1971 (2) TMI 2 - HC - Income Tax

Salary of a pujari who used to invoke the blessings of gods and goddesses of prosperity for the benefit of the assessee - not admissible for deduction under section 10(2)(xv) of Indian Income-tax Act 1922

Summary

Issues:
1. Deductibility of expenses incurred for a pujari invoking blessings for prosperity.
2. Interpretation of section 10(2)(xv) of the Income-tax Act, 1922.
3. Application of the test of commercial expediency for determining allowable expenses.
4. Comparison with precedents regarding admissibility of expenses for business purposes.

Analysis:
The High Court of Delhi considered the deductibility of expenses incurred by an assessee on the salary of a pujari for invoking blessings of gods and goddesses for prosperity. The Income-tax Officer disallowed these expenses, questioning their necessity for running the business. The Appellate Assistant Commissioner upheld the disallowance, stating the failure to prove the necessity of such expenses. However, the Income-tax Appellate Tribunal allowed the deduction, emphasizing the intangible positive impact on the business due to a sense of security and prosperity created by such expenses.

Regarding the interpretation of section 10(2)(xv) of the Income-tax Act, 1922, the court analyzed whether the expenses were laid out wholly and exclusively for the purpose of the business. Referring to the Supreme Court's decision in Commissioner of Income-tax v. Malayalam Plantations Ltd., the court highlighted the wide scope of "for the purpose of the business," encompassing various aspects like rationalization, preservation, and protection of business interests. The court also cited the Calcutta High Court's decision disallowing political contributions for not being solely or exclusively for profit-earning purposes.

The court considered the test of commercial expediency, as per the Supreme Court's ruling in Commissioner of Income-tax v. Walchand & Co. P. Ltd., emphasizing that reasonableness of expenditure should be judged from the businessman's perspective. However, the court noted that the expenses for a pujari did not align with the businessman's judgment of commercial expediency, as they lacked a direct connection to the business operations.

In analyzing the comparison with precedents, the court distinguished the case from Sree Meenakshi Mills Ltd. v. Commissioner of Income-tax, where civil litigation expenses directly related to business operations were allowed as deductions. The court concluded that the expenses for the pujari were not admissible deductions, ruling in favor of the revenue and against the assessee. The parties were directed to bear their own costs, and the question was answered in the negative.