the assessee company in compliance with the agreement, but she was, in fact, made a director of the assessee company. In such circumstances, what has been indicated as a reason for disallowing the deduction is that the management studies are not relevant for carrying on a business. Furthermore, the identical expenditure for the same event was allowed in the succeeding assessment year in the case of very assessee. In such circumstances, expenditure on foreign education was allowed as business expenditure. Once again the factual position must be borne in mind before applying this judgment or seeking its assistance. There the Tribunal found as a matter of fact that it is not for the Assessing officer to determine whether son has gone abroad for higher education in any such faculty which would assist the business of assessee company or otherwise. These are not the matters which could have been determined by the Assessing officer particularly when he allowed same expenditure in succeeding year. In these circumstances, even this judgment also does not assist the assessee before us.

Decision:
0[ds]4. We have, with the assistance of Mr.Chatterjee, perused the concurrent findings and conclusions. We are not in agreement with him that this appeal raises substantial question of law. Each of the Authorities found that this matter was distinct from Sakal Papers (P.)Ltd. (supra). It may be that both the cases involved were of daughter being sent abroad for higher education. However, in the present case what has been found is that the appellantassessee is a firm of Advocates. The daughter joined him and immediately was sent for education abroad. The assessee has not been able to bring on record anything and particularly the scheme so as to provide higher education abroad to the employees or associates. The Commissioner of Income Tax (Appeals) has observed that in the firm of the appellantassessee, there were at least 14 associate advocates and none were given an opportunity to go abroad prior for higher education. Some of them have worked with him for at least 15 years. In the present case within a period of 2 to 3 months after the daughter became an Advocate and joined the firm as Associate, she went abroad. The Appellant may have then stated that there was an undertaking signed or bond given to serve the firm for five years after return. But the Authorities found that not only she was allowed to continue and stay abroad, but permitted to join any firm after completing the higher education. Thus, this was not the decision taken in the interest of the activities and profession of the firm of Advocates but for furthering the career prospects of the child/ daughter. In such circumstances, neither of the Authorities committed any error or perversity in disallowing the deduction.5. The judgment in the case of Sakal Papers (P.) Ltd. (supra) must be seen in the peculiar facts and background. There, it was acompany with two shareholders (Husband and wife), both directors. They are publishing a leading Marathi newspaper. Their daughter who was Master of Arts with English and French as special subjects, worked in the editorial department of the paper from September,1955, started as an apprentice. In pursuance of a resolution of the directors dated 24.3.1960, the daughter was sent to U.S.A. in September,1960, for specialised education in journalism and business administration, which the directors believed would be good for progress of the paper. She attended several top ranking schools of Journalism abroad and had returned and joined the editorial department and was working with the company. There was no agreement with the company binding her or committing to serve the company for a specified period of years. But the cumulative impact of all these events and circumstances led this Court to hold that the deduction could not have been disallowed. It was disallowed only because of the relationship with the Directors of the Company. It was disallowed on two other reasons which are not found to be germane and relevant for suchIt is in these circumstances that this Court laid down the principle that merely because there was no commitment or contract or bond taken from the trainee, the expenditure which was otherwise proper, cannot be disallowed to the company, particularly when as a result of that expenditure the trainee had secured both a degree and training which would be of assistance to the company. She was, in fact, found to be serving the company on her return to India. These peculiar facts and circumstances must be seen while applying the ratio or principle laid down in the case of Sakal Papers (P.) Ltd. (supra). All those were completely absent in the present case. This was nothing but a desperate attempt to avoiding tax liability and by taking resort to departure of the daughter who incidentally happened to be an Advocate. The departure was for higher education and for the prospects of daughter herself. In such circumstances, this decision cannot be of any assistance to the assessee.6. The second submission also does not deserve to be accepted and which is based on the judgment of the Tribunal in the case of J.B. AdvaniCo. Ltd. v. Jt. CIT [2005] 1 SOT 830 (Mum.).7.The submission is that when the Tribunals own judgment bound the Tribunal, it could not have discarded that.In that also daughter of one of the directors of assessee company, who worked as an employee of the company, was sent abroad. Not only that she was to return to India and to work for the assessee company in compliance with the agreement, but she was, in fact, made a director of the assessee company. In such circumstances, what has been indicated as a reason for disallowing the deduction is that the management studies are not relevant for carrying on a business. Furthermore, the identical expenditure for the same event was allowed in the succeeding assessment year in the case of very assessee. In such circumstances, expenditure on foreign education was allowed as business expenditure. Once again the factual position must be borne in mind before applying this judgment or seeking its assistance. There the Tribunal found as a matter of fact that it is not for the Assessing officer to determine whether son has gone abroad for higher education in any such faculty which would assist the business of assessee company or otherwise. These are not the matters which could have been determined by the Assessing officer particularly when he allowed same expenditure in succeeding year. In these circumstances, even this judgment also does not assist the assessee before us.