TMI Blog1980 (4) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... s a manufacturing unit. During the assessment year 1958-59, it paid a sum of Rs. 5,67,000 to the Indian National Congress. It also made payments to the Indian National Congress of Rs. 5,000 in each of the assessment years 1960-61 and 1961-62. The assessee claimed these amounts as permissible deductions under s. 10(2)(xv) of the Indian I.T. Act, 1922. The assessee contended before the ITO that the donation to the Indian National Congress was incurred wholly and exclusively for the purpose of its business. The ITO did not accept this contention, and disallowed the deductions. On appeal by the assessee, the AAC confirmed the view of the ITO. On further appeal to the Income-tax Appellate Tribunal, the Tribunal concurred with the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business and the expenditure. Mr. G. C. Sharma, learned counsel for the assessee, has formulated before us the following propositions: 1. A sum of money expended voluntarily on the ground of commercial expediency to indirectly facilitate the carrying on of the business, may be expended wholly and exclusively for the purposes of the trade. It is not necessary for such an expenditure to be directly related to the process involved in the carrying on of the business. 2. The expenditure may be admissible as a deduction under s. 10(2)(xv) even if the primary motive for incurring it is not directly to earn income thereby. Learned counsel, therefore, urges us to accept that the payment to the Indian National Congress was to indirectly fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haracter as a trader. The assessee has to establish a direct and intimate connection between the expenditure and the business, i.e., between the expenditure and the character of the assessee as a trader. In short, only such expenditure can be allowed which is really incidental to the trade itself. An expenditure remotely connected with the trade does not qualify for permissible deduction." The court agreed with the decision of the Allahabad High Court in J.K. Cotton Spg. Wvg. Mills.Co. Ltd. v. CIT [1966] 62 ITR 813, where similar contribution made to the Congress parliamentary board had been disallowed on the ground of absence of direct nexus between the business of the assessee and the contribution. It was, however, observed that an ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 ITR 383. A Full Bench of the Madhya Pradesh High Court has, in Addl. CIT v. Kuber Singh Bhagwandas [1979] 118 ITR 379, relied on these decisions and held that the amount of donation to the Chief Minister's Drought Relief Fund was an allowable deduction under s. 37(1) of the I.T. Act, 1961, the particular facts being, that though the donation was voluntary, the permit for foodgrains was directly related to the amount of donation paid by the trader. In fact, the original receipt showing deposit of the donation was to be annexed to the application for the permit. There was, therefore, a direct nexus between the business and the donation. However, a general donation, as in the present case, leaves the nexus too remote and will, therefore, not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor. Mr. G. C. Sharma also sought to contend that the Orissa Cement Ltd.'s case [1969] 73 ITR 14 (Delhi) had relied on Travancore Titanium Products Ltd. v. CIT [1966] 60 ITR 277 (SC) and that, since the latter had been overruled in Indian Aluminium Co. Ltd. v. CIT [1972] 84 ITR 735 (SC), the decision in Orissa Cement Ltd. [1969] 73 ITR 14 (Delhi) needs reconsideration. We do not agree. Indian Aluminium Co. Ltd.'s case [1972] 84 ITR 735 (SC) has no doubt overruled the decision in Travancore Titanium Products Ltd.'s case [1966] 60 ITR 277(SC).But the former has not over ruled the test of " direct and intimate connection between the expenditure and the business ", which the latter had enunciated. It only points out that the latter had erred ..... X X X X Extracts X X X X X X X X Extracts X X X X
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