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TMI Blog2012 (8) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... ious business decisions on the part of the Management, whose function and responsibility and, thus, prerogative, it is to decide as to how to conduct the same; the only requirement of law being a clear exhibition of the same being motivated by considerations only of business - assessee’s claim as not sustainable - ITA No.975/JP/2011 - - - Dated:- 15-3-2012 - R K Gupta, Sanjay Arora, JJ. For Appellant: Shri Vinod Johri, Sr.DR For Respondent: Shri P C Parwal, CA-AR ORDER Per: Sanjay Arora: This is an Appeal by the Revenue and Cross objection by the Assessee, directed against the order by the Commissioner of Income-tax (Appeals)-II Jaipur ( CIT(A) for short) dated 10- 08-2011 for the assessment year (A.Y.) 2008-09, partly allowing by the assessee s appeal contesting its assessment vide order u/s. 143(3) of the Income-tax Act, 1961 ( the Act for short) dated 22-12-2010. We shall take up the Revenue s appeal first, whereby it raised two grounds. Revenue s Appeal: ITA No.975/JP/2011 2. At the very outset, it was submitted by the ld. AR, the assessee s counsel, that both the grounds of the Revenue s appeal are covered in favour of the assessee by the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was deleted by the tribunal on the basis that the said fund had been set up solely for the purpose of welfare and benefit of the employees, drawing support from its earlier decision in the case of Rajasthan State Seeds Corporation Ltd. for AY 2006-07 (in ITA No. 233/JP/2009 dated 22-05-2009) , wherein the issue was decide d by placing reliance on the decision by hon'ble jurisdictional high court, as in the case of Addl. CIT vs. Rajasthan Spinning Weaving Mills Ltd., 274 ITR 465; CIT vs. Shri Rajasthan Syntax Ltd., 221 CTR 410 , and by distinguishing the decision in the case of CIT vs. Jodhpur Cooperative Marketing Society, 275 ITR 372 (Raj.) , wherein the amount was set apart for the shareholders of the society, while in the case on hand, it was provided for the benefit of the employees. The relevant para of the said order stands reproduced as a part of para 15 of the tribunal s order. Though there is nothing on record to link the quantum of the expenditure with the purpose for which the impugned payment is made; it being trite that the word 'wholly occurring in sec. 37(1) refers to quantum, in view of the consistent stand by the tribunal, particularly for a preceding year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee were for cultural events, so however, the same qualified the test of expenditure, placing reliance on the decision in the case of Sri Venkata Satyanarayana Rice Mill Contractors Co. vs. CIT (1997) 223 ITR 101 (SC); CIT vs. Vazir Sultan Tobacco Co. Ltd., 169 ITR 139 (A.P.); ACIT vs. Ranbaxy Laboratories, 7 (Trib) 161 (Del.) . Similar contribution/s by the assessee came up for adjudication in the assessee's own case by the tribunal for the assessment year 2006-07 (in ITA No.740/JP/2009 dated 31-03-2010) wherein vide para 9 of its order, the tribunal allowed the assessee's claim for Rs. 14,650/- made in respect of contribution for organizing two days workshops on Human Rights for Police Officers and Rs. 10,000/- for organizing a competition by the Wild Life Development Samiti, which celebrated the Wild Life Week in the firs week of October every year by organizing such competition amongst school students. Such events enable the company to maintain good relations with the District Administration. The assessee s claim was allowed placing reliance on the decision in the case of CIT vs. Madras Refinery Ltd., 266 ITR 170 (Mad.) , and CIT vs. Velumanickam Lodge, 32 DTR 246 (Mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the high court confirming the action of the AO in not entertaining the claim made before him through a letter, as in the instant case. In fact, as we see it, the assessee s decision not to do so, i.e., not to press the claim per the return, was a conscious and deliberate one; the expenditure under reference, debited to the account head 'Donation forming part of its Profit Loss Account for the year, being disallowed suo motu in the computation of income, claiming the part thereof (Rs. 444 lacs, to the 'Chief Minister s Relief Fund ), forming part of the same account, per the return of income, u/s. 80G of the Act. The decision in the case of NTPC Ltd. v. CIT (supra) or Jute Corporation of India v. CIT (1991) 187 ITR 688 (SC) , to which the former refers and, in fact, applies, have no application in the instant case, which come into play where a claim stands made before an appellate authority for the first time, being under the facts and circumstances of the case unable to be made earlier, and toward which, therefore, the satisfaction of the said authority, of course to be arrived at judicially, is relevant and paramount. This is an important and crucial difference which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee advanced any, either before him or even before us. Under the circumstances, we find the decision in the case of Goetze (India) Ltd. v. CIT (supra) as having been rightly applied by the AO. The decision by the tribunal in the case of Kerala State Co-op. Agricultural Rural Development Bank Ltd. v. Asstt. CIT (2011) 139 TTJ (Coch) 585 is also relevant in this regard. As regards the decision in the case of CIT v. Ramco International (supra), the same nowhere discusses or even refers to the decision in the case of Goetze (India) Ltd. v. CIT (supra), which we have found as squarely applicable in the facts and circumstances, including inferential findings, of the case. We decide accordingly. 6.3 We may also discuss the impugned claim on merits. This is as the ld. CIT(A) has, after admitting the same, disallowed the same on merits, and whose order is under challenge before us, with our order, holding the said admission as impermissible in law, being also appealable. We find the assessee s claim, the facts qua which are not disputed, as equally without merit. As explained in the decisions in the case of Voltas Ltd. v. CIT (supra) and Standard Mills Co. Ltd. v. CIT (supra), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of an expectation, and would not qualify the expenditure under reference for deduction u/s. 37. The said decision, in fact, as also emphasized by the ld. CIT(A), is squarely applicable in the facts and circumstances of the case. In the facts of that case, the assessee made donations to various institutions, like the Rotary Club, sewa mandal, a trust, and to the Chief Minister's Drought and Flood Relief Fund, and claimed deduction of the same as business expenditure under section 37 of the Act, as by making such donations its business was claimed to have increased. The tribunal found that since there was no scheme or provision for relief to the affected employees of the assessee due to the floods, there was no nexus between the donation and the assessee's business and, hence, the assessee was not entitled to deduction of the expenditure under section 37 of the Act, but was entitled to deduction of 50 per cent. of the expenditure as provided in section 80G of the Act. On reference, it was held as under: 'The provisions of section 37 of the Income-tax Act, 1961 are general in nature and the provisions of section 80G are specific. Applying the maxim generalia specialibus non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Contractors Co. v. CIT (supra), it would be incumbent on us to deal therewith. We have carefully gone through the said decision. In the facts of that case, the assessee, a rice exporter, contributed to a fund [Andhra Pradesh Welfare Fund] formed by the Andhra Pradesh Rice Exporter s Association under the auspices of the Deputy Collector, at the prescribed amount, calculated with reference to the rice to be exported as sought to be purchased from the State of Andhra Pradesh. Contribution to the said Fund at a defined rate per quintal of rice to be so purchased formed an essential condition for the grant of permit for the export of rice to be issued by the office of the Deputy Collector. On the Revenue taking a stand that the payment to the Fund was not obligatory under any law, so that it was only in the nature of a voluntary payment, it was clarified by the apex court that what was relevant is not whether the payment was made under a binding prescription or was voluntary, but whether it was made for a business purpose. If the commercial expediency in making the payment was shown, which in fact was apparent and not disputed in that case, no adverse view on account of the payment be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts arising only out of conscious business decisions on the part of the Management, whose function and responsibility and, thus, prerogative, it is to decide as to how to conduct the same; the only requirement of law being a clear exhibition of the same being motivated by considerations only of business. Further, it is also not clear if the contributions are to any public fund/s as opposed to a private fund/s. The said reliance would thus, in our view, be of no assistance to the assessee. With regard to the order by the tribunal in the assessee s case for AY 2006-07, we are unable to see as to how the same could form a binding precedent to be followed. The said decision is firstly sans any discussion on law, while for the current year the Revenue validly supports its case with legal precedents in the matter, including by the jurisdictional high court, with we rather finding it to be supported by the decision by the apex court in Sri Venkata Satyanarayna Rice Mill Contractors Co. v. CIT (supra). Could we venture a decision contrary to these decisions? Secondly, as afore-stated, the assessee s case is de hors any factual basis, with we observing the classification of the impugned exp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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