TMI Blog2005 (9) TMI 510X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer has disallowed contribution of Rs. 9.49 lakhs towards Ryots Welfare Fund. The Assessing Officer in his order has mentioned that contribution paid to the Trust for the welfare of the Ryots is related to the business but since the Trust came into existence with effect from 20-7-1994, therefore, the expenditure is not allowable as deduction. For the subsequent years, the Assessing Officer observed that the fund was to be utilised for taking up various welfare measures and therefore, the fund is not for the cane development programme. The Assessing Officer mentioned that the company is eligible for deduction under section 80G if the trust satisfies the necessary conditions. The contribution made to the Trust was disallowed for the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the issue under reference. In that case the issue was regarding the interpretation of current repair and other repair. The learned CIT(A) further observed that the decision of Sri Venkata Satyanarayana Rice Mill Contractors Co. s case ( supra ) is not applicable in the instant case as no commercial expediency has been established for the payment to be made to the trust. The learned CIT(A) therefore upheld the order of the Assessing Officer. 3.2 During the course of proceedings before us, the learned A.R. submitted that the Board of Directors of Mysore Sugar Company Limited at their meeting held on 15-7-1992 decided to create a trust for the welfare of the Ryots of the reserved area of the Mysore Sugar Co. Ltd., Mandya. The trust w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( i ) CIT v. Hindustan Hosiery Industries [1994] 209 ITR 383 (Bom.). ( ii ) CIT v. Industrial Development Corpn. of Orissa Ltd. [2001] 249 ITR 401 (Ori.) ( iii ) L.H. Sugar Factory Oil Mills (P.) Ltd. v. CIT [1980] 125 ITR 293 (SC) ( iv ) State Trading Corpn. of India Ltd. v. CIT [1974] 94 ITR 496 (Delhi) ( v ) CIT v. Gobald Motor Services (P.) Ltd. [1975] 100 ITR 240 (Mad.). 4. We have heard both the parties. The Assessing Officer while passing the assessment order for the assessment year 1994-95 observed that the fund created for the welfare of the Ryots (Ryots in Kannada means farmers) is certainly related to the business. The fund is created with a matching contribution from the Ryots i.e., cane gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s deduction as no connection with the business of assessee was shown. The case law is of no help to revenue. The contribution made for meeting out the welfare expenses in the instant case has a direct nexus to the business of the assessee. The learned Bombay High Court in the case of Hindustan Hosiery Industries ( supra ) held that expenditure incurred for training of one of the sons of the partners is not an allowable expenditure as no nexus between the expenditure and the business of the assessee shown. Similary the learned Orissa High Court in the case of Industrial Development Corpn. of Orissa Ltd. ( supra ) held that donation of Chief Minister relief fund is not allowable as no evidence has been shown that the donation resulted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yee on grounds of commercial expediency are revenue expenditure, deductible under section 37 of the Income-tax Act. On the same analogy, voluntary payments made by the assessee for the general welfare and benefit of the cane growers will be an allowable expenditure. The learned Madras High Court in the case of CIT v. Madras Refineries Ltd. [2004] 266 ITR 170 held that expenditure incurred to earn goodwill of local community is deductible. In this case, the amount was spent on bringing drinking water to the locality and aiding local school. The learned Madras High Court in the case of CIT v. Dynavision Ltd. [2003] 128 Taxman 406 held that an oral trust is permissible in case of creation of a trust. A formal deed is not necessary to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year 1997-98, there is an additional issue. The appellant is aggrieved on account of addition of Rs. 98,75,000 on account of net excise duty. The Assessing Officer noticed that Central Excise and State Excise duty has not been considered for the purpose of valuation of closing stock lying in the factory. A sum of Rs. 98.75 lakhs was added in respect of Central Excise duty which has not been paid till the filing of return. Such excise duty related to the closing stock. 5.1 During the course of proceedings the learned A.R. submitted that the appellant is following a consistent method of valuation of stock. Excise duty is not included in the valuation of stock. This has also not been included in the valuation of opening stock. Opening a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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