M/S.aswathanarayana & Eswara,Old v. The Assistant Commissioner Of Income Ttax,Circle-I, Chennai

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 30.03.2021 CORAM THE HON'BLE MR.JUSTICE M. DURAISWAMYANDTHE HON'BLE MRS.JUSTICE T.V. THAMILSELVI Tax Case Appeal No. 409 of 2009 M/s.Aswathanarayana & Eswara,Old No.61, New No.117, Royapettah High Road,Jammi Buildings, MylaporeChennai-600 004. ... Appellant v. The Assistant Commissioner of Income Ttax,Circle-I, Chennai.... Respondent Tax Case (Appeal) filed under Section 260A of the IncomeTax, 1961 against the order of the Income Tax AppellateTribunal, “D” Bench, Chennai dated 21.11.2008 in ITANo.550/Mds/2008 for the assessment year 1999-2000, preferredagainst the order of Commissioner of Income Tax Appeals (VI),Chennai dated 18/02/2008 in ITA No.163/06-07 filed against theAssessment order of the Assistant Commissioner of Income Tax,Circle-I, Chennai-34 dated 28/09/2006 for the Assessment Year1999-2000. For Appellant:Mr.R.Venkat NarayananFor Respondent :Mr.T. Ravi Kumar,Senior Standing Cousnel JUDGMENT (Judgment was delivered by M. DURAISWAMY, J.) Challenging the orders passed in ITA No.550/Mds/2008 inrespect of the Assessment Year 1999-2000 on the file of theIncome Tax Appellate Tribunal, “D” Bench, Chennai , theassessee has filed the above appeal. 2. The main issue that arise for consideration in thisappeal is regarding confirmation of disallowance of expensesincurred. https://hcservices.ecourts.gov.in/hcservices/ 3. At the time of admission of the above appeal, thefollowing substantial question of law arose for consideration: “Whether on the facts and in thecircumstances of the case, the Tribunal was rightin law in holding the expenditure incurredtowards foreign education and training expensesof a partner Shri H.E.Srinivas Shastry, son ofone of the partners Shri. Eswara, as personal innature and hence not an allowable deduction?”" 4. Mr. R.Venkat Narayanan. learned counsel appearing forthe appellant submitted that in the Tax Case Appeal No.929 of2008, the Hon'ble Division Bench of this Court, by its Judgmentdated 07.08.2018, in respect of the very same assessee, decidedthe question of law that has been raised in the present appealin favour of the assessee and against the revenue. The relevantparagraph in the Judgment of the Hon'ble Division Bench dated07.08.2018 made in T.C.A. No.929 of 2008 reads as follows:- " ............ 5. This appeal has beenadmitted on 09.07.2008, on the following substantialquestion of law:- “Whether on the facts and in thecircumstances of the case, the Tribunal wasright in law in holding the expenditureincurred towards foreign education andtraining expenses of a partner ShriH.E.SriprakashShastry, son of one of thepartners Shri. Eswara, as personal in natureand hence not an allowable deduction?”................... 24.We have examined the facts placed before thelower authorities and we find that the assessee is apartnership firm consisting of two brothers, two sonsof one brother. All the four partners are dulyqualified Engineers (B.E.) and the firm is carryingon Engineering Consultancy Profession for leadingIndian Corporate Clients. One of the partner's son,Mr.H.E.Sriprakash Shastri, joined the firm in April2000 after completing his B.E., degree. He had takenactive part in the conduct of the business of thefirm from the date of his induction as partner. Evenwhile doing his B.E. Degree course, he is stated tohave been attending the office of the firm andgetting acquainted with reinforced concrete design,planning estimates and construction management. 24.We have examined the facts placed before thelower authorities and we find that the assessee is apartnership firm consisting of two brothers, two sonsof one brother. All the four partners are dulyqualified Engineers (B.E.) and the firm is carryingon Engineering Consultancy Profession for leadingIndian Corporate Clients. One of the partner's son,Mr.H.E.Sriprakash Shastri, joined the firm in April2000 after completing his B.E., degree. He had takenactive part in the conduct of the business of thefirm from the date of his induction as partner. Evenwhile doing his B.E. Degree course, he is stated tohave been attending the office of the firm andgetting acquainted with reinforced concrete design,planning estimates and construction management. After graduation, he was made a working partner ofthe firm and he has worked on several projects, whichhave been mentioned by the assessee. In February2001, he was sent to Australia for higher education.The duration of the course and training is for aperiod of two semesters and the course underwent wasdirectly related to the profession carried on by thefirm and this accrued in favour of the firm, as couldbe seen from the facts placed before the CIT(A),where the professional fee received by the firm hadsubstantially increased. 25.On return, after completion of the postgraduate degree, the partner continued to work forthe firm and materials were placed to show thatseveral important contracts have been secured by thefirm, which they attribute to the educationalqualification and expertise acquired by the partnerof the firm abroad. There was no material place bythe Revenue to demonstrate that any part or whole ofthe stand taken by the assessee was either false oruntrue. Viewed from this angle, this Court is fullysatisfied that this is not a case where there is amisuse of the provision of Section 37 of the Act tofoist a personal expenditure as a businessexpenditure. Therefore, we are of the consideredview that the expenditure was allowable and theauthorities concurrently erred in not taking intoconsideration the factual position placed, in spiteof specific grounds raised before the Tribunal, whichwould render the decision perverse. 26.The learned Standing Counsel for the Revenuepointed out that no ground has been raised by theassessee stating that the finding rendered by theAssessing Officer, CIT(A) and the Tribunal areperverse. 27.Perusal of the grounds of appeal filed beforethe CIT(A) shows that the assessee has specificallyraised the point regarding non-consideration of thematerials placed before the assessing authority. Yetthe CIT(A) did not make an endeavour to examine thestand taken by the assessee, resulted in non-consideration of the materials placed. Thisundoubtedly would be perversity writ large on theface of the orders passed by the Assessing Officer https://hcservices.ecourts.gov.in/hcservices/ and the CIT(A). Therefore, in our considered view,the assessee cannot be non-suited merely because, hehas not used the expression “perverse” in the groundsof appeals before the CIT(A) as well as before theTribunal. There is no dispute raised by the Revenuewith regard to the factual position that theconcerned partner went abroad for completion of thehigher studies/education and on his return continuedwith the firm. Non-consideration of the factualissues, which are germane and which ought to havebeen considered, leads to perversity. Thus, theTribunal committed serious error of law therebyvitiating the entire proceedings more particularly,the aspects which goes to the root of the matter. 28.Thus, for the above reasons, we are of theconsidered view that the authorities concurrentlycommitted serious error of law and failed to addressthe issues which ought to have been addressed,ignored materials which ought to have been consideredand applied the decisions which are whollydistinguishable on facts. 28.Thus, for the above reasons, we are of theconsidered view that the authorities concurrentlycommitted serious error of law and failed to addressthe issues which ought to have been addressed,ignored materials which ought to have been consideredand applied the decisions which are whollydistinguishable on facts. 29.In the result, the tax case appeal isallowed, the order passed by the tribunal is setaside and the substantial question of law is answeredin favour of the assessee and against the Revenue. Nocosts. 5. The Hon'ble Division Bench of this Court took intoconsideration the Judgments of this court reported in (2001) 250ITR 0769 [M.Subramaniam Bros. vs. Commissioner of Income Tax]and (2002) 258 ITR 0306 [Commissioner of Income Tax vs. R.K.K.RSteels] and decided the question of law in favour of theassessee. 6. On a reading of the judgment of the Hon'ble DivisionBench of this Court, it is clear that the substantial questionof law that has been raised in the present appeal has beendecided in favour of the assessee. Further, it is brought tothe notice of this court that the judgment passed inT.C.A.No.929 of 2008 has become final for the reason that therevenue has not filed any appeal as against the same.Therefore, we are of the considered view that the present appealis covered by the judgment made in T.C.A.No.929 of 2008. https://hcservices.ecourts.gov.in/hcservices/ 7. In these circumstances, following the Judgment of theHon' ble Division Bench of this Court dated 07.08.2018 made inT.C.A.No.929 of 2008, the order passed by the Income TaxAppellate Tribunal is liable to be set aside. Accordingly,the same is set aside,. The question of law is decided infavour of the appellant-assessee. The Tax Case Appeal standsallowed. No costs. Sd/- Assistant Registrar(CS VIII) //True Copy// Sub Assistant RegistrarRjTo1. The Assistant Commissioner of Income Ttax, Circle-I, Chennai.. 2. The Assistant Registrar, Income Tax Appellate Tribunal, “D” Bench, Chennai.3. The Commissioner of Income Tax (Appeals)-VI, Chennai-34.+1cc to Mr.Subbaraya Aiyar, Advocate Sr.20969+1cc to Mr.T.Ravikumar, Advocate Sr.21000 Tax Case Appeal No.409 of 2009 um[co]srg 03/05/2021