JUDGMENT judgment of court was delivered by N. Kumar J.-The assessee has preferred this appeal against impugned order, where it has been held that disallowance of expenditure of Rs. 5,00,000 spent for education of Dr. Gauri Sriram is justified as said amount spent on her did not accrue any benefit to assessee company. assessee is private limited company running hospital. assessee filed return of income for assessment year 2005-06 on October 31, 2005, declaring total income of Rs. 94,43,461. assessee claimed deduction in sum of Rs. 5,00,000 spent for higher education of Dr. Gowri S. D/o. Dr. A. C. Sriram and Mrs. Kala Sriram, who are managing director and executive director of company. exemption was claimed on ground that their daughter was committed to work for assessee after successful completion of her studies. It is not in dispute that after successful completion of studies, she has come back and working in said assesseecompany. She was paid sum of Rs. 20,000 per month as salary before she was sent for higher studies. After returning, she is being paid Rs. 30,000 per month. assessing authority disallowed assessee's claim on ground that expenditure incurred by father of his natural love and affection for his children, meeting cost of their education cannot become business expenditure, merely because he is owner or director of business in which son or daughter subsequently takes part. Aggrieved by said order, assessee preferred appeal to Commissioner of Income-tax (Appeals), which upheld said finding of assessing authority. In second appeal, for same reasons, Tribunal also upheld said finding and dismissed appeal. Aggrieved of these three concurrent findings, assessee is before this court. substantial questions of law, which arise for consideration is as under: 1. Whether, in law, Tribunal is justified in saying that expenditure did not enure any benefit to appellant and benefit was only to daughter of managing director of appellant company and, thus, same was not to be allowed under section 37(1) of Act without considering argument of appellant that daughter of managing director was employee of appellant and on getting higher education had served appellant company in pursuance of contract? 2. Whether, in law, Tribunal was correct in holding that expenditure incurred towards higher education of professional whose services were available to appellant was not in business prudence to justify for allowance under section 37(1) of Act? 3. Whether, in law, provisions of section 40A was applicable when expenditure was in business prudence incurred for benefit of appellant whose value was not proved to be excessive?" We have heard learned counsel for parties. This court had occasion to consider said question in case of CIT v. RAS Information Technologies P. Ltd. [2011] 238 CTR (Karn) 76. After noticing section 37(1) of Act, it was held as under at paragraphs 8 and 9: "8. Thus, once expenses incurred is not capital expenditure or expenditure incurred for personal expenses of assessee or said expenditure is for which is not offence or is not prohibited by law and was not spent in advertising in any souvenir, brochure, tract, pamphlet or like published by political party, assessee is entitled to benefit of deduction under section 37 of Act. In other words, money spent by assessee either in sponsoring student or towards educational expenses of student in discipline, in which assessee is carrying on its business, is valid expenditure and is entitled to deduction. 9. In instant case, son of managing director is engineering graduate. assessee is consulting agency in manufacturing and engineering industry. They have sponsored candidature of Sri Arun Srinivasan, to pursue his post-graduation course in engineering. In that regard, they have entered into written contract. While pursuing studies, student has rendered services, which is acknowledged by assessee. Merely because in agreement there was clause that in default of his rendering services, he would return sponsored money with interest, genuineness of agreement cannot be doubted. On contrary, it only shows that assessee had taken precaution to see that interest of assessee was protected by imposing such condition on student. Even otherwise, when assessee is running engineering and consulting services earning profits and in pursuance of its business or profession, it laid out certain monies for education of student in very same field, such expenditure cannot be held to be unlawful or prohibited by law. Having regard to quantum of amount spent it cannot also be said that it is devise to avoid payment of tax or to reduce tax by such device of sponsoring student's studies abroad. In facts and circumstances of case keeping in mind amount extended towards educational expenses and nature of education and also other attending circumstances, we are satisfied that amount expended by assessee is not devise to avoid payment of tax or reduce payment of tax and this expenditure is bona fide in that view of mater, we do not find any merit in these appeals." In instant case, before expenditure was incurred, daughter had acquired degree in medicine. She was employed. Apart from fact that she is daughter of managing director and chief executive, she was employee of assessee. She was sent outside country for acquiring higher educational qualification, which would improve services, which assessee is giving to its patients. It is in this context, sum of Rs. 5,00,000 is spent. That is not in dispute. After acquiring degree, she has come back and she is working with assessee. She was paid Rs. 20,000 per month as salary, before she was sent to higher education and after returning she is being paid Rs. 30,000 per month. Merely because she happens to be daughter of managing director and chief executive, it cannot be said that money is spent by her parents out of love and affection for higher education of their daughter. She was employee of assessee, in field, in which, she has acquired degree. They wanted her to specialise in radiological investigations and, therefore, she was sent abroad for acquiring knowledge. After acquiring additional knowledge, she has come back and she is working with assessee. Therefore, there is direct nexus between expenses incurred towards her education, with business, which assessee is carrying on. In that view of matter, following aforesaid judgment, we hereby set aside impugned orders passed by all three authorities and direct assessing authority to allow deduction of said expenses. substantial questions of law is answered in favour of assessee and against Revenue. Accordingly, we pass following order: (a) Appeal is allowed. (b) impugned orders are set aside. (c) assessing authority is directed to allow deduction of Rs. 5,00,000 as claimed by assessee. *** Mallige Medical Centre P. Ltd. v. Joint Commissioner of Income-tax