TMI Blog1997 (8) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentative, the assessee made the provision for audit fees as in earlier years, as it was an ascertained liability and so in arriving at the profit of the year the liability was to be taken into account. Considering the facts of the case, we are inclined to agree with the learned representative that the CIT(A) is not justified in confirming the disallowance of the audit fees, as the claim is on account of an ascertained liability in the accounts maintained on mercantile basis. The deduction is allowable in computing the income of the previous year. The AO is accordingly directed to allow the deduction towards audit fees as claimed by the assessee. 3. In the next ground the assessee is aggrieved with the disallowance of depreciation in respect of machinery taken from Zodiac Rubbers. The assessee had taken over the assets of the partnership firm Zodiac Rubbers at revalued figures as recorded in the balance sheet. The controversy centered around the value at which the plant and machinery were to be depreciated. The view taken by the AO was that the assessee had arranged to put an entirely fictitious price on the assets just to enable it to claim higher depreciation at artificial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the Tribunal. He also relied on the decision of the Supreme Court in the case of Sri Venkata Satyanarayana Rice Mill Contractors Co. vs. CIT (1997) 137 CTR (SC) 267 : (1997) 223 ITR 101 (SC) to contend that commercial expediency of a businessman's decision to incur an expenditure could not be tested on the basis of the strict legal liability to incur such expenditure. According to the learned representative, the decision taken by a businessman to incur the expenditure would have to be considered from the business point of view. It was contended that as the expenditure incurred by the assessee in making contributions towards the development of the hospital and the technical high school in the locality would be indirectly benefiting the assessee, the same could be viewed as an expenditure on business expediency entitled to deduction under s. 37. 5. K.R. Sudhakaran Pillai, the Departmental Representative, submitted before us that before the AO the assessee's claim was that the payments were by way of donations only and deduction was claimed at 50 per cent of the total sum of Rs. 16,500. It was stated that the assessee had never claimed that the donation was in the nature of bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for the first time before the Tribunal even though it had not been raised in any form before the assessing authority or before the CIT(A). When once any such new or additional ground is raised, the Tribunal is duty bound to entertain that ground or render a decision thereon, either itself or by remanding the matter. The assessee's claim is that they had to make payments towards the development of the hospital and the technical high school in the locality as an expenditure necessary for the purpose of their business. In the case of Sri Venkata Satyanarayana Rice Mill Contractors Co. vs. CIT relied on by the learned representative of the assessee, the assessee was carrying on the business of exporting rice from the State of Andhra Pradesh. Rice could not be exported without obtaining a permit from the District Collector and permits were given only if payments were made to the Andhra Pradesh Welfare Fund, a welfare fund which had been established in pursuance of a scheme evolved by the Rice Millers Association in consultation with the District Collector. The ITO disallowed the deduction holding that the said payment was neither mandatory nor statutory, but was only discretionary. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the technical school. The assessee has made donation as a voluntary payment for a humanitarian cause, but that does not qualify it as an expenditure laid out wholly and exclusively for the purpose of the business, to fall in s. 37(1) of the IT Act. In fact, there is no nexus between the voluntary payment in the nature of donation and the business of the assessee-company. In the above circumstances, we hold that the assessee is not entitled to claim deduction under s. 37(1) on the donations made to the Hospital Development Committee and the Technical High School Welfare Committee, as expenditure incurred for the purpose of business. As the payments were made by way of donation, the claim can be considered for deduction under s. 80G of the IT Act. The AO would allow the deduction in accordance with law after verification of the receipts which the assessee would produce before him. 7. In the appeal by the Revenue the first ground is that the CIT(A) erred in deleting the disallowance out of the claim of salary payment to the directors of the assessee-company. The assessee's claim was for deduction of a total sum of Rs. 1,20,000 as remuneration to the directors. The AO made a disall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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