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TMI Blog2024 (8) TMI 433X X X X Extracts X X X X X X X X Extracts X X X X ..... er labour law, or for that matter, payment that is made as an employer . It is apparent that both forums have found that the payments had a commercial linkage to the business and led to benefits for the conduct of the business of the assessee in those years. The payments made by the Respondent-Assessee were for public causes in the locality of the business operations and benefits flowed from it to the business of the Assessee. In our view, if at all the Memorandum of Settlement is relevant, it would be to show that there was a nexus between such social welfare activity undertaken by the Respondent-Assessee and the business of the Respondent-Assessee. The local harmony and goodwill that the social welfare and community expenses generated, benefited the Respondent-Assessee s conduct of business. That such expenses were being incurred was acknowledged and recited as a continuing commitment. Thus, merely because such expenditure finds a place in the Memorandum of Settlement, the nature and character of such expenditure would not be altered, so as to fall under Section 37 (1), or to attract Section 40A (9). Therefore, the two concurrent views expressed by the CIT-A and the Tribunal need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls filed by the Appellant-Revenue in respect of the other four assessment years 1983-84, 1984-85, 1986-87 and 1990-91 came to be withdrawn on the premise of the tax effect being below the thresholds stipulated for continuing with litigation. 3. The two Appeals that are being disposed of by this judgement involve identical questions of law. The amount of disallowance of expenditure involved in the two relevant assessment years, marginally varies. 4. By an order dated 16 October, 2008 passed by this Court in Income Tax Appeal No. 321 of 2008 and by an order dated 17 March, 2008, Income Tax Appeal (L.) No. 720 of 2006 (Registered No. 2070 of 2009, the Appeals were admitted on common questions of law. For convenience, the questions of law in Appeal No. 321 of 2008 are extracted below: (A) Whether the ITAT was justified in law in upholding the action of the CIT(A) in deleting the disallowance of Rs. 1,96,71,842/- made under section 40A (9) of the Act ? (B) Whether a payment made under a memorandum of settlement under the Industrial Disputes Act can be said to be a payment required by or under any law ? [Emphasis Supplied] 5. The short point that arises for consideration is whether payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Union of the employees, the expenditure could also be defended as payments made under the law in terms of the settlement reached with the employees. Towards this end, the following extracts from the Memorandum of Settlement are relevant and set out below:- 9.17 COMMUNITY SERVICES/SOCIAL WELFARE 9.17.1 The Company shall continue to discharge its social responsibilities for the development and welfare of the population residing in the Telco Township and the adjoining bustees. It shall continue to render assistance in providing facilities such as roads, drinking water, improved sanitation, maintenance and extension of school buildings etc. in the bustees mainly inhabited by the Company s workmen. 9.17.2 The Company shall continue to extend financial grants to -- 9.17.2.1 GRAM VIKAS KENDRA, JAMSHEDPUR , for planning and execution of development programmes (agriculture, irrigation, health services, primary education, skill training, rural industries etc.) in some forty villages of three administrative blocks (Chandil, Potka and Jamshedpur) of Singhbhum over 10 kilometers outside Jamshedpur. 9.17.2.2 PARIVAR KALYAN SANSTHAN , for organising Family Welfare Camps every month at the newl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the recitals of the local welfare measures was that of community services and social welfare . Such expenses were already being incurred and the Memorandum of Settlement recorded that it would continue to be incurred. It will be seen from Paragraph 9.17.2.1 of the Memorandum of Settlement, that the expenditure under that head, was towards planning and execution of agriculture, irrigation, health services and primary education in forty villages across three administrative blocks in the vicinity of Jamshedpur. Likewise, under Paragraph 9.17.2.2, it is apparent that expenditure would cover laproscopic operation for women from rural areas and non-employees families. Similarly, one of the heads of expenditure was towards leprosy patients settlements in the vicinity and for conduct of education programmes in the city to increase awareness and to remove social stigma attached to leprosy. 10. It is apparent that the expenditure on community services and social welfare, in the context of the Respondent-Assessee s business in that region, was being undertaken even before the execution of the Memorandum of Settlement. The document merely recited that the Company would continue to spend o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see as an employer . 12. We are unable to see how the payments under the heads listed in the table extracted earlier in this judgement could be regarded as payments made by the Respondent-Assessee in its exclusive capacity as an employer. The payments in question are made towards wider local welfare measures that would boost its presence in the local ecosystem and enable harmonious conduct of its factory and business operations in the vicinity. Merely because a commitment to continue such welfare measures is recited in the Memorandum of Settlement with the Workmen s Union, these payments would not partake the character of payments made under the Memorandum of Settlement or payment required to be made under labour law, or for that matter, payment that is made as an employer . 13. Expenditure not covered by Section 30 to Section 36, and expenditure made for purposes of business shall be allowed under Section 37(1) of the Act. At all times, relevant to these appeals, as Section 37 then stood, such expenses was not disallowed under Section 37. We have given our careful consideration to the analysis in the orders passed by the CIT-A and the Tribunal, concurrently finding in favour of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d] 14. In the instant case too, the payments made by the Respondent-Assessee were for public causes in the locality of the business operations and benefits flowed from it to the business of the Assessee. In our view, if at all the Memorandum of Settlement is relevant, it would be to show that there was a nexus between such social welfare activity undertaken by the Respondent-Assessee and the business of the Respondent-Assessee. The local harmony and goodwill that the social welfare and community expenses generated, benefited the Respondent-Assessee s conduct of business. That such expenses were being incurred was acknowledged and recited as a continuing commitment. Thus, merely because such expenditure finds a place in the Memorandum of Settlement, the nature and character of such expenditure would not be altered, so as to fall under Section 37 (1), or to attract Section 40A (9). Therefore, the two concurrent views expressed by the CIT-A and the Tribunal need not be faulted. This Court, in appellate jurisdiction on substantial questions of law should not substitute an alternate view, merely because another view is possible, unless the views expressed in the concurrent findings are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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