Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1998-99 There being no nexus between education expenses incurred abroad for director's son and business of assessee-company, such expenses could not be allowed under section 37(1) [In favour of revenue] The assessee was an engineering company manufacturing various engineering items, like, steel forgings, automobile components, various types of rings, etc. During the year under consideration, one of the directors' son was sent abroad for higher studies in industrial engineering on the condition that he would serve the assessee-company for a period of at least five years after the completion of his studies on a reasonable remuneration to be decided by the board of directors. Accordingly, the assessee incurred expenses and claimed deduction of same under section 37(1). The Assessing Officer, disallowed the expenses holding it to be expenses not incurred during the course of the assessee's business. The Commissioner (Appeals) and the Tribunal dismissed the assessee's appeal. Held that the finding recorded by the Commissioner (Appeals) that there was no nexus between the education expenses incurred abroad for director's son and the business of the assessee-company was confirmed by the Tribunal. No documentary evidence with respect to appointment of trainee was produced before the Tribunal or before the assessing authority. In the aforesaid facts and circumstances of the case, the appeal was to be dismissed in liminefor want of substantial question of law. CASES REFERRED TO CIT v. Hindustan Hosiery Industries [1994] 209 ITR 383 (Bom.) (para 8) and Sakal Papers (P.) Ltd. v. CIT [1978] 114 ITR 256 (Bom.) (paras 8, 12). P. Pardiwalla and V.S. Hadade for the Appellant. P.S. Sahadevan and Suresh Kumar for the Respondent. JUDGMENT 1. Heard learned counsel for the parties. 2. Perused the appeal memo. The questions said to be substantial questions of law which sought to be raised, read as under : "(a) On the facts and in the circumstances of the case and in law, whether the Tribunal was right in dismissing the appeal and thereby confirming the disallowance of Rs. 11,83,697…

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