328. Apprentices training - Expenditure on apprentices covered under the Apprentices Act, 1961 - Whether allowable as business deduction
Circular No. 192 was issued by the Central Board of Direct Taxes on 10 March 1976. Its subject is 328. Apprentices training - Expenditure on apprentices covered under the Apprentices Act, 1961 - Whether allowable as business deduction.
Allows the cost of statutory apprentice training as a business deduction and denies it for voluntary schemes. Section 9(4) read with section 11 of the Apprentices Act, 1961 obliges an employer to impart basic training to apprentices, in a separate part of the workshop or a separate building set up for the purpose where the establishment has 500 or more employees, and in Government training institutes where it has fewer. Because that obligation is statutory, recurring expenses on imparting basic training under the Act qualify under section 37(1) as laid out wholly and exclusively for the purposes of the business. Expenses on practical training under the Practical Training Stipends Scheme and the Programme of Apprenticeship Training do not, no statutory obligation being cast on the employer under those two schemes.
The Board considered whether expenditure on training apprentices covered by the Apprentices Act, 1961 is allowable under section 37(1).
328. Apprentices training - Expenditure on apprentices covered under the Apprentices Act, 1961 - Whether allowable as business deduction
1. The Board have considered the question of allowability under section 37(1), expenditure incurred on training of apprentices covered under the Apprentices Act, 1961. Any expenditure to qualify for deduction under section 37(1) must be laid out or expended wholly and exclusively for the purposes of the business or profession carried on by the assessee.
2. Section 9(4), read with section 11, of the Apprentices Act, casts a legal obligation on the employers for imparting of basic training to the apprentices. If the number of employees in the establishment is 500 or more, then the training to the apprentices has to be given either in separate parts of the workshop building or in a separate building which is specially set up by the employer for this purpose. In case the number of workers is less than 500, the basic training is to be imparted to the apprentices in training institutes set up by the Government. In view of the statutory obligation cast on the employers under the provisions of the Apprentices Act, 1961, recurring expenses incurred on imparting of the basic training to the apprentices under the said Act will be allowable as a deduction under section 37(1).
3. As regards expenses for imparting of practical training under practical Training Stipends Scheme and Programme of Apprenticeship Training (PAT), these expenses will not be covered within the meaning of section 37( 1), as no statutory obligation is cast on the employer under these two training schemes.
Circular : No. 192 [F. No. 204/39/75-IT(A-II)], dated 10-3-1976.
In an assessment where apprentice training expenditure is disallowed as not laid out for the purposes of the business.
Source: the Income Tax Department’s own published text — its page for this instrument.