INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Expenses incurred on higher education of daughter of director - No business purpose -

Assessee-company claimed expenditure in respect of educational expenses incurred by assessee for overseas education of Esha Arya, daughter of one of directors of assessee-company. AO disallowed deduction. Assessee challenged this on the ground that Esha Arya entered into agreement with assessee company wherein she undertook to remain in employment of company for a period of not less than one year from the date of completion of higher education/training.Held: It was highly improbable that assessee-company which incurred expenditure to the tune of Rs. 70 lakhs approximately on overseas education of Miss Esha Arya (daughter of one of the existing directors), agreed to have Esha Arya make a commitment to work for the company only For a period of one year and in the event she was to leave the Company before expiry of said period, she was required to pay only Rs. 50,000 as default money which too could also be waived off at discretion of director of assessment. Accordingly, there was no nexus between higher education expense of its Esha and business of assessee and accordingly, AO rightly disallowed expenses incurred by assessee on higher education of Miss Esha.

Distinguished:Kostub Invesment Ltd. v. CIT (2014) 365 ITR 436 (Del) : 2014 TaxPub(DT) 1600 (Del-HC).

REFERRED :

FAVOUR : Against the assessee.

A.Y. :

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