The Commissioner Of Income Tax vs M/S Ras Information Technologies Pvt ... on 21 July, 2010

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Karnataka High Court

The Commissioner Of Income Tax vs M/S Ras Information Technologies Pvt ... on 21 July, 2010

Bench: N.Kumar, B.V.Nagarathna

.....,e

IN "I'I"if§ HIGH COURT OF K1\RNATAK./\ AT I3ANGA.LOREZ

DATED Tl"iIS THE 21*' DAY OF JULY. 2010 

PRES ENT

THIS IIONISLE MR. Jus'1'1CI«: N. Kuzx/ma 'A O" A

AND   ._

THE: HONBLE MRS. JUs'1'1<:;I:s:A £3152.

I.T.A. Nos.2358/2505. c/v'v*2$e7_/2§d5;«--v...  

I.T.A. NO.2868/2005  O'

BETWEEN:

1

O  z3ANQA_1_,o RE; **** ~ '

THE) COMMISSIONIC-R GOP'Vi1'§fCc--3.I§/I§§f_Tgé§_};<
CRBUlI._UING  " H. 1 ., 

QI..lEE'3NOS' Féi_>_AI)   "

;I3AN(3;*\_gLQF{fi"24 _ " '

"I'~::1 E;«.1NcoVN2Vf:~i1*Ax:O}%£--~':CE1a
WARD 12m ' '

_ C R B'LIIL{)E\:I(}A"v.

QUEEZNS ROAD V
.. . APPELLANTS

   S"r'-;.-OE [R .1:N'I)RA KUMAR FOR 11: SANM./xml
" .£N£)RAEi{j~M}-'\J§".'"ADV.]
 AND: 

57   RAS 1Nr«'0R_MA'1'1oN 'I'1:'.CI{N()LOGIlES
 _P'\/'T;'LTD. , NO. 1. 26

NANDHEDURG ROAD

 'V ._~BANGALORI£

. . . RES POND ENT

[By 511': A SHANKAR. ADV.)





hw

This I.'I'.A. is filed LI/S.260w[\ of I.'.i'.A0i,, E961 a1*isi11g
out of Orcﬁer dated I«-4-03-2005 passed in ITA
N0875/Bang/2003 for {he Assessment Year } €)Q8w99.
praying that this H0n'ble Conn. mzly be pleased to:  "

1'.. f01'mula1,e $116 substemiizll q:1c:'s{.i01'1s 0i'1£1w Si;-Lfeci  
ii. allow the appeal and SM aside the orders  by U10 
ITAT. E3anga1().1"e in ETA. N(1,§75/ Eﬁzlfig;/'2G03"v. "(i21.i_,€Cf 

14-O3-2005 (:01'1fi1-m the order of {Tie Ap'p¢§1Iaie.; C_()'1"'a'I.1fr"aVissVi«01T"aCr
and (:onfi1'r:r1ir1g the o1'cie1* Imssccl by %1_}"1€.. --'.'1'1c:'Qrm: Tzxx :O_ffi'c':1c:r.
Ward~12{2). Bangalore and etc.    V. 2 --  W
I.T.A. NO.2867/2005 ' ' *  "

BETWEEN:
1 THE COMMiSSiONﬁ+3_R 'Q1«'s.j;NC'£> n<1 TAX

C.R.BUIL.DING. QUIa:E:;\JE; 'ROAD"--  
BANGALORE     

:2 ':'I~1r~:'DE~:¥:?U1Y CC)MI\/iiSE'~,.iOI\JI¥Z}{ or 1l\ECO1.\/Ii') TAX
'cc0.E\x1I)AN';"C_1Ra;:I;&;44£5'} '
R.BUiLDlNG_, Q§3*£.=:..1a:.Ns ROAD
BANGAL0'RE", » V   APPELLANTS

(33; 'Sn; 1: R I'N.I;:) Rj}\ KUMAR FOR E SANMATHI

 *  _ 11\;:>*;<A£§L;zx/IAR. A'3~v--;y'

M/_S F2AS:Ii%%3:5OE{MA1"IOE\1 'I_'f£C}--INOLOGIl.:3S 1>v':r1;:H::>
NO'. "126. NANDI~I1I")URG ROAD

 f3ANG.AE;OI{Iji  R1381-'ONl')EN"F

 V(I3_§",'s1-1: A SHANKAR. ADV.)

*$*$**

This ITA is filed L1/S260-A of I.T.AcL 196 I. arising out
of order dated 14-03-2005 passed in ITA N0.7'44/Bang/2002
for the Assessmem. Year 1997398. p1'ayi1"1g that this I~i0n":)le

Court may be pleased to: 



i. fommlate the substantial questions of Iaw stated therein.

ii. aiiow the appeal and set aside the orders passed by the
ETAT. Bangalore in ETA N0.744/Bang/2002 dated
14vO3~2005 <3: confi1'1'1'1 the order passed by the Apgncrllzxie
C0mn'1issi011er (',()I1I'iFI'IK1'.1'1g the order passed.  the
Deputy C0mn1issi0ner of meorxae "flax.  dCo{1~1y1)'21.1*1y
Cire.le--«-M5}Bangalore.   

These 1TAs comm Y on for EssI(_%a11'in.}§~.,{E3152 Cayd 
£23  , y

N.Kumar J., delivered the i:()EE<')\'»r:'3'1'\sj:" "

J U  E NT

These two appeals are byu"th_e';ieVen.t:e«,_e_haUe11gi11g the
order passed by the zxpﬁellgxtct%.j_T§'ib'aha}',~ ._wh:'eh has upheld

dedL1et.i.0ns under S€('.vT_i'G'H .3.'7(1'}_(':~.E'_ the It'ir§,r3i'§1e* Tax Act. 1961

(he1'ejh'at;te1;si1v?;'e1'efije'd  VAet'"]. by sett.£11g aside the
orderxhpassed .byr"t_i1e»9'Assessing Officer as well as the First
Appeliate }X~:.:tVh017i'£--y. 

 '~These 't-we' appeals arise out of two assessment

9 A.s_t9..97--98 and 1998-99 wherein. deduetiexls are

- L

on iden_t_i.'Ca.I g_iI'0L111ds.

 One Arm} S1'i11iVasan. who is the son of the

Niaxziaging Director of the Assessee Company was sent to

~U.S.A. for higher studies. The assessee spent money

towards his education zmd-the said an'101mt was claimed

under deduction under Seetiml 37(1) of {1'1(:'. Act and the said

Vt



expencliture during, the current assessment

year'?

5. We have heard the learned eounse! 21ppera:"i'r1_,§,'~forV

parties.

6. The material on record diS'i:1<)s'es-:'t.hé1t_ Aron 

Srinivasan is the son the Managing"Director w_ho=ent'e:redA

into an agreement with the asse's«se'e.--cornpa.ny':iugrider which
he agreed to work i'o1*.iT1'ie cto1i'i§ﬁa11.y: ori.._eoi'np1etioi'1 of his
course abroad. Therefore. the a'sse:Sse§2?(ronip';}11y undertook

to sponsor him:foi'..hi_'ghei? St?/1(.j.j|':eS'."V  usponsorship was paid

during the effouixee.  bu's;.iuriess._ Wit  on record that the

assesseevis'-re11dei9irig._eonsmtaney service in the field oi'

n1anui}1et,uringVVand.,'--engine'ering. in [hot Arun Srinivasan

'*was'-...ﬁn2_;Engineering""(}raduale. it is for pursuing his

 Poot..--'Girétd_udatVion"Course in Manufacturing and Engineering,

abroad.  Firianciail assisteince was provided. The

',n1ateri21i on record shows that during the course of pursuing
Tiiis i7'ost--Graduat:ion Course at USA. he kept the company

i  ugadated about the latest trends 2-incl developments in the

feiid and was also sending key inputs; in t.he iorrn oi" articles.
research papers ete.. to eligible the company to keep itself

updated of the techniezil know how and krmwledge. For the



:T\_

subscquenl ycars. the assesseevcompany has sliovm higher

lLl1'1'1OV€"11' and laighci' §:)1'0i"i1.

7. In the b.:41c:l{groui'1d of this. we will lc)c2.l:<:"
3'?[1} ofihe Act. which reads thus:-V-'  *

Section 37(1):-- Any ex,o';}i-;d::'i.i_;%;> {l":l>(.)'l'_"'.b£.'.l"vl"L1".,'JV "
expenditizre Q/' the i1atii.?i_,e'*:l¢sc:r'ib.r2cl. in  
30 ('O 35 {*''°'''} and not  in U"l(':-.lflACillll'€:VI§C2/'
capilial. e2,\<per1dii.Lt:t-*..g)r p€f§()i'icil VVéJ<}{)crise$4"Qj"'ll1e
assessed. lciid ()iii' his)!' ' r;{%;§§:I'1c.léci;iL:l1()Ili; and
exclusively. for 1"l1e"- f;'l:l.l':p()S€'§ ~._Qf'  fiizgéixiess or
proj'ess::§r:"'jc:;iiar:  aqz1LmLe<e¢:i' -in ..cOlnpLtiing the
inconiiél  head "'l~"rQf1',f;s and

gr1inlS_ _p"r'cj;'%255.:;ji'(_)rvi 

[Exp'Eqr1a£iOn;"--3 Fc):'=.i_.l1e__remouc1l Of doubts. ii. is
he're_b'y_cieclared.' t"h'i».__ci'r'Lg ex,r)end1'ture incurred. by
an (IS'S(3SvSG€f()f'.C1blI§){~f3IU"pOS(3 i.ul'u'c.l1 is an Qfj'ence
cot 1.uh1'c.'-it i;<;"pr't>l'1.i'£9iieci by lcziv shall r101. be
 deerrleci 1cf)'*li.(.1;_i_¢{ been i'.ncLm'ed.fc)r the purpose of
b'zI3iIie.ss or prqfession and no deduction or

V (3tI.lO~!l.DCIﬂ"C£3 sliall be made in respect" of such

' €X}3_€fL(if.{'l:l I

ilfilic"cXpe1'1c:lit.u1"e incu1'1'ccl by the EISSGSSCE'. is for any

  pUi.fp0SE". which is an offence 01' which is prohibited by law

'ii not criiitled ':10 'she be1"1el'ii: of cledilciioii. Sin'1ila1'ly._

' ~.CXp€1"£d'1l.uI'€ l11CUl'I'('.d by an t1SSE?SS(3Ei on E1d\-'C'.l"EiSt'1'Il€1"iE. in

any souvenir. b1'()(',1'1Li1"E?._ Elraci. pa1'1'1plc1lei or the like piibiished

l:>V a p<.)lil.ic2.1l pa1'l.y. 2-118(1) is no ci'1tii.lc('t to clc(:l11cti01'1. 



8. Thtis. once the expmises l1'l(?L1.1'1'CCl is not 2:: ('.E1]i)i1.£-ll
€X].)t'i1Clil.LIi'€ or an expei'1c1itt,1re l1'1('.L.1I'i'€(l for personal

expenses of the assessee oi' E"l"i(.' said expenditiire is l.(v)V1'l".?£_7l"'}'l()l'1

is not an ()lTe1'1(1te or is not pmli1ibi!e(l by law zt_1;i'Cl"<\.i={a.sj iﬁgt 

spent. in adveitisiiig in any s0:.1\-'(:1'ii1.'.. b.1?0r,;l}iuVi"e'.," E.i'a('.t."."

pamphlet oi' the like published lgy 2b1__1.)(:,sli4t.it*é14l";)é1i'1.y;tfgie'

 is eiititled to {lie beiiefit of (ll./.'i_(.\ll.'1'{..'.ll()11,1jl.Vi:'1'd¢1'.S€€?l.ibl'1 

37 of the Act. ln other w01'cls,ltl1e n'il0nelys*spe'1:it. by an
assesses either in ' sf3£)11sc_31'i1ig :4 ..s't.i,ide1it or towards
€ClL1('.dl'.lOi'1'c1l expenses of at 'st;._t1dt_*l1s1=l 111321"£h:ae_i--pli11e, in which

the 21856388663"l5';,_C:£1l'I'S«§lI1g"'i)i'i.'*llS-.'*§)1,iSii1€SS. is a valid

eXpe11LliE'.u1"e'  is l'Zi"'l"Li'll't"C.'l"1'.f,} cledt1eE.i01'1.

9. "iii"fl'1(;'VV"i1'1$lt1I.11.!'"{I£:i'f-36. the sort of £1116: i\/laiiaging

I)i1'e=§_itb1"; is Eli1.V'E1"lgl1'l€€i'i11g G1'e1dL.1at'.e. Assessee is a

,Car}.suliii1g_"age11cy in l-.\/lé-l.11Lil"c1(Tlt.Il'lI1g and l§:1'1§§iI1€€i'l1'1g

 l_Itél.i,isti'yl.""Tl.'_h<3§/'vhave s1')01'1s0i"e.d the eatitdidatttre of Sri Arum

Srih.ivass{ii,«--"' to pursue his P0s't,-G1-acluai.i.on Course in

' lEi1g,iiielE:--~r.i11g. I11 that i'egard. they lmve entered into 2-1 written
'~e0nt..'ra(:t.. While pursuing the stuclics. the stucient. has

...rei'ide1"ed sewiees. whieli is zi<"kii(')wleclge(l by the assessee.

Merely be('at.1se in 1.l"i(.' zi;3j1'e(ri'11e11i there was 21 ctlmise that. in
ciefault 01" his 1'e1'ide1'i11g, services. l'}.(:'. would reit.1r1'i the

spmisorecl immey with l1'1t.C1'('Sl'.. the ge.i1ui1'1ei'iess of the



1 1. ACctc)1'ding1y, both the appea}s 2,111: dl'S11'}I'SSCd:_   

"'mus

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Karnataka High Court

The Commissioner Of Income Tax vs M/S Ras Information Technologies Pvt ... on 21 July, 2010

Bench: N.Kumar, B.V.Nagarathna
