9911796707
TMI Blog1990 (2) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... contended before him that the assessee had to get licences and permits from the State Government for carrying on its business and so the expenditure incurred in connection with the Tamil Conference conducted by the State Government should be viewed as out of business expediency. The CIT(Appeals) did not agree with these submissions of the appellant. He held that it was not possible to visualise any direct nexus between the assessee's business and the Tamil Conference. He held that the money spent on providing dinner to the delegates of the Conference had no connection whatsoever with the appellant's business in the manufacture of industrial alcohol and other products and that at the most it could be said that the amount spent was for a worthy cause. He, however, held that however worthy the cause is, that by itself would not make it an allowable item of expenditure. He therefore upheld the disallowance made by the Income-tax Officer. Aggrieved by this decision of the CIT(Appeals), the appellant has come up on further appeal to the Tribunal. 2. Shri T.N. Seetharaman, the learned counsel for the appellant placed before us the letter received from the Special Officer, Vth World Tami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that delegates from all over the world had assembled at Madurai during the period of the conference. The appellant-company and another allied company, namely Thiru Arooran Sugars Ltd. had hosted a lunch to the delegates of the Fifth International Conference of Tamil Studies held as part of the Vth World Tamil Conference. The Special Officer has informed the assessee's Managing Director that they have received a bill for Rs. 40,000 from Pandian Hotel at Madurai where the lunch was given to the delegates. He had requested the Managing Director to send the cheques in his favour. In reply to this, the Managing Director sent two cheques of Rs. 20,000 each, one from the appellant-company and the other from Thiru Arooran Sugars Ltd. on 18th Feb. 1981. The official receipt for Rs.20,000 in favour of the Managing Director of the assessee-company was issued by the Asstt. Special Officer, (Accounts), Vth International Tamil Conference, Madurai on 26-2-1981. On the above facts, there is no dispute about the genuineness of the expenditure incurred by the appellant-company. 4. We are unable to agree with the revenue's contention that the expenditure in question is in the nature of entertainm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the business. Their Lordships further held that for an expenditure to fall within sec. 37(1) of the Act, it is not necessary that it should have been incurred ' necessarily ', that an expenditure can be allowed under sec. 37(1) if it fulfils the necessary conditions even though it is incurred voluntarily and without any necessity, that the expression " for the purposes of business " as it occurs in the section is wider in scope than the expression " for the purposes of earning profits ". Their Lordships further held that it may take in not only the day-to-day running of a business, but also many other acts incidental to the carrying on of the business and that, to decide whether a payment of money or incurring of expenditure is for the purpose of the business and an allowable expenditure, the test applied is of commercial expediency and principles of ordinary commercial trading. Their Lordships also held that if the payment or expenditure is incurred to facilitate the carrying on of the business of the assessee and is supported by commercial expediency, it does not matter that the payment is voluntary or that it also enures to the benefit of a third party. Their Lordships fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly gratuitous or for some improper or oblique purposes outside the course of business then the expenditure is not deductible. In deciding whether a payment of money is a deductible expenditure one has to take into consideration questions of commercial expediency and the principles of ordinary commercial trading. If the payment of expenditure is incurred for the purpose of the trade of the assessee it does not matter that the payment may enure to the benefit of a third party (Usher's Wiltshire Brewery Ltd. Bruce (1914) 6 TC 399 (HL). Another test is whether the transaction is properly entered into as a part of the assessee's legitimate commercial undertaking in order to facilitate the carrying on of its business ; and it is immaterial that a third party also benefits thereby [Eastern Investments Ltd. v. CIT [1951] SCR 594 ; 20 ITR 1 (SC)]. But in every case it is a question of fact whether the expenditure was expended wholly and exclusively for the purpose of trade or business of the assessee." 7. In Amarjothi Pictures v. CIT [1968] 69 ITR 755, the Madras High Court held that the expenses incurred by the assessee in connection with the Silver Jubilee run of one of its pictures was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " In such situations of devastating floods everybody contributes their might for relief. So the workers would have ordinarily requested the mill to take a lead in such matters. So the expenditure was at the behest, initiative and desire of the local officials and mill workers. The assessee in private enterprise cannot afford to displease the local officials nor their workers. Non-co-operation with the local officials or indifference to the request of the workers will lead to difficult situations. The adverse effect of such a conduct can well be imagined than described. So the expenditure incurred at the behest of Government officials and mill workers is amply supported by commercial expediency. It is, therefore, allowable under section 37. There is nothing personal, capital, charitable or donative in such expenditure. It was all incurred only because of pressure from outside authorities. It was not a voluntary charitable donation. So it is allowed. Ground allowed." 13. Similarly, in Varadhalakshmi Mills Ltd.'s case, the Appellate Tribunal, Madras Bench A held that the donation made by the assessee-company to the Chief Minister's Public Relief Fund for facilitating flood relief ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
