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Deduction under PGBP

sriram (CA) (281 Points)

12 December 2009

whether expenditure for education in usa can be claimed as deduction under PGBP

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3 Replies

P-A-W-A-N (TAX - MANAGER AT GURGAON) (541 Points)
Replied 12 December 2009

must clear the quetion first

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Max Payne (employed) (2574 Points)
Replied 12 December 2009

First of all, is there a nexus between the education and the business?

Here is one case where there was no nexus and the amount was disallowed.

Is expenditure incurred by the assessee-company on the training of an employee allowable as deduction, if there is no business necessity for such training?

Silicon (India) Ltd. v. DCIT (2007) 295 ITR 422 (Mad)

Relevant Section: 37

The Assessing Officer, in this case, disallowed the training expenses incurred by the assessee-company on the ground that such expenses were not related to the business of the assessee. The disallowance was upheld by the Tribunal on the following grounds –

(1) the expenses were incurred on an employee, who was the son of the director of a group company, for his higher education abroad;

(2) the business was not commenced by the end of the relevant previous year in respect of which such deduction was claimed;

(3) the employee had joined a full-time Master’s course of Engineering Degree in computer science, which cannot be considered as a training course. Therefore, it is not the case of sending an employee to acquire technical competency;

(4) no material or evidence or compelling reason was given as to how the higher studies are indispensable for the company;

(5) the assessee-company had received unsecured loan from a group company, in which the employee’s father was a director and it had utilised the said loan to meet the education expenses of the employee.

The High Court, therefore, held that such expenses were not deductible since there was no material to show that there was a commercial expediency or business necessity for sending the employee abroad for higher education.