1994 (7) TMI 37 - HC - Income Tax

Summary

Issues involved:
The issues involved in this judgment relate to the deductibility of donations made by the assessee as business expenditure under section 37(1) of the Income-tax Act, 1961, and the applicability of section 80G for claiming deductions.

Reference No. 34 of 1985:
The Tribunal referred questions regarding the justification of disallowing donations as business expenditure under section 37(1) and allowing only 50% deduction under section 80G. The Tribunal questioned the nexus between the donations and business perspective, the necessity to prove direct business benefit from donations, and the disallowance of 100% allowance for donations made to specific institutions.

Reference No. 35 of 1985:
The Tribunal questioned whether the assessee was entitled to claim the entire donation amount of Rs. 30,000 as a business expenditure under section 37(1) of the Act.

The judgment analyzed the case of M/s. Jaswant Trading Company, where donations were made to various parties for business consideration. The Tribunal found that there was no direct link between the donations and business benefits, leading to the disallowance of claiming the entire amount as business expenditure. The Tribunal emphasized the requirement under section 37(1) that expenditure should be wholly and exclusively for the purpose of business, with the burden of proof on the assessee.

Furthermore, the judgment highlighted the distinction between the general provisions of section 37 and the specific provisions of section 80G. It explained that if an amount is eligible for deduction under section 80G, it cannot be claimed under section 37(1). The judgment emphasized the necessity to prove that expenditure was wholly and exclusively for the purpose of business to claim benefits under section 37(1).

In conclusion, the Tribunal held that there was no established nexus between the donations and the business perspective of the firm, leading to the disallowance of claiming the donations as business expenditure under section 37(1) and allowing only a 50% deduction under section 80G. The reference was answered in favor of the Revenue and against the assessee, with no order as to costs.