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TMI Blog1984 (11) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... mselves into an association called the Indore Mill Owners Association and by resolution No. 1 dated 2-1-1946 resolved that the said association should buy all the property described as Bungalow No. 9, South Tukoganj, along with Block No. 7 originally known as Block No. 49 in Tukoganj, Indore, in the name of the President and the Vice-President of the said association for and on behalf of the association for a consideration of Rs. 76,000. The said consideration amount of Rs. 76,000 was contributed by the seven-member mills and the contribution of the assessee, Hukamchand Mills Ltd., amounted to Rs. 17,899,15 annas and 9 paise. It was also specified in the deed that each one of these seven companies, who are the members of the association, shall have a share in the properties so purchased, in proportion to the amount contributed by each of them. There is no dispute that this deed of conveyance in favour of the Indore Mill owners Association is a registered document. 3. It appears that some time in 1968, the association, which by then came to be known as Madhya Pradesh Textile Mills Association, wanted to dispose of a portion of the land at the rear side of the building admeasuring a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then examined the question whether the relinquishment necessitated any reconveyance as discussed in paragraph No. 5 of the order of the Tribunal dated 27-10-1978. The Commissioner (Appeals) held since the original deed was in the name of the association, there was no necessity of any reconveyance. He pointed out that the assessee-company, along with other members of the association, was showing its contribution towards purchase and appreciation thereon (which should be further contribution), as its asset in the balance sheet. He further held that the assessee relinquished its share in the year under appeal by appropriate resolution of the board of directors. 8. The Commissioner next held that the object of the assessee-company surrendering its right was quite clear. He pointed out that the purpose of the above-mentioned Textile Mills Association is to advance, promote, develop and encourage the textile industry in the State of Madhya Pradesh, of which the assessee-company is a founder member. 9. On the above facts, the Commissioner (Appeals) held that any contribution made by any members of the association, which was formed to promote and protect the interest of that trade, had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bution of Rs. 21,016. 13. We have heard Shri Roy Alphonso, the learned departmental representative, and Shri Dinesh Vyas, the learned counsel for the assessee, and carefully considered this submission in the light of the materials placed before us. 14. It is the argument of Shri Roy Alphonso that since the outlay had taken place in 1946, the expenditure itself was in fact incurred in 1946 and not in the year of account 1970. He pointed out that this item was not shown under fixed assets but under the head ' Investments '. Shri Roy Alphonso then pointed out that if there was any expenditure in this year, such expenditure could be claimed only under section 37(1) of the Act. But he argued that the expenditure in question was in the nature of capital expenditure and further, it was not laid out wholly and exclusively for the purpose of the business of the assessee-company. In support of this plea, Shri Roy Alphonso relied on the decision of the Madras High Court in M.S.P. Senthikumara Nadar & Sons v. CIT [1957] 32 ITR 138. He, therefore, submitted that the Commissioner (Appeals) was in error in allowing this claim of the assessee. 15. Shri Dinesh Vyas, the learned counsel for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as relied on the passage at p. 481 of Volume 1 of Kanga and Palkhivala's Law and Practice of Income-tax, 7th edn., under the heading ' Where capital asset belongs to third party '. He, therefore, submitted that the decision of the Commissioner (Appeals) was correct and that the same should be upheld. Shri Dinesh Vyas further submitted that the assessee's claim under section 80G was only an alternative claim in the cross-objection and that the same should be considered if the assessee's claim for deduction under section 37(1) is not accepted by the Tribunal. 16. From the facts stated above, it is clear that the property in question stood in the name of the Madhya Pradesh Textile Mills Association and its predecessor Indore Textile Mills Association right from the date of its acquisition on 29-3-1946. Therefore, the Commissioner was right in his conclusion that no further deed of conveyance or reconveyance was necessary for conferring title in favour of the association. There is no dispute in the present case that this amount of Rs. 21,016 was being shown by the assessee-company as an investment at its original cost in its balance sheet as at 31-12-1969. Consistent with this positio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of this surrender, Rs. 58,219.75 have now been transferred from the Indore Mills Building Fund to the Building fund of the association. Swadeshi Cotton and Flour Mills Ltd. have agreed to surrender their share against payment of Rs. 5,489.87, their original contribution." 18. On the above facts, we are satisfied with the decision of the Commissioner (Appeals) allowing the assessee's claim for deduction under section 37(1) is right and the same has to be upheld. We are unable to agree with the revenue that the expenditure has been incurred by the assessee in 1946 itself and not in the year under appeal. This is clearly opposed to facts which we have discussed above. The expenditure has been incurred only in the year under appeal when the board passed the resolution relinquishing its right, title and interest in the property in favour of the association and stating that it was making it as its contribution to the association. Apparently, the original amount of Rs. 21,016, contributed by the assessee-company for acquiring this property for and on behalf of the association, has been treated as an expenditure in the year under appeal. As rightly contended for the assessee, it di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by their Lordships in the said decision. 20. In addition to these two decisions, the following decisions also are in support of the assessee's case. In CIT v. Associated Cement Cos. Ltd. [1974] 96 ITR 650 (Bom.) an amount of Rs. 2,09,459 spent by the assessee on installing pipelines, etc., to provide water supply to the Shahabad town Municipality, was held to be allowable as business expenditure under section 10(2)(xv). In that case, the pipelines became the property of the Shahabad Municipality. It was held that the expenditure was made for the convenient and economical running of the business for a period of 15 years during which the Government agreed not to include the area in which the assessee's factory was situated within the municipal limits, so that the assessee would not have to pay municipal taxes for the period. 21. The next decision is also of the Bombay High Court in CIT v. Tata Sons (P.) Ltd. [1978] 111 ITR 290. In this case, a contribution of Rs. 1 lakh made by the assessee to the managed mills, without earmarking the contribution for any particular business purpose, on the occasion of the Golden Jubilee celebrations or the managed mills and which amount was uti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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