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2009 (8) TMI 732

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..... e 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 grades of steel by the steel plants. The appellant filed a return for the assessment year 1992-93 showing income of Rs. 13,35,910. However, assessment was made at a total income of Rs. 15,79,780. The claim of the appellant of Rs. 9,097 as expenditure incurred towards performing puja during the financial year including expenditure of Rs. 6,181 incurred towards vishwakarma puja, was disallowed by the Assessi .....

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..... ompany 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) that in cases such as this case, in order to justify deduction the sum must be given up for reasons of commercial expediency it might be voluntary, but so long as it was incurred for the assessee s benefit the deduction was allowable ; (ii) that as the Appellate Tribunal had found that the amount was expended for reasons of commercial expediency, and was not given as a bounty but to strengthen the manag .....

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..... ng 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, which Hindu traders in a cus-tomary way at the time of Mahurat or opening of their account books on the auspicious occasion of Diwali, incur, are to be treated as expenditure laid out wholly and exclusively for the purposes of the assessee s business. Such expenses are generally of the nature of advertisement with a view to securing new business and are incurred in the interests of business. There-fore, i .....

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..... mpany 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 in the factory premises under section 37(1) of the Act ? 12. The Assessing Officer relying upon the judgment in the matters of Sanghameshwar Coffee Estates Ltd. [1986] 160 ITR 203 (Karn) and Kolhapur Sugar Mills Ltd. [1979] 119 ITR 387 (Bom), held that the company, which is a creation by legal fiction and not a real person made up of flesh and blood, cannot profess any religion and, therefore, performa .....

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..... 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 in India, to revenue in its accounts in ascertaining the profits and gains of its business for the said year. However, the Income-tax Officer as also the appellate authority included the said amount in the income of the com-pany. The Tribunal held that the assessee was entitled to deduct the said amount in computing income, and set aside the order of the appellate authority. The High Court confirmed th .....

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..... d 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 387 (Bom) and, accordingly, we hold that the expenditure incurred in puja/Vishwakarma puja by a company cannot be treated as expenditure incurred wholly and exclusively for the purposes of business or profession of a company, and the assessee cannot be allowed any deduc-tion under section 37(1) of the Act towards such expenditure. We find no illegality or infirmity in the order of the Tribunal restoring .....

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