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TMI Blog1984 (1) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered. The authorities, however, have pointed out that the proviso to sub-section (1) of section 35CC lays down that the approval should have been obtained before incurring expenditure. The first appellate authority confirmed the disallowance for the same reason. The assessee is, therefore, in second appeal. It is claimed that the provision relating to the date of approval for incurring the expenditure is only directory and not mandatory. Reliance was placed on the rationale of the decision of the Calcutta High Court in the case of CIT v. Birla Bros. (P.) Ltd. [1982] 133 ITR 373. The learned counsel for the assessee took us over the facts. It was claimed that the programme was a rural development programme, taken up with effect from 1-10-1977, the beginning of the accounting year at the instance of the Chief Minister of Andhra Pradesh and Secretary to the Government for Rural Development. The work was taken up in the village Nadlapur situated in Telengana region which required special development programmes being a backward region. The assessee had no reason to believe that such a programme sponsored at the instance of the State Government would not qualify for the deduction un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such programme before incurring the expenditure : (3) No deduction shall be allowed in respect of the expenditure referred to in sub-section (1) unless the assessee furnishes, along with the return of income for the assessment year for which the deduction is claimed, a statement of such expenditure in the prescribed form duly signed and verified by an accountant as defined in the Explanation below sub-section 2 of section 288 and setting forth such particulars as may be prescribed." The assessee applied for the approval on 12-12-1977. It had incurred an expenditure to the extent of Rs. 18,833 till this date, while the total expenditure up to 21-2-1978 was Rs. 99,225. The entire expenditure during the accounting year for which the claim is made is Rs. 4,56,898, while the amount allowed by the ITO is Rs. 3,57,673. The programme as planned by the assessee is approved by the Ministry of Finance as prescribed authority vide its letter dated 10-3-1978. The clause in the letter relied upon by the authorities for restricting the assessee's claim reads as under : " (2) The approval of the prescribed authority is subject to the following conditions : (b) The programme has been app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, be passed for each year separately if the prescribed authority is satisfied that the programme has been implemented properly. For this purpose, the prescribed authority may monitor the implementation of the programme." [Emphasis supplied] Hence, the approval that is contemplated is approval of a programme in the accounting year and not the expenditure incurred from any particular day in the accounting year. At the same time, we cannot ignore the argument on behalf of the authorities that the assessee should have obtained the approval ' before incurring the expenditure '. Having noticed that the expenditure incurred for a programme in the whole year has to be treated as allowable or to be disallowed on the basis of the approval or disapproval, we consider that since the substantial part of the expenditure had been incurred after the approval date, the authorities took too narrow view in splitting up the expenditure. We further find that the approval letter sets the date from 21-2-1978. We do not understand how this date was fixed. Probably it is the date on which the prescribed authority decided to approve this programme though such a decision was communicated in the letter da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bing a particular date in the statute. In fact, the statute, the instructions and the guidelines clearly expect that the approval is for the expenditure incurred in a particular accounting year. If it were so, there is no reason why any part of the expenditure incurred during the year on a programme which has met with the approval of the Government should be disallowed. However, the assessee has to pass a further hurdle inasmuch as the accountancy certificate does not cover the entire expenditure. In our opinion, this point is well taken but the assessee should have been given an opportunity to amend its certificate. The assessee's accountant took the safer course of certifying that expenditure after the date of approval. If a revised certificate in the prescribed proforma satisfying the requirements of the balance of expenditure prior to 21-2-1978 is furnished, there is no reason why such certified expenditure should not be allowed. The ITO should have given an opportunity to the assessee in this regard. We, therefore, remit the claim back to the ITO to give the assessee an opportunity to furnish a certificate in respect of the balance of expenditure admissible out of the further ..... X X X X Extracts X X X X X X X X Extracts X X X X
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