TMI Blog2019 (6) TMI 1183X X X X Extracts X X X X X X X X Extracts X X X X ..... )? - HELD THAT:- In case of Commissioner of Income-tax-LTU Vs. Indian Petrochemicals Corporation Limited [ 2019 (1) TMI 1364 - BOMBAY HIGH COURT] considered the case where the assessee-employer had contributed to various clubs meant for staff and family members and claimed such expenditure as deduction. Once again the revenue had resisted in the expenditure by citing section 40A(9) of the Act. This Court confirmed the view of the Tribunal and dismissed the revenue s appeal, in which the Tribunal had allowed the expenditure claimed by the assessee. Once again in case of The Principal Commissioner of Income-Tax-14 Vs. Indian Oil Corporation [ 2019 (2) TMI 1652 - BOMBAY HIGH COURT] revenue had raised such an issue when the assessee had spent certain amounts in either setting up or providing grant-in-aid made to Kendriya Vidyalaya Schools where the students of the assessee-Indian Oil Corporation would receive education. This Court referred to a judgment of Kerala High Court in case of P. Balakrishnan, Commissioner of Income-Tax Vs. Travancore Cochin Chemicals Ltd. [ 1999 (10) TMI 33 - KERALA HIGH COURT] and of the decision of this Court in case of Bharat Petroleum Corporation Lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it scheme ignoring the provision of section 40A(9) of the Act which provide for deduction only for payment to approved/recognized funds as referred to section 36(1)(iv) (v) of the Income Tax Act, 1961? iii. Whether on facts and in the circumstances of the case, the Tribunal was right in law in allowing a loss of ₹ 16,84,481/- on account of loss on revaluation of permanent category investments, even though the same is a notional loss and inadmissible in law? iv. Whether on the facts and in the circumstances of the case and in law, ITAT was right in deleting the disallowance without appreciating the fact that the disallowance determined by the Ld. CIT(A) on the basis of the decision of ITAT in the assessee s own case in earlier years and giving scientific method of disallowance of the interest expenses in respect of share purchase during the year? 3. Question No.i arises out of the judgment of the Income Tax Appellate Tribunal in remanding the issue before the Assessing Officer for proper verification of facts. The record would suggest that the assessee, in view of its success before the Tribunal on the issue of disallowance of interest credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such sum is so paid, for the purposes and to the extent provided by or under clause (iv) (or clause (iva) or clause (v) of subsection (1) of section 36, or as required by or under any other law for the time being in force. 7. In plain terms, sub-section (9) of section 40A disallows deduction of any sum paid by an assessee as an employer towards setting up of or formation of or contribution to any fund, trust, company etc. except where such sum is paid for the purposes and to the extent provided under clauses (iv) or (iva) or (v) of subsection (1) of Section 36 or as required by or under any other law for the time being in force. It is undoubted that the instance of the assessee does not fall in any of the above mentioned clauses of sub-section (1) of Section 36. However, the question remains whether the purpose of inserting sub-section (9) of section 40A of the Act was to discourage genuine expenditure by an employer for the welfare activities of the employees. This issue has been examined by this Court on multiple occasions. Before taking note of such decisions, we may notice that the explanatory notes on the provisions contained in the Finance Act, 1984, in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the nature of capital expenditure) wholly and exclusively for the welfare of the employees of the assessee out of the sums contributed by him, such expenditure will be allowed as deduction in computing the taxable profits of the assessee in respect of the relevant accounting year in which such expenditure has been so incurred, as if such expenditure had been incurred by the assessee. The effect of the under-lined words will be that the deduction under this provision would be subject to the other provisions of the Act, as for instance, section 40A(5), which would operate to the same extent as they would have operated had such expenditure been incurred by the assessee directly. Deduction under this provision will be allowed only if no deduction has been allowed to the assessee in an earlier year in respect of the sum contributed by him to such trust, fund, etc. 8. The very purpose of insertion of sub-section (9) of section 40A thus was to restrict the claim of expenditure by the employers towards contribution to funds, trust, association of persons etc. which was wholly discretionary and did not impose any restriction or condition for expanding such funds which had possi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts held outside the club premises like Times shield in cricket. On such occasions, the assessee- Corporation used to reimburse expenses incurred by the club. This is the finding of fact recorded by the Tribunal. In the circumstances, section 40A(9) is not applicable. No substantial question of law arises. Hence, our answer to the aforestated question No.2 is in the negative, i.e. in favour of the assessee and against the Department. 10. In case of Commissioner of Income-tax-LTU Vs. Indian Petrochemicals Corporation Limited (2019) 261 Taxman 251(Bombay) , Division Bench of Bombay High Court considered the case where the assessee-employer had contributed to various clubs meant for staff and family members and claimed such expenditure as deduction. Once again the revenue had resisted in the expenditure by citing section 40A(9) of the Act. This Court confirmed the view of the Tribunal and dismissed the revenue s appeal, in which the Tribunal had allowed the expenditure claimed by the assessee. 11. Once again in case of The Principal Commissioner of Income-Tax-14 Vs. Indian Oil Corporation reported in Income Tax Appeal No. 1765 of 2016 , revenue had raised su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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