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Issues involved: The issue involves the deductibility of a donation made to the Chief Minister's Relief Fund as a business expenditure under section 37 of the Income-tax Act, 1961.
Judgment Summary: Facts: The State Government Corporation donated Rs. 1,00,000 to the Chief Minister's Relief Fund for the assessment year 1983-84. The Assessing Officer disallowed the claim, which was upheld by the Commissioner of Income-tax (Appeals). The Corporation appealed to the Income-tax Appellate Tribunal, which allowed the deduction under sections 37 and 35(1)(ii) of the Act. Legal Principles: Section 37 of the Act allows deduction of expenditure wholly and exclusively laid out for the business, not covered by any other specific provision. The test for deductibility is that the expenditure must be for the purpose of the business and not capital in nature. Legal precedents like Atherton v. British Insulated and Helsby Cables Ltd. and CIT v. Chandulal Keshavlal and Co. establish the criteria for determining deductible expenses. Case Precedents: In CIT v. Industry and Commerce Enterprises (P.) Ltd., the loss from the sale of Government loan bonds was considered a revenue loss as it was connected to business activities. Similarly, in Sri Venkata Satyanarayana Rice Mill Contractors Co v. CIT, contributions to a welfare fund related to business were allowed as deductions under section 37(1) of the Act. Decision: The High Court held that the donation to the Chief Minister's Relief Fund by the State-owned Corporation was not allowable as a business expenditure under section 37(1) of the Act. The Corporation failed to prove a direct connection between the donation and its business activities, leading to the denial of the deduction. The reference was disposed of accordingly. Separate Judgment: Justice CH. P. K. MISRA concurred with the decision.
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