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TMI Blog2001 (12) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... amely, (1) an expenditure in a sum of Rs.1,53,863 incurred towards helping the excise authorities in conducting raids on illegal manufacturers of liquor and an expenditure in a sum of Rs.75,925 incurred towards payment/donation to informants providing information regarding illicit brewing of liquor and also to charitable organisations. In this reference, we are concerned with only these two items of expenditure which were claimed as expenditure necessary and incidental for the carrying on of its business by the assessee and which had come to be disallowed by the Assessing Officer as well as the Appellate Commissioner in the first appeal by the assessee, but which had come to be allowed in the second appeal by the Income-tax Appellate Tribunal purporting to follow its earlier view taken in respect of a sister concern of the assessee involving similar issues and thereby allowing the appeal and directing deduction of an amount of 50 per cent. in respect of the raid expenses and 75 per cent., an expense towards donation/awards paid by the assessee to informants. The Tribunal having held this to be an item of expenditure allowable under section 37(1) of the Act, the Revenue had sought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd or donations to informers or charitable organisation is concerned, learned counsel submits that here again the question of the assessee incurring such expenditure does not arise as prevention of illegal acts amounting to offence under the Excise Act is the responsibility of the Excise Department which is the enforcing agency and the information, if at all by any informers, is to the Department, who, if found fit and proper, may reward such informers. It is submitted that the question of the assessee making or paying amounts by way of reward, does not arise. It is also submitted that if any amounts are given by way of donation to any charitable organisations, it definitely is not an "expenditure" incurred for the purpose of its business and that can be claimed to the extent permitted under law as an amount contributed by way of donations to such charitable organisations. In so far as the expenditure incurred towards conduct of raids by the Department, learned counsel for the Revenue draws the attention of the court to the Explanation under section 37 of the Act which has been inserted by the Finance (No. 2) Act of 1998 with retrospective effect from 1st April, 1962. For the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this court referred to and relied upon by learned counsel for the assessee is the order dated January 24, 2000, passed in I.T.R.C. No. 47 of 1998 in the case of CIT v. A. Janardhana Shetty [2002] 254 ITR 281 involving assessment year 1984-85 and the order dated February 11, 2000, passed in I.T.R.C. No. 630 of 1998 in the case of A.J. Shetty Family Trust, Mangalore, another sister concern of the present assessee and also for the assessment year 1984-85. Learned counsel for the assessee has also made available copies of this order before the court. Such submission apart, learned counsel for the assessee further submits that the Revenue had not taken the stand at any time earlier that the expenditure incurred by the assessee for which deduction was claimed, was in the nature of illegal expenditure and if the Revenue had not agitated this aspect before the Tribunal, a finding to the effect that the expenditure incurred is in the nature of illegal expenditure, cannot be sought to be projected by the Revenue for the first-time while answering a reference made by the Tribunal on the question of law and submits that a finding of fact which is concluded before the Tribunal and any ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder and are as under: "(3.1) It is seen that a sum of Rs.1,53,863 has been shown as incurred on what is called 'raid expenses'. This is stated to be expenses incurred to assist the excise staff to raid the illicit distillery. As this item of expenditure cannot be proved by the assessee, I hold that this is not admissible. (3.2) Further a sum of Rs.75,925 is shown as donation. These donations are stated to have been made to maintain good relations with people by liberally donating to charitable and religious causes. This item is also not admissible as not proved." The assessing authority having disallowed the claim, the assessee had appealed to the Commissioner of Income-tax (Appeals). The finding of the first appellate authority at this point of time is to be found in para. 3.2 of the appellate order dated December 30, 1998, which is as under: "3.2 The appellant claimed deduction in respect of Rs.75,925 shown as donation for maintaining good relations with people and for obtaining essential information in the manufacture of illicit liquor. The claim was disallowed by the Assessing Officer on the ground that the expenditure was not proved and information, if any, had to be giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licy and placing reliance in the case of CIT v. Kodandarama and Co. [1983] 144 ITR 395, a decision of the Andhra Pradesh High Court, the expenditure was sought to be disallowed. The alternative submission was that the assessee having incurred the expenditure for the purpose of eliminating rivalry to the trade, was an expenditure incurred for the benefit of enduring nature and as such the expenditure could be characterised as "capital expenditure" and in this regard reliance was placed on the decision of the Supreme Court in the case of CIT v. Coal Shipments P. Ltd. [1971] 82 ITR 902. However, the Tribunal negatived both these submissions of the Revenue by distinguishing the decisions relied upon and ultimately went back to its view in an earlier case. The view of the Tribunal on this aspect of the matter is found in para. 1.4 of the order of the Income-tax Appellate Tribunal and reads as under: "1.4. Finally, therefore, we would like to stick to our earlier decision as given in the case of A.J. Shetty Family Trust, as mentioned above, and would direct that 50 per cent. of the raid expenses and 75 per cent. of the expenses towards donations/rewards paid to the informants be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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