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2020 (8) TMI 667 - AT - Income TaxDisallowing social welfare expenditure - Whether expenditure incurred for construction of houses to rehabilitate flood victims would be in the realm of business expenditure allowable u/s 37? - A.O. was of the opinion that expenditure incurred for social welfare expenditure is in the nature of donation given to Chief Minister Relief Fund but not in the nature of expenditure incurred wholly and exclusively for the purpose of business, which can be allowed u/s 37(1) - HELD THAT:- Identical issue has been considered in the case of Kanhaiyya Lal Dhuderia Vs. JCIT [2019 (9) TMI 354 - KARNATAKA HIGH COURT] where under similar set of facts, the High Court after considering various case laws considered by the Ld. A.O. came to the conclusion that where assessee entered into an MOU with State Government wherein assessee agreed to construct houses to rehabilitate flood victims, since assessee incurred this expenditure not only as a social responsibility but also keeping in mind goodwill and benefit it would yield in long run in earning profit, impugned expenditure would be in realm of business expenditure allowable u/s 37(1). Therefore, by respectfully following the decision of Hon’ble High Court of Karnataka, we are of the considered view that expenditure incurred under the head Social Welfare Expenditure for construction of houses to flood victims is in the nature of expenditure incurred wholly and exclusively for the purpose of business and deductible u/s 37(1) of the Act. Hence, we direct the A.O. to delete additions made towards disallowance of social welfare expenditure. - Decided in favour of assessee.
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