Whether expenditure on education of director is personal expenditure and allowable as deduction under section 37(1)?

Last updated: 11 July 2014

Court :
Bombay High Court

Brief :
The appellant had paid fees to a Management & Research institute on behalf of one of its director as training fees of director and had also paid salary to the director. Both were disallowed by the Assessing Officer during scrutiny. Aggrieved, the appellant-assessee preferred an appeal before CIT(Appeals). However, the disallowances were upheld by CIT (Appeals). The dissatisfied appellant therefore appealed before ITAT. The appellant contended that it was looking to grow and expand its business as well as it’s marketing needs and for this reason, it sponsored the son of another Director of the Appellant-Assessee, for an advanced course in marketing with the S.P. Jain Institute of Management & Research. Hesubmitted that the above studies and training had eventually helped the Appellant-Assessee in its business and had direct nexus with the growth of the business. It was held that the expenditure incurred for the education of the director was out of personal consideration. CIT (Appeals) held that the salary paid to the director cannot be claimed as deduction since the director was doing his management course and was not possible for him to work in capacity as a director at the same time when he was a student.

Citation :
M/s Shreenath Motors Pvt.Ltd. – Appellant – Versus - Commissioner of Income Tax - Respondent