1970 (11) TMI 35 - HC - Income Tax

Expenditure Tax Act, 1957 amount incurred by chairman of a political party has been claimed as exempt as these are donations within meaning of section 5(j) claim is accepted further expenditure in connection with the purpose of the political party and payments to office bearers and members can be claimed for exemption u/s 5(a), as they were incurred wholly and exclusively for the purpose of occupation

Issues Involved:
1. Whether the Tribunal was right in holding that the items of expenditure do not fall within section 5(a) or (j) of the Expenditure-tax Act, 1957.
2. Whether the assessee is entitled to deduct the expenditure-tax payable in respect of an assessment year on an estimated basis under section 6(1)(a) and 2(h) of the Act.

Issue 1: Applicability of Section 5(a) or (j) of the Expenditure-tax Act, 1957

The court examined whether the expenditures of Rs. 19,349, Rs. 17,348, and Rs. 4,750 for the assessment years 1959-60, 1960-61, and 1961-62, respectively, could be exempted under section 5(a) or (j) of the Expenditure-tax Act, 1957. The assessee, a politician, claimed these expenditures as donations for the advancement of his political party, seeking exemption under section 5(a) or (j). The Expenditure-tax Officer admitted the expenditures but denied the exemption, arguing that the assessee's political career did not constitute a vocation and there was no proof that the amounts were not loans. The Tribunal partially allowed the appeals, recognizing the political career as an occupation but disallowing the exemption under section 5(a), stating the expenses were not wholly and exclusively for the occupation.

Section 5(j): Donations

The court referred to the definitions of "donation" from the Concise Oxford Dictionary and Corpus Juris Secundum, noting that a donation need not be equivalent to a gift and can include consideration such as popularity or goodwill. The court held that the expenditures in question were donations, as they were for the public cause of the political party and not loans, thus qualifying for exemption under section 5(j).

Section 5(a): Expenditure for Occupation

The court defined "occupation" as a regular business or pursuit, distinct from a hobby, and considered politics as an occupation. The court rejected the revenue's argument that the expenditure must be for earning income, stating that an occupation need not have a profit motive. The court concluded that the expenditures were wholly and exclusively for the assessee's political occupation, thus qualifying for exemption under section 5(a).

Issue 2: Deduction of Expenditure-tax under Section 6(1)(a) and 2(h)

The court examined whether the assessee could deduct the expenditure-tax payable for the relevant assessment years under section 6(1)(a). The court held that the term "paid" in section 6(1)(a) implies actual payment, not just accrual or liability. The court noted that the expenditure-tax assessments for the relevant years were completed after the respective previous years, and no tax was paid during those years. Therefore, the assessee was not entitled to deduct the expenditure-tax payable on an estimated basis.

Conclusion

The court answered the first question in the affirmative, allowing the exemption under section 5(a) and (j) for the expenditures, and the second question in the negative, denying the deduction of expenditure-tax payable on an estimated basis. The parties were ordered to bear their own costs, with an advocate's fee fixed at Rs. 400.

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