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Issues involved:
The judgment involves the question of whether certain payments made by an assessee to the Indian National Congress are permissible deductions under section 10(2)(xv) of the Indian Income-tax Act, 1922 for the assessment years 1958-59, 1960-61, and 1961-62. Assessment Year 1958-59: The assessee, a manufacturing unit, made a payment of Rs. 5,67,000 to the Indian National Congress during this year. The assessee claimed this amount as a permissible deduction under section 10(2)(xv) of the Indian I.T. Act, 1922, contending that the donation was incurred wholly and exclusively for the purpose of its business. However, the Income Tax Officer (ITO) and the Appellate Authority did not accept this contention, disallowing the deductions. The Tribunal also concurred with this decision, emphasizing the need for a direct and intimate connection between the expenditure and the business of the assessee. Assessment Years 1960-61 and 1961-62: In each of these assessment years, the assessee made payments of Rs. 5,000 to the Indian National Congress. Similar to the previous year, the assessee claimed these amounts as permissible deductions under section 10(2)(xv) of the Act, arguing that the payments were made on grounds of commercial expediency. The Tribunal, however, found that there was no direct or intimate connection between the business of the assessee and the expenditure, leading to the disallowance of the deductions. Legal Precedents and Arguments: The counsel for the assessee contended that voluntary expenditure on grounds of commercial expediency, even if indirectly related to the business, may qualify as wholly and exclusively for the purposes of the trade. However, the court referred to precedents such as Orissa Cement Ltd. case and emphasized the need for a direct and intimate connection between the expenditure and the business to qualify for deduction under section 10(2)(xv). The court also discussed other relevant cases where deductions for political contributions were disallowed due to the absence of a direct nexus with the business of the assessee. Judgment: Based on the precedents and the lack of established link between the payments to the Indian National Congress and the business of the assessee, the court upheld the disallowance of the deductions. The court emphasized the requirement of a direct and intimate connection between the expenditure and the business to qualify for permissible deduction under section 10(2)(xv). Consequently, the court answered the question in the negative, ruling against the assessee without any order as to costs.
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