Abroad study expenses of proprietor's daughter

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Anuradha (Querist)
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04 December 2009 Proprietor's daughter is working in the concern & she was sent from the company for pursuing MBA (HR) at Singapore for upgradation. Can the college fees, lodging, boarding & travelling expenses of her be accounted in company's expenditure under staff welfare expenses.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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04 December 2009 Expenditure on education of son of director is not deductible - Expenditure incurred on the education of the son of a director of a family-owned company cannot be claimed as deduction on the ground that the expenditure benefited the company since the son became a director. If this logic were to be accepted, in every family-owned business, all the expenditure incurred in bringing up the children who may later on be given a role in the business as partners or directors could be claimed as business expenditure incurred in training the prospective employees and directors of the business. The expenditure which a father incurs out of his natural love and affection for his children in meeting the cost of their education cannot become a business expenditure merely because he is also the owner or a director of a business in which son or daughter subsequently takes part. It was evident that a director-father had, instead of incurring the expenses from his personal account, which he should have, had merely chosen to debit the expenditure of his son's education to the business of which he was the director. Such expenditure does not become business expenditure merely because the father was in a position to debit the expenditure to the accounts of the business - CIT v. R.K.K.R. Steels (P.) Ltd. [2002] 258 ITR 306 (Mad. - Cegat).

Anuradha

Anuradha (Querist)
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04 December 2009 A director is different from proprietor. Past 3 yrs daughter was working in the company. While studying one cannot work. So she was temporarily terminated from work. Our main business is dealers & indenting agents for which we require an MBA candidate. A small company like ours cannot spend huge amount on 3rd person for further studies as we don't know how many days or yrs he/she will be with us. Hence we took such a decision. Pls clarify

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Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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04 December 2009 Pl read another decision also.

Where, in a partnership firm comprising
father and his three children as partners, the father sent one of the said children abroad for higher studies, and the agreement between the firm and its partners provided that the said son should, on his return, join the firm and serve it for five years, the expenses incurred by the firm on the education of the son abroad is not allowable as business expenditure, being personal in nature - M. Subramaniam Bros. v. CIT [2001] 250 ITR 769 (Mad.).

Anuradha

Anuradha (Querist)
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05 December 2009 This is a proprietory concern. Pls let us know the status if the concern is run by an individual under proprietorship.