TMI Blog1993 (4) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... t Kishanganj, Patna in Bihar, to assist in the alleviation of human suffering and preserving private and public property from the Bihar floods. It was also contended that the company had necessarily to participate in the said project by making the abovementioned payment. It was further contended that the assessee had a branch office in Patna in Jamshedpur and the total sales for the year under consideration of the Patna branch amounted to Rs. 827.30 lakhs which was about 13.8 per cent. of the total sales of the company. The gross profits earned by the said branch for the corresponding period amounted to Rs. 103.98 lakhs. It was, therefore, contended that, for such a high business, it was necessary for the assessee to participate in the Bihar flood relief by contributing the above referred amount to keep good relations. The Income-tax Officer did not accept the claim of the assessee and this action of the Income-tax Officer was confirmed by the Appellate Assistant Commissioner of Income-tax in appeal. The Appellate Assistant Commissioner observed that the object for which the assessee-company had contributed to the project might no doubt be laudable but it did not in any way alter t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the assessee, it was an expenditure incurred wholly and exclusively for the purposes of the business of the assessee. In support of these submissions, reliance is placed on the decisions of the Supreme Court in CIT v. Malayalam Plantations Ltd. [1964] 53 ITR 140 and Sassoon J. David and Co. P. Ltd. v. CIT [1979] 118 ITR 261 and the decision of the Full Bench of the Madhya Pradesh High Court in Addl. CIT v. Kuber Singh Bhagwandas [1979] 118 ITR 379 and of the Karnataka High Court in Mysore Kirloskar Ltd. v. CIT [1987] 166 ITR 836. The submission of learned counsel for the Revenue, on the other hand, is that the amount paid by the assessee to Tata Refugee Relief Project is a donation simpliciter for public welfare and, by no stretch of imagination, it can be held to be expenditure incurred "wholly and exclusively for the purpose of the business". We have carefully considered the rival submissions. We have perused the provisions of sub-section (1) of section 37 of the Act which read as follows: "S. 37. General.-(1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and section 80VV and not being in the nature of capital expenditure or per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y expenditure should be incurred in the course of his or its business. Such expenditure may be incurred voluntarily and without any necessity and if it is incurred for promoting the business and to earn profits, the assessee can claim deduction .... even though there was no compelling necessity to incur such expenditure." We have considered the above decision. It appears that the observations of the Supreme Court have been quoted out of context. A careful reading of the above decision of the Supreme Court clearly goes to show that the controversy in that case related to the allowability of certain sums paid by the assessee to its employees, managing director and a director by way of compensation for termination of their services. The above observations of the Supreme Court were made in that context. It is clear from the following observations (at page 271) : "It is also not the case of the Department that the payment was excessive. That there was a substantial reduction in the wage bill in the future years as a consequence of retrenchment was also not disputed. It is too late in the day now, whatever may have been the position about two decades ago, to treat the expenditure inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act gives relief in respect of payments made by an assessee for such laudable purposes. In this view of the matter, we are of the clear opinion that the payment in question does not meet the requirements of section 37(1) of the Act and is not an allowable deduction. Before parting with this case, we may refer to the decision of the Karnataka High Court in Mysore Kirloskar Ltd. v. CIT [1987] 166 ITR 836, on which reliance is placed by counsel for the assessee in support of his contention that donations falling under section BOG might also fall under section 37(1) and the following observations therein (at page 842) : "The basic requirements for invoking sections 37(1) and BOG are .... quite different, but none the less, the two sections are not mutually exclusive. If the contribution by an assessee is in the form of donations of the category specified under section BOG, but if it could also be termed as an expenditure of the category falling under section 37(1), then the right of the assessee to claim the whole of it as allowance under section 37(1) cannot be denied." We don't think that the above observations can help the assessee in the present case. If the case of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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