TMI Blog2004 (8) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... Departmental Representative fairly accepts this position. 3. In the first ground of appeal, the assessee is aggrieved that on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the disallowance of expenditure under s. 37(1) on 20 point programme by calling the said expenditure as 'donation' . 4. During the course of assessment proceedings, the AO noticed that the assessee has claimed a deduction of Rs. 10,55,648, being expenditure incurred towards implementation of 20 point programmes, which are claimed as expenditure incidental to the business activities of the assessee-company. This deduction was claimed under s. 37(1) of the Act. The AO was, however, of the view that any expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planning camps in villages near appellant's refineries/terminals. As per the statement of objectives and obligations adopted by the appellants (Annexed hereto and marked as Exhibit 'D'), the appellants have, inter alia, adopted the following obligations towards the community. (i) to improve the condition of SC/ST in pursuance of national policies. (ii) to help acceleration of all-round development of villages by providing assistance to educated unemployed to earn a living, etc. Incurring of such expenditure has resulted in significant contribution to the business of the appellants, by improving the business image in the society as well as in the Government and thereby has helped in obtaining approval as well as financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yees of the assessee-company. It was also observed that the assessee did not have any statutory obligation to incur the said expenditure and that the expenditure was prompted by altruistic motives. The CIT(A) finally held that the expenditure, therefore, has to be treated as an application of income, and not as an expenditure incurred for earning the said income . The CIT(A) thus upheld, and in fact fortified, the disallowance made by the AO. Aggrieved by the order of the CIT(A), the assessee is in second appeal before us. 6. We have heard Shri Pardiwala, learned counsel for the assessee, and Shri Kumar, learned senior Departmental Representative. We have also perused the material before us, and have duly considered factual matrix of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aspect of the matter, we may only refer to the observations of Hon'ble Supreme Court in the case of Sri Venkata Satyanarayana Rice Mill vs. CIT (1997) 137 CTR (SC) 267 : (1997) 223 ITR 101 (SC): ...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 results in the benefit to the assessee's business has to be regarded as an allowable deduction under s. 37(1) of the Act. Such a donation, whether voluntary or at the instance of the authorities concerned, when made to a Chief Minister's Drought Relief Fund or a District Welfare Fund established by the District Collector or any other fund for the benefit of the public and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the control and directions of the Government of India. As the statement of facts clearly sets out, the expenditure on 20 point programme was incurred in view of specific directions of the Government of India. This factual aspect is not even disputed or challenged by the Revenue at any stage. It cannot, but be in the business interest of the assessee-company to abide by the directions of the Government of India which also owns the assessee-company. In any event, as observed by the Hon'ble Supreme Court in Madras Refineries Ltd.'s case, monies spent by the assessee as a good corporate citizen and to earn the goodwill of the society help creating an atmosphere in which the business can succeed in a greater measure with the help o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elsbey Cables Ltd. (1925) 10 Tax Cases 155 (HL), referred to with approval by the Hon'ble Supreme Court in the case of CIT vs. Chandulal Keshavlal Co. (1960) 38 ITR 601 (SC), which reads as follows: It was made clear in the above cited cases of Usher's Wilshire Brewery vs. Bruce and Smith vs. Incorporated Council of Law Reporting 1914 (6) Tax Cases 477 that a sum of money expended not with a necessity and with a view to direct an immediate benefit to the trade, but voluntarily and on the grounds of commercial expediency and in order to indirectly facilitate carrying on of the business, may yet be expended wholly and exclusively for the purpose of the trade;... It will, therefore, be clear that even if an expense is incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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