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2009 (8) TMI 732

..... f a company, and the assessee cannot be allowed any deduc-tion under section 37(1) of the Act towards such expenditure – appeal dismissed - 23/01 - 7-8-2009 - DHIRENDRA MISHRA and CHANDRAKAR R. N. JJ. Judgment: Dhirendra Mishra J.- This income-tax appeal under section 260A of the Income-tax Act, 1961 (for brevity the Act ) has been admitted on the following substantial question of law : Whether in the facts and circumstances of the case, the appellant/company is entitled for the benefit/deduction of section 37 of the Income-tax Act, 1961 ? 2. Briefly stated, the facts of the case are that the appellant/company is engaged in the business of manufacture and sale of ferro manganese and silico manganese utilized for production of various grad .....

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..... y is run by the management and labourers-skilled or unskilled. The expenditure on puja acts as a morale booster for the employees and labourers associated with the company and thus, it is clearly associated with the assessee s business. The puja expenditure was not directly or indirectly connected with the personal expenditure of the director and the same was purely connected with the business of the company and as such, deductible under section 37 of the Act. 5. Reliance is placed on the judgment in the matter of CIT v. Chandulal Keshavlal and Co. [1960] 38 ITR 601 (SC), wherein the hon ble Supreme Court, while dealing with the deductible allowances under section 10(2)(xv) of the Indian Income-tax Act, 1922 has held thus (headnote) : (i) t .....

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..... r for the carrying on of a business ; it may comprehend many other acts incidental to the carrying on of the business. However, wide the meaning of the expression may be, its limits are implicit in it. The purpose shall be for the purpose of busi-ness, that is to say, the expenditure incurred shall be for the carrying on of the business and the assessee shall incur it in his capacity as a person carrying on the business. It cannot include sums spent by the assessee as agent of a third party, whether the origin of the agency is voluntary or statutory. 7. Reliance is also placed on the judgment in the matter of Brijraman Das and Sons v. CIT [1983] 142 ITR 509 (All) in which the High Court of Alla-habad held that Ganeshji ki puja expenses, whi .....

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..... faith. A company, which is only a juristic person, cannot claim to profess, practice or follow any religion or faith. The argument that the expenditure towards Vishwakarma puja is a welfare measure and helps in keeping the employees/workers satisfied is a farfetched argument and the same cannot be treated as expenditure incurred wholly and exclusively for the purpose of business or profession of the company under section 37(1) of the Act. 10. We have heard learned counsel for the respective parties. 11. The short question involved in this appeal is, whether the assessee-a limited company registered under the Companies Act can claim deduction towards expenditure incurred by the company in puja functions, including Vishwakarma puja performed .....

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..... agent, was income of the assessee and deduction was not permissible. However, the Tribunal held that if the managing agent had forgone a part of his commission in the interest of managed company, the same would be allowed as expenditure under section 10(2)(xv) of the Act. The above finding of the Tribunal was confirmed by the High Court. The finding of fact recorded by the Tribunal and confirmed by the High Court was subsequently again confirmed by the hon ble Supreme Court with the observations as detailed above in paragraph 5. 14. In the case of Malayalam Plantations Ltd. [1964] 53 ITR 140 (SC), the assessee debited the amounts paid by him towards estate duty, which was payable on the death of certain shareholders, who were not domiciled .....

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..... of deductions under section 37 of the Act, has held in paragraph 21 of the judgment that a particular item of expenditure may be deductible if the expenditure does not fall within sections 30 to 36 ; that it should have been incurred in the accounting year ; that it should be in respect of a business carried on by the assessee ; that it should not be on personal account of the assessee ; that it should not be in the nature of capital expenditure and that it should be spent wholly and exclusively for business. 18. We are in respectful agreement with the law laid down by the Karnataka High Court in the matter of Sanghameshwar Coffee Estates Ltd. [1986] 160 ITR 203 (Karn) and the Bombay High Court in Kolhapur Sugar Mills Ltd. [1979] 119 ITR 3 .....

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