SHREENATH MOTORS P. LTD, MUMBAI v. DCIT 5(3), MUMBAI

ITA 4880/MUM/2009 | 2006-2007
Pronouncement Date: 18-11-2011 | Result: Dismissed

Appeal Details

RSA Number 488019914 RSA 2009
Assessee PAN AAFCS0033D
Bench Mumbai
Appeal Number ITA 4880/MUM/2009
Duration Of Justice 2 year(s) 2 month(s) 24 day(s)
Appellant SHREENATH MOTORS P. LTD, MUMBAI
Respondent DCIT 5(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 18-11-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted I
Tribunal Order Date 18-11-2011
Date Of Final Hearing 03-11-2011
Next Hearing Date 03-11-2011
Assessment Year 2006-2007
Appeal Filed On 24-08-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI B.R. MITTAL JUDICIAL MEMBER AND SHRI P.M. JAGTAP ACCOUNTANT MEMBER I.T.A. NOS. 4879 & 4880/MUM/2009. ASSESSMENT YEARS : 2005-06 & 2006-07. M/S SHREENATH MOTORS PVT. LTD. ADDL. COMMISSIONER OF MORYA ESTATE NEW LINK ROAD VS. INCOME-TAX-5(3) ANDHERI (WEST) MUMBAI. MUMBAI 400 053. PAN : AAFCS0033D APPELLANT. RESPONDENT. APPELLANT BY : SHR I H.S.PARIKH. RESPONDENT BY : SHRI O.A. MAO. DATE OF HE ARING : 03-11-2011. DATE OF PRONO UNCEMENT : 18-11-2011. O R D E R PER P.M. JAGTAP A.M. : THESE TWO APPEALS FILED BY THE ASSESSEE AGAINST TW O SEPARATE ORDERS PASSED BY THE LEARNED CIT(APPEALS)-V MUMBAI ON 09-07-200 9 FOR ASSESSMENT YEARS 2005-06 AND 2006-07 INVOLVE SOME COMMON ISSUES AND THE SAME THEREFORE HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS SINGLE COMPOSITE ORDER. 2. FIRST WE SHALL TAKE UP THE APPEAL OF THE ASSESSE E FOR ASSESSMENT YEAR 2005-06 BEING ITA NO. 4879/MUM/2009. 2 ITA NOS.4879&4880/MUM/2009 ASSESSMENT YEARS:2005-06&2006-07. 3. THE ISSUE INVOLVED IN GROUND NO. 1 (INCLUDING GR OUND NO. 1.1 TO 1.5) RELATES TO THE DISALLOWANCE OF RS.73 534/- MADE BY THE AO A ND CONFIRMED BY THE LEARNED CIT(APPEALS) ON ACCOUNT OF FOREIGN TRAVEL EXPENSES INCURRED IN RESPECT OF SPOUSE OF A DIRECTOR. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS A DEALER OF HYUNDAI MOTORS FOR THEIR VEHICLES SPARES AND ACCESSORIES. DURING THE YEAR UNDER CONSIDERATION SHRI SHAILESH KACHALIA DIRECTOR OF THE ASSESSEE COMPANY VISITED BUSTAN DUBAI ISTAMBUL AND TURKEY ALONG WITH HIS W IFE MRS. AARTI KACHALIA. THE TOTAL EXPENSES INCURRED ON THE SAID VISIT AMOUNTING TO RS.1 47 071/- WERE CLAIMED AS DEDUCTIBLE BUSINESS EXPENDITURE. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS THE AO FOUND THAT MRS. AARTI KACHALIA WAS NEITHER T HE EMPLOYEE OF THE ASSESSEE COMPANY NOR DID SHE HAVE ANY PROFESSIONAL QUALIFICA TION. THE ASSESSEE ALSO COULD NOT ESTABLISH ANY BUSINESS EXPEDIENCY OF THE FOREIG N TRIP UNDERTAKEN BY MRS. AARTI KACHALIA ALONG WITH HER HUSBAND EXCEPT SAYING THAT IT WAS A CUSTOM IN FOREIGN COUNTRIES FOR THE SPOUSE OF THE DIRECTOR OF THE COM PANY TO ATTEND SOCIAL FUNCTIONS. THE ASSESSEE HOWEVER COULD NOT SUPPORT OR SUBSTAN TIATE THIS STAND BY ADDUCING ANY EVIDENCE AND IN THE ABSENCE OF THE SAME AS WELL AS RELYING ON THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF RAM BAHADU R THAKUR LTD. VS. CIT 257 ITR 289 AND THAT OF HONBLE MADRAS HIGH COURT IN TH E CASE OF D.B. MADAN VS. CIT 261 ITR 193 50% OF THE FOREIGN TRAVEL EXPENSES CL AIMED BY THE ASSESSEE COMPANY WERE DISALLOWED BY THE AO. ON APPEAL THE LEARNED C IT(APPEALS) CONFIRMED THE SAID DISALLOWANCE OBSERVING THAT THERE WAS NO EVIDE NCE FILED BY THE ASSESSEE TO ESTABLISH THAT ITS DIRECTOR ATTENDED ANY SOCIAL FUN CTION WHICH WAS NECESSARY TO FURTHER ITS BUSINESS INTEREST AND THAT THE WIFE OF THE SAID DIRECTOR JOINED HIM AS A CUSTOMARY PRACTICE. THE LEARNED CIT(APPEALS) HELD THAT THE TRAVEL OF MRS. AARTI KACHALIA THUS HAD NOTHING TO DO WITH THE BUSINESS O F THE ASSESSEE COMPANY AND 3 ITA NOS.4879&4880/MUM/2009 ASSESSMENT YEARS:2005-06&2006-07. CONFIRMED THE DISALLOWANCE MADE BY THE AO ON ACCOUN T OF EXPENSES INCURRED ON HER FOREIGN TRAVEL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE ASS ESSEE HAS MAINLY REITERATED BEFORE US THE SUBMISSIONS MADE ON BEHALF OF THE ASS ESSEE BEFORE THE LEARNED CIT(APPEALS) ON THIS ISSUE. IT IS HOWEVER OBSERVE D THAT THERE IS NO EVIDENCE WHATSOEVER FILED BY HIM TO SUPPORT AND SUBSTANTIATE THE ASSESSEES STAND THAT THE FOREIGN TRAVEL WAS UNDERTAKEN BY THE WIFE OF ITS DI RECTOR AS A CUSTOMARY PRACTICE. AS RIGHTLY HELD BY THE LEARNED CIT(APPEALS) THERE IS NOTHING BROUGHT ON RECORD BY THE ASSESSEE TO ESTABLISH THAT THE TRAVEL OF MRS. A ARTI KACHALIA HAD ANY CONNECTION TO DO WITH ITS BUSINESS. IN OUR OPINION THE ONUS I N THIS REGARD WAS ON THE ASSESSEE AND SINCE IT HAS FAILED TO DISCHARGE THE SAME WE F IND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) CONFIRMING THE DI SALLOWANCE MADE BY THE AO ON ACCOUNT OF FOREIGN TRAVEL EXPENSES INCURRED IN RESP ECT OF MRS. AARTI KACHALIA. THE SAME IS THEREFORE UPHELD ON THIS ISSUE DISMISSING GROUND NO. 1 OF THE ASSESSEES APPEAL. 4. THE NEXT ISSUE RAISED IN GROUND NO. 2 (INCLUDING GROUND NO. 2.1 TO 2.4) RELATES TO THE DISALLOWANCE OF RS.1 38 074/- MADE B Y THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) ON ACCOUNT OF FINANCE COMMISSI ON WRITTEN OFF BEING IRRECOVERABLE. 5. THE ASSESSEE COMPANY IS A DEALER OF HYUNDAI MOT ORS AND DURING THE COURSE OF RUNNING OF THE SAID BUSINESS IT GETS COMMISSION FROM M/S KOTAK MAHINDRA PRIMUS LTD. IN RESPECT OF FINANCES ARRANGED BY THEM . IN THE PROFIT & LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE COMP ANY HAD WRITTEN OFF A SUM OF RS.1 38 074/- ON ACCOUNT OF SHORT PAYMENT OF COMMIS SION WHICH HAD BEEN 4 ITA NOS.4879&4880/MUM/2009 ASSESSMENT YEARS:2005-06&2006-07. ACCOUNTED FOR IN ASSESSMENT YEAR 2004-05. ACCORDING TO THE ASSESSEE THE SAID AMOUNT COULD NOT BE RECOVERED INSPITE OF PROTRACTED NEGOTIATIONS WITH M/S KOTAK MAHINDRA PRIMUS LTD. AND THE SAME THEREFORE WAS W RITTEN OFF IN THE BOOKS OF ACCOUNT AS IRRECOVERABLE. THE AO HOWEVER NOTED TH AT THE ASSESSEE COMPANY CONTINUED TO HAVE BUSINESS WITH M/S KOTAK MAHINDRA PRIMUS LTD. HE ALSO FOUND THAT THE ASSESSEE COULD NOT BRING ANYTHING ON RECOR D TO SHOW THAT THE AMOUNT OF RS.1 38 074/- WRITTEN OFF BY IT IN THE BOOKS OF ACC OUNT HAD ACTUALLY BECOME IRRECOVERABLE. HE THEREFORE DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF FINANCE COMMISSION RECEIVABLE WRITTEN OF F. ON APPEAL THE LEARNED CIT(APPEALS) CONFIRMED THE SAID DISALLOWANCE ON THE GROUND THAT NO SATISFACTORY REASON WAS GIVEN BY THE ASSESSEE FOR WRITING OFF TH E AMOUNT IN QUESTION AS IRRECOVERABLE. ACCORDING TO HIM IN THE ABSENCE OF ANY SUCH SATISFACTORY EXPLANATION THE CLAIM OF THE ASSESSEE FOR BAD DEBT WRITTEN OFF WAS NOT BONAFIDE AND THE SAID CLAIM THEREFORE WAS NOT ALLOWABLE. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS AGREED BY LEARNED REPRESENTA TIVES OF BOTH THE SIDES THIS ISSUE NOW STANDS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TRF LTD. 323 I TR 397 (SC) WHEREIN IT WAS HELD THAT EVERY ASSESSEE PRIOR TO 1-4-1989 HAD TO E STABLISH AS A MATTER OF FACT THAT DEBT ADVANCED BY HIM HAD IN FACT BECOME IRRECOVERAB LE. AS FURTHER HELD BY THE HONBLE SUPREME COURT THIS POSITION HOWEVER GOT ALTERED BY THE DELETION OF THE WORD ESTABLISHED WHICH EARLIER EXISTED IN SECTION 36(1)(VII). THE HONBLE SUPREME COURT HAS HELD THAT IT IS THEREFORE NOT N ECESSARY FOR THE ASSESSEE WITH EFFECT FROM 1-4-1989 TO ESTABLISH THAT THE DEBT IN FACT HAS BECOME IRRECOVERABLE AND IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRE COVERABLE IN THE ACCOUNTS OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE DECISION OF TH E HONBLE SUPREME COURT IN THE 5 ITA NOS.4879&4880/MUM/2009 ASSESSMENT YEARS:2005-06&2006-07. CASE OF TRF LTD. (SUPRA) WE DELETE THE DISALLOWAN CE MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) ON ACCOUNT OF BAD DEBTS WRITTEN OFF BY THE ASSESSEE AND ALLOW GROUND NO. 2 OF THE ASSESSEES APPEAL. 7. THE NEXT ISSUE RAISED IN GROUND NO. 3 OF THE ASS ESSEES APPEAL RELATES TO THE DISALLOWANCE OF RS.60 297/- MADE BY THE AO AND CONF IRMED BY THE LEARNED CIT(APPEALS) OUT OF EXPENSES ON COMMISSION AND REBA TE TREATING THE SAME AS PRIOR PERIOD EXPENSES. 8. FROM THE DETAILS OF COMMISSION AND REBATE EXPENS ES FURNISHED BY THE ASSESSEE THE AO NOTICED THAT THE ASSESSEE HAS CLAI MED REBATE IN RESPECT OF FIVE INVOICES WHICH PERTAINED TO THE PREVIOUS YEAR RELEV ANT TO ASSESSMENT YEAR 2004-05. THE SAID REBATE AMOUNTING TO RS.60 297/- THEREFORE WAS DISALLOWED BY HIM ON THE GROUND THAT THE SAME REPRESENTED PRIOR PERIOD EXPE NSES. ON APPEAL THE LEARNED CIT(APPEALS) CONFIRMED THE SAID DISALLOWANCE MADE B Y THE AO OBSERVING THAT THE REBATE CLAIMED BY THE ASSESSEE IN RESPECT OF INVOIC ES RAISED IN THE EARLIER YEAR COULD NOT BE ALLOWED AS DEDUCTION IN THE YEAR UNDER CONSIDERATION SINCE THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNT ING. 9. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE ASS ESSEE HAS INVITED OUR ATTENTION TO THE COMPUTATION OF TOTAL INCOME PREPARED AND FURNIS HED BY THE ASSESSEE (COPY PLACED AT PAGE NO. 15 OF HIS PAPER BOOK) TO SHOW TH AT PRIOR PERIOD EXPENSES TO THE EXTENT OF RS.41 534/- WERE DISALLOWED BY THE ASSESS EE COMPANY ITSELF WHILE COMPUTING ITS TOTAL INCOME. HE THEN INVITED OUR ATT ENTION TO THE DETAILS OF PRIOR PERIOD EXPENSES PLACED AT PAGE NO. 3 OF HIS PAPER B OOK AND SUBMITTED THAT OUT OF THE TOTAL PRIOR PERIOD EXPENSES OF RS.60 297/- DISA LLOWED BY THE AO AND CONFIRMED 6 ITA NOS.4879&4880/MUM/2009 ASSESSMENT YEARS:2005-06&2006-07. BY THE LEARNED CIT(APPEALS) THE ASSESSEE ON ITS OW N HAD MADE A DISALLOWANCE TO THE EXTENT OF RS.41 534/-. HE HAS SUBMITTED THAT T HE BALANCE AMOUNT OF REBATE ALLOWED BY THE ASSESSEE IN RESPECT OF DISHA FINANCI AL SERVICES ACTUALLY PERTAINED TO THE YEAR UNDER CONSIDERATION AND NOT TO THE EARLIER YEAR. IN SUPPORT OF THIS CONTENTION HE HAS INVITED OUR ATTENTION TO THE COP Y OF LEDGER ACCOUNT EXTRACT OF SRIKANT GUPTA PLACED AT PAGE NO. 4 OF HIS PAPER BOO K TO POINT OUT THAT THE RELEVANT TRANSACTION PERTAINED TO THE FINANCIAL YEAR 2004-05 RELEVANT TO ASSESSMENT YEAR 2005-06. THE LEARNED DR HAS SUBMITTED THAT THIS STA ND NOW TAKEN BY THE ASSESSEE BEFORE THE TRIBUNAL SPECIFICALLY FOR THE FIRST TIME REQUIRES VERIFICATION BY THE AO. WE FIND MERIT IN THE CONTENTION OF THE LEARNED DR. ACCORDINGLY THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) ON THIS ISSUE IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE AO FOR DECIDING THE SAM E AFRESH AFTER VERIFYING THE SUBMISSION OF THE ASSESSEE FROM THE RELEVANT RECORD . GROUND NO. 3 IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 10. THE ISSUE RAISED IN GROUND NO. 4 (INCLUDING GRO UND NO. 4.1 TO 4.5) RELATES TO THE ADDITION MADE BY THE AO AND CONFIRMED BY THE LE ARNED CIT(APPEALS) BY WAY OF DISALLOWANCE OF EXPENDITURE CLAIMED BY THE ASSES SEE ON ACCOUNT OF FEES PAID TO S.P. JAIN INSTITUTE AMOUNTING TO RS.1 75 000/- AND REMUNERATION PAID TO ITS DIRECTOR MR. KRISHNA KACHALIA AMOUNTING TO RS.3 12 500/-. 11. IN ITS PROFIT & LOSS ACCOUNT FILED ALONG WITH T HE RETURN OF INCOME THE ASSESSEE COMPANY HAD DEBITED RS.3 12 500/- ON ACCOU NT OF REMUNERATION PAID TO MR. KRISHNA KACHALIA AND HIS TRAINING EXPENSES AMOU NTING TO RS.1 75 000/- WHICH REPRESENTED FEES PAID TO S.P. JAIN INSTITUTE OF MA NAGEMENT AND RESEARCH FOR MANAGEMENT COURSE. THIS CLAIM OF THE ASSESSEE WAS E XAMINED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. ON SUCH EXAMI NATION THE AO FOUND THAT 7 ITA NOS.4879&4880/MUM/2009 ASSESSMENT YEARS:2005-06&2006-07. SHRI KRISHNA KACHALIA WAS ONLY 26 YEARS OLD AT THE RELEVANT TIME AND WAS INDUCTED AS A DIRECTOR OF THE ASSESSEE COMPANY IMMEDIATELY A FTER COMPLETION OF HIS GRADUATION IN SEPTEMBER 2003. HE ALSO FOUND THAT S HRI KRISHNA KACHALIA WAS SON OF SHRI SHAILESH KACHALIA DIRECTOR OF THE ASSESSEE COMPANY. AS REGARDS THE FEES PAID BY THE ASSESSEE COMPANY FOR MANAGEMENT COURSE OF SHRI KRISHNA KACHALIA THE AO FOUND THAT NO SUCH EXPENDITURE WAS INCURRED BY THE ASSESSEE ON ANY OTHER EMPLOYEE. HE HELD THAT THE PAYMENT OF FEES MADE BY THE ASSESSEE COMPANY FOR MANAGEMENT COURSE OF SHRI KRISHNA KACHALIA THUS WAS OUT OF PERSONAL CONSIDERATION AND NOT OUT OF COMMERCIAL CONSIDERATI ON. HE THEREFORE DISALLOWED THE EXPENDITURE CLAIMED BY THE ASSESSEE ON ACCOUNT OF THE SAID FEES. HE ALSO DISALLOWED THE REMUNERATION OF RS.3 12 500/- CLAIME D TO BE PAID BY THE ASSESSEE COMPANY TO SHRI KRISHNA KACHALIA ON THE GROUND THAT HE WAS SHOWN TO BE INCHARGE OF MARKETING ACTIVITY AT BORIVALI CENTRE WHEREAS A NOTHER DIRECTOR SHRI SURYAKANT KACHALIA WAS ALREADY LOOKING AFTER MARKETING AND SE LLING ACTIVITY AT BORIVALI FOR WHICH REMUNERATION AT RS.10 LAKHS WAS PAID TO HIM. THE AO HELD THAT THE APPOINTMENT OF SHRI KRISHNA KACHALIA AS WORKING DIR ECTOR THUS WAS ONLY FOR NAME SAKE AND THERE WAS NO SERVICES RENDERED BY HIM TO J USTIFY THE REMUNERATION OF RS.3 12 500/-. 12. THE MATTER WAS CARRIED BEFORE THE LEARNED CIT(A PPEALS) AND IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE HIM THAT THE MANAGEMENT COURSE UNDERGONE BY SHRI KRISHNA KACHALIA HAD EVENTUALLY H ELPED ITS BUSINESS SINCE HE WAS INSTRUMENTAL IN ACQUIRING AND LOOKING AFTER BUS INESS IN VOLVO DIVISION. IT WAS SUBMITTED THAT ONLY BECAUSE OF HIS TRAINING IN FORE IGN COUNTRIES THE ASSESSEE COMPANY COULD GET DISTRIBUTORSHIP OF VOLVO AND THE EXPENSES INCURRED ON SUCH TRAINING THEREFORE WERE WHOLLY AND EXCLUSIVELY IN CURRED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. 8 ITA NOS.4879&4880/MUM/2009 ASSESSMENT YEARS:2005-06&2006-07. 13. THE LEARNED CIT(APPEALS) DID NOT FIND MERIT IN THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE ON THIS ISSUE AND PROCEEDED TO CONFIRM THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF REMUNERATION PAID TO M R. KRISHNA KACHALIA AS WELL AS EXPENSES INCURRED ON HIS TRAINING FOR THE FOLLOW ING REASONS GIVEN IN PARAGRAPH NO. 5.3 OF HIS IMPUGNED ORDER : I HAVE CONSIDERED THE FACTS OF THE CASE. THE APPE LLANT COMPANY HAS PAID FEE OF RS.1 75 000/- TO S.P.JAIN INSTITUTE OF MANAGEME NT AND RESEARCH FOR MANAGEMENT COURSE OF MR. KRISHNA KACHALIA WHO IS T HE SON OF THE DIRECTOR OF THE APPELLANT COMPANY. THE DURATION OF COURSE WA S 18 MONTHS FROM OCTOBER 2003 TO APRIL 2005. HE HAS COMPLETED HIS B. COM STUDY IN 2003 AND ALSO DONE M CORN PART I. HE WAS SHOWN TO BE THE DIR ECTOR OF THE APPELLANT COMPANY ON 30.09.2003. THE APPELLANT HAS ALSO PAID SALARY OF RS.3 12 500/-. THE APPELLANT IS A COMPANY AND THEREFORE ONLY BEC AUSE PERSONS HAPPENS TO SON OF THE DIRECTORS OF THE APPELLANT COMPANY IT C AN NOT BE SAID THAT EXPENSES INCURRED ON EDUCATION OF DIRECTOR ARE EXPE NSES INCURRED FOR THE PURPOSE OF BUSINESS. THE APPELLANT COMPANY FILED NO EVIDENCE THAT IT HAS FRAMED ANY RULES AND REGULATIONS FOR INCURRING EXPE NSES ON THE EDUCATION OF SON OF DIRECTOR OR ANY OTHER EMPLOYEE. THE APPELLAN T COMPANY HAS ALSO NOT FILED ANY DETAIL WHICH MAY SHOW THAT SHRI KRISHNA K ACHALIA WAS UNDER ANY OBLIGATION TO SERVE THE COMPANY AFTER THE COMPLETIO N OF HIS MANAGEMENT STUDIES. THE FACT THAT HE MAY BE ACTUALLY SERVING T HE COMPANY IS NOT RELEVANT AS LONG AS HE WAS NOT UNDER ANY CONTRACTUAL OBLIGAT ION TO SERVE THE COMPANY. OBVIOUSLY THE APPELLANT COMPANY HAS PAID THE EDUCA TION EXPENSES OF SHRI KRISHNA KACHALIA BECAUSE HE HAPPENS TO BE BELONGING TO THE FAMILY CONTROLLING THE APPELLANT COMPANY. THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF ITO VS APURVA P. PATEL AND IN THE CASE OF J.B.ADVANI & CO. LTD. IS NOT APPLICABLE TO THE FACTS OF THE CASE. IT IS A SETTLED LAW THAT WHETHER THE EXPENDITURE IS INCURRED FOR THE PURPOSE OF BUSINESS OR NOT IS TO BE DECIDED IN THE FACTS AND CIRCUMSTANCES OF A PARTICULAR CASE. T HERE CANNOT BE JUDICIAL PRECEDENT ON FACTS AS HELD BY THE SUPREME COURT IN THE CASE OF WILLIE SLANEY VS STATE OF M.P.2 SCR 1140. IN THIS CASE IT WAS OBS ERVED BY SUPREME COURT THAT A DECISION WILL BE AVAILABLE AS PRECEDENT ONLY IF IT DECIDES A QUESTION OF 9 ITA NOS.4879&4880/MUM/2009 ASSESSMENT YEARS:2005-06&2006-07. LAW. IN OTHER WORDS PRINCIPLES LAID DOWN FOR ARRIV ING AT A DECISION ALONE WILL BIND AS A PRECEDENT. IN THE CASE OF APURVA P. PATEL ((SUPRA)) CHARTERED ACCOUNTANT HAD GONE ABROAD FOR DOING MBA WHICH WILL HELP IN HIS BUSINESS AND IT WAS UNDER THOSE CIRCUMSTANCES IT WAS HELD T HAT EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS. IN THE CASE O F THE J.B.ADVANI & CO. LIMITED DAUGHTER OF THE DIRECTOR OF THE APPELLANT COMPANY WAS SENT ABROAD IN COMPLIANCE OF AN AGREEMENT SHE ENTERED INTO WITH THE COMPANY BEFORE LEAVING INDIA. ACCORDINGLY IN THE PRESENT CASE TH ERE IS NO SUCH AGREEMENT. ALLOWABILITY OF THE EXPENDITURE IS TO BE LOOKED I NTO BY GOING THROUGH THE NATURE OF EXPENDITURE AND ITS RELATION WITH THE BUS INESS. THE FACT THAT EXPENDITURE HAS BEEN ALLOWED IN ANY OTHER YEAR CAN NOT BE THE GROUND FOR ALLOWING EXPENDITURE. LOOKING INTO THE FACTS AND CI RCUMSTANCES OF THE CASE EXISTING IN THE APPELLANT COMPANY IT IS HELD THAT EXPENDITURE ON THE EDUCATION OF THE SON OF THE DIRECTOR SHRI KRISHNA KACHALIA IS NOT EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS AN D CANNOT BE ALLOWED AS DEDUCTION IN THE HAND OF APPELLANT. ACCORDINGLY TH E ACTION OF ASSESSING OFFICER IS UPHELD. THE APPELLANT HAS ALSO GIVEN SAL ARY OF RS.3 12 5001- TO SHRI KRISHNA KACHALIA. THE ASSESSING OFFICER HAS ST ATED THAT SHRI KRISHNA KACHALIA WAS LOOKING AFTER THE MARKETING ACTIVITY A T BORIVALI CENTRE WHEREIN ANOTHER DIRECTOR IS ALSO POSTED TO WHOM ALSO SALARY HAS BEEN PAID. THERE CAN NOT BE TWO DIRECTORS AT THE SAME PLACE LOOKING AFTE R THE WORK OF THE APPELLANT COMPANY IN THE SAME POSITION. THIS SHOWS THAT HIS A PPOINTMENT IS ONLY FOR NAME SAKE AND TO ENABLE THE APPELLANT COMPANY TO BEAR EDUCATION EXPENSES OF SHRI KRISHNA KACHALIA. THE FACTS OF THE PRESENT CASE DO NOT SHOW THAT SHRI KRISHNA KACHALIA WAS MADE DIRECTOR OF THE APPELLANT COMPANY FOR THE PURPOSE OF BUSINESS OF THE APPELLANT COMPANY. SHRI KRISHNA KACHALIA WAS DOING MANAGEMENT COURSE WITH S.P.JAIN INSTITUTE OF MANAGEMENT AND RESEARCH FROM OCTOBER 2003 TO APRIL 2005 AND THEREF ORE IT IS NOT POSSIBLE THAT HE WAS WORKING FOR THE COMPANY IN THE CAPACITY OF DIRECTOR AT THE SAME TIME WHEN IN FACT HE WAS STUDENT. IN VIEW OF THESE FACTS THE ACTION OF ASSESSING OFFICER IN DISALLOWING REMUNERATION PAID TO MR. KRISHNA KACHALIA IS UPHELD. ACCORDINGLY GROUND NO. 4 IS DISMISSED. 10 ITA NOS.4879&4880/MUM/2009 ASSESSMENT YEARS:2005-06&2006-07. 14. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT MR. KRISHNA KACHALIA SON OF ANOTHER DIRECTOR OF THE ASSESSEE COMPANY NAMELY SHRI SHAI LESH KACHALIA WAS INDUCTED AS A DIRECTOR IN THE MONTH OF SEPTEMBER 2003 AFTER CO MPLETING HIS GRADUATION IN COMMERCE. IMMEDIATELY THEREAFTER HE ENROLLED HIMSEL F FOR THE MANAGEMENT COURSE IN MARKETING WITH S.P. JAIN INSTITUTE OF MANAGEMENT IN THE MONTH OF OCTOBER 2003 FOR A PERIOD OF 18 MONTHS I.E. UPTO APRIL 2005. TH E FEES FOR THE SAID COURSE WAS PAID BY THE ASSESSEE COMPANY AND CLAIMED AS DEDUCT ION. AS RIGHTLY NOTED BY THE AO WHILE DISALLOWING THE SAID DEDUCTION NO SUCH BE NEFIT WAS CONFERRED BY THE ASSESSEE TO ANY OTHER EMPLOYEE AND THERE IS NOTHING BROUGHT ON RECORD TO SHOW THAT THERE WAS ANY SCHEME IMPLEMENTED BY THE ASSESSEE TO PROVIDE SUCH TRAINING TO ITS EMPLOYEES. IT HAS ALSO NOT BEEN CLEARLY ESTABLISHED ON EVIDENCE BY THE ASSESSEE THAT THE EXPENDITURE INCURRED BY IT ON THE FEES PAID FOR THE MANAGEMENT COURSE OF MR. KRISHNA KACHALIA WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS. WHEN THE SAID COURSE WAS COMPLETED IN THE MONTH OF APRIL 2005 I.E. ONLY AFTER THE END OF THE YEAR UNDER CONSIDERATION WE FIND IT DIFFICULT TO BELIEVE HOW MR. KRISHNA KACHALIA WAS RENDERING MARKETING SERVICES TO THE AS SESSEE COMPANY IN THE YEAR UNDER CONSIDERATION TO EVEN JUSTIFY THE REMUNERATIO N PAID TO HIM. ALTHOUGH AN ATTEMPT HAS BEEN MADE ON BEHALF OF THE ASSESSEE TO MAKE OUT A CASE THAT HE WAS INSTRUMENTAL IN ACQUIRING DISTRIBUTORSHIP OF VOLVO AND THEREAFTER DEALING WITH THE SAID DISTRIBUTORSHIP NO EVIDENCE WHATSOEVER HAS BE EN FILED BY IT TO SUPPORT AND SUBSTANTIATE THE SAME. EVEN SENDING THE EMPLOYEE WH O WAS A COMMERCE GRADUATE AND HAD JOINED THE COMPANY JUST A MONTH BACK FOR MA NAGEMENT COURSE IN MARKETING AT THE COST OF COMPANY WITHOUT ANY EXPOSU RE OR EXPERIENCE IN OUR OPINION CANNOT BE JUSTIFIED ON A TOUCHSTONE OF COM MERCIAL EXPEDIENCY. THE ASSESSEE HAS ALSO NOT BEEN ABLE TO SATISFACTORILY E XPLAIN THE SERVICES RENDERED BY 11 ITA NOS.4879&4880/MUM/2009 ASSESSMENT YEARS:2005-06&2006-07. MR. KRISHNA KACHALIA AND WHATEVER EXPLANATION THAT WAS SOUGHT TO BE GIVEN IN THIS REGARD HAS ALREADY BEEN FOUND TO BE NOT ACCEPTABLE BY THE AO BY GIVING SPECIFIC REASONS. ALTHOUGH THE LEARNED COUNSEL FOR THE ASSES SEE HAS RELIED ON VARIOUS JUDICIAL PRONOUNCEMENTS IN SUPPORT OF THE ASSESSEE S CASE ON THIS ISSUE WE ARE OF THE VIEW THAT THE ISSUE IN DISPUTE IS A FACTUAL ISS UE AND HAVING CLAIMED DEDUCTION ON ACCOUNT OF REMUNERATION PAID TO MR. KRISHNA KACHALI A AND EXPENSES INCURRED ON HIS TRAINING THE ONUS IS ON THE ASSESSEE TO ESTABL ISH ON EVIDENCE THAT THE SAID EXPENDITURE IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS. HAVING REGARD TO ALL THE FACTS OF THE CASE AND THE MATERIAL AVAILABLE ON RECORD WE FIND THAT THE ASSESSEE COMPANY HAS FAILED TO DISCHA RGE THIS ONUS. WE THEREFORE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LEAR NED CIT(APPEALS) CONFIRMING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF ASSES SEES CLAIM FOR DEDUCTION TOWARDS REMUNERATION PAID TO MR. KRISHNA KACHALIA A ND THE EXPENSES INCURRED ON HIS TRAINING AND UPHOLDING THE SAME WE DISMISS GRO UND NO. 4 OF THE ASSESSEES APPEAL. 15. NOW WE SHALL TAKE UP THE APPEAL OF THE ASSESSE E FOR ASSESSMENT YEAR 2006- 07 BEING ITA NO.4880/MUM/2009 WHICH INVOLVES A SOLI TARY ISSUE RELATING TO THE ADDITION MADE BY THE AO AND CONFIRMED BY THE LEARNE D CIT(APPEALS) BY WAY OF DISALLOWANCE OF EXPENDITURE INCURRED BY THE ASSESSE E ON ACCOUNT OF REMUNERATION PAID TO MR. KRISHNA KACHALIA AND THE FEES PAID FOR HIS TRAINING. 16. SINCE THIS ISSUE INVOLVED IN ASSESSMENT YEAR 20 06-07 AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO ASSE SSMENT YEAR 2005-06 WE FOLLOW OUR DECISION RENDERED IN ASSESSMENT YEAR 2005-06 IN THE FOREGOING PORTION OF THIS ORDER AND UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) CONFIRMING THE DISALLOWANCE MADE BY THE AO ON THIS ISSUE. 12 ITA NOS.4879&4880/MUM/2009 ASSESSMENT YEARS:2005-06&2006-07. 17. IN THE RESULT THE APPEAL OF THE ASSESSEE FOR A SSESSMENT YEAR 2005-06 BEING ITA NO. 4879/MUM/2009 IS PARTLY ALLOWED WHEREAS THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2006-07 BEING ITA NO. 4880/MUM/2009 IS DISMISSED. ORDER PRONOUNCED ON THIS 18 TH DAY OF NOV. 2011. SD/- SD/- (B.R. MITTAL) ( P.M. JAGTAP) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI DATED: 18 TH NOV. 2011. WAKODE COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR I-BENCH. (TRUE COPY) BY ORDE R ASSTT. REGI STRAR ITAT MUMBAI BEN CHES MUMBAI .