Commissioner of Income Tax vs Hindustan Hosiery Industries

D.R. Dhanuka, J.—By this reference u/s 256(1) of the income tax Act, 1961 (''the Act''), the Tribunal has referred the following question of law to this Court for opinion: Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the expenditure of Rs. 60,678 incurred for management training of Shri Vijaykumar Kejriwal, a partner of assessee-firm, was an allowable deduction in determining the business profits of the firm for the assessment year 1978-79?

The assessment year concerning this reference is 1978-79.

At the material time, the assessee-firm consisted of five persons, i.e., including one Shri Vijaykumar Kejriwal. The assessee was a family concern of mother and her four sons, amongst whom, Shri Vijaykumar Kejriwal was one. During the previous year relevant to the assessment year 1976-77, Shri Vijaykumar Kejriwal was sent for higher studies to the United States of America (USA). Shri Vijaykumar got a degree of American University in business management. The assessee carries on business as manufacture of nylon socks and underwears. The assessee had taken Shri Vijaykumar Kejriwal as a partner in the firm almost at or about the same time when Vijaykumar was sent for higher studies to USA as aforesaid. The age of Shri Vijaykumar was 21 at the material time. The assessee claimed that the expenditure amounting to Rs. 60,678 incurred by the assessee for training of Shri Vijaykumar Kejriwal be allowed as business expenditure. The ITO rejected the claim of the assessee on the ground that the expenditure incurred was of personal nature and not a business expenditure. The Commissioner (Appeals) and the ITO rightly held that there was no nexus between the business of the assessee and expenditure incurred. However, the Tribunal accepted the claim of the assessee. Having regard to the facts of the case, it is not possible to agree with the view taken by the Tribunal.

We have gone carefully through the orders of the Tribunal, the Commissioner (Appeals) and the ITO. It is not possible to accept the submission of the learned counsel for the assessee that the expenditure in question was incurred in relation to the business of the assessee-firm. We have no hesitation in recording our conclusion to the effect that the expenditure incurred by the assessee has no nexus with the business of the assessee. We agree with the conclusion arrived at by the ITO and the Commissioner (Appeals).

In light of the above discussion, we answer the question referred to us in the negative, i.e., in favour of the revenue and against the assessee. No order as to costs.