TMI Blog2012 (3) TMI 586X X X X Extracts X X X X X X X X Extracts X X X X ..... he same, it was decided to create a trust for this purpose. Accordingly, a trust in the name of Pasudhan Kalyan and Upbhokta Samvardhan Trust alias SPARSH for productivity of animals and rural self help was constituted vide trust deed dt. 12.03.2004. The trust is registered u/s 12A and also granted certificate u/s 80G. This trust carries out various programs in the field of animal productivity enhancement. Assessee vide its agenda note dt. 17.11.2003 decided to contribute 5 paisa per liter of the milk procured by it. Accordingly, assessee contributed and paid ₹ 89,67,327/- to this trust during the year under consideration. The relevant ledger account and vouchers are placed on record. 3.1. AO disallowed the amount of contribution of ₹ 89,67,327/- by making the following observations:- (i) Trust is registered u/s 12AA and has been granted certificate u/s 80G, therefore, any payment made by assessee to this trust falls within the definition of donation can not be treated as an expenditure u/s 37(1). (ii) Assessee s contention as to the reimbursement of expenditure borne by the trust is not verifiable in the absence of audit report of the trust, ledger account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions filed on behalf of the assessee are reproduced here in this order as under :- The various observations made by lower authorities for disallowing the contribution made by assessee to trust is incorrect as explained under:- (i) The basic requirements for invoking sections 37(1) and 80G are quite different, but nonetheless the two sections are not mutually exclusive. Even, if contribution made by an assessee is in the form of donations of the category specified u/s 80G, it could still be termed as an expenditure of the category falling u/s 37(1), if such contribution is laid out or expended wholly and exclusively for the purpose of business . This has been so held by Hon ble Karnataka High Court in case of Mysore Kirloskar Ltd. Vs. CIT 166 ITR 836 Hon ble Mumbai Tribunal in case of Hindustan Petroleum Corporation Ltd. Vs. DCIT 96 ITD 186. Therefore, the disallowance of contribution by the lower authorities simply on the ground that the trust is registered u/s 12A granted certificate u/s 80G thus any payment made by assessee to the trust falls within the definition of donation can not be treated as an expenditure u/s 37(1) is misconceived. (ii) Now the issue w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Ltd. Vs. DCIT 96 ITD 186. (v) CIT(A) relied on decision of Hon ble Rajasthan High Court in case of Jaswant Trading Co. Anil Trading Co. Vs. CIT 212 ITR 24. This case supports the case of the assessee as the contribution made to the trust has directly resulted into the benefit by better quality, hygienic and more quantity of milk therefore the same is wholly and exclusively for the business of the assessee. 2. It is a settled law that donation are allowable as business expenditure if they satisfy the expenditure test. Apart from the cases relied before CIT(A) [PB 2A-3A], reliance is further placed on the following cases:- CIT Vs. Vazir Sultan Tobacco Co. Ltd. 169 ITR 139 (AP) (HC) Assessee formed a trust under a trust deed with a corpus for providing financial assistance and affording higher education to the needy children of the employees of the company. The amount was claimed by way of deduction. AO disallowed the claim by holding that the expenditure claimed was unrelated to the business of the company and that it was extraneous to its business requirements. He was of the opinion that the connection, if any, between the contribution to the trust and the we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Raj) (HC) The concept of wholly and exclusively is not that nobody else is to be benefited by making like expenses. Question is why the assessee makes such contribution. If his contribution is motivated by his own interest and there is nexus between the expense incurred and his business interest, he has spent the money for his own business exclusively and wholly. It is well-settled that the expression wholly and exclusively does not denote necessarily . The word wholly refers to quantum of expenditure. The word exclusively refers to motive, objective or purpose with which the particular expense has been incurred. Ordinarily, it is for the assessee to decide whether any expenditure should be incurred in the course of its or his business. Such expenses can be incurred voluntarily and without necessity. If it is incurred for promoting the business and to earn the profits, the assessee can claim the deduction. It is also well established that that any contribution made by an assessee to a public welfare fund which is directly connected or related with the carrying on of the assessee s business or which result in benefit to the assessee s business has to be regarded as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been given by assessee or reimbursed by assessee that has been spent by the Trust on the animals to get better quality and quantity of milk. The assessee had contributed @ ₹ 0.05 paise per liter of milk procured to its Trust for the purpose of incurring expenditure for better quality of milk. An agenda note was prepared which clearly states that the purpose of contribution is for medical and health facility of the animals of the milk producers at the District Level. The contribution made by assessee to trust is thus directly linked with the procurement of better quality, hygienic and more quantity of the milk. It is in the interest of the assessee that the milk animals at the village level from where it procures the milk are healthy for this purpose, SPARSH trust incurred expenditure in providing vaternity care, regular treatment, emergency care, preventive care, breed improvement through A.I. uninterrupted supply of nutritional supplements etc. Therefore, in our considered view, contribution made by assessee to this trust is an expenditure incurred wholly and exclusively for the purpose of business which is allowable under section 37(1). From the Income and Expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detailed as to what activities are carried on by it by making payment to Vikas Yojna Fund and therefore it can t be said to be incidental to the business of the assessee. 9.2. The CIT (A) confirmed the disallowance of ₹ 3,23,670/- by giving the following findings:- It is seen that the appellant has given incentives to village level milch animal owners and societies to become its members. For this purpose, it has given incentives @Rs. 90 per person and ₹ 5000/- per society who got registered with it and assessee has given incentives to the dairy farmers on the pretext of protecting them from private milk vendors. However it is not clear that what benefit was derived by the appellant by contributing to Vikas Yojna Fund therefore the contribution could not be said to be incidental to the business of the appellant In present case, assessee has given incentives to dairy farmers on the pretext of protecting them from private milk vendors. However, it is not incidental to the business of the assessee. There is no evidence placed by the assessee that dairy farmers to whom incentives were given, did not sell milk to private vendors in the subsequent years. In suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nrajgirji Raja Narasingirji 91 ITR 544. In view of the above, disallowance made by AO confirmed by CIT (A) be deleted. 11. On the other hand, the ld. D/R has placed reliance on the orders of the AO and ld. CIT (A). 12. After considering the orders of the AO and ld. CIT (A) and written submissions, we find that the assessee deserves to succeed in this ground also. It is seen that expenditure claimed under the head Vikas Yojna Fund is not any contribution but actual expenditure incurred for registering the members and the societies at the village level for which certain incentive/subsidy is given to ensure the regular procurement of milk from these persons/societies. It is further seen that for the purpose of over-all development of the dairy in the State assessee has received grant for revival of the societies from the Apex Society i.e. Rajasthan Co-operative Dairy Federation Limited at ₹ 22,91,920/- which has been offered for taxation by the assessee. The expenditure of ₹ 3 lacs or odd has been incurred for the same purpose i.e. for registering the members and the societies at village level so that regular supply of milk from these persons/societies can be m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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