9911796707
TMI Blog1983 (5) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee-company from this forest. The district magistrate and the President of the District Athletic Association, Dhenkanal, wrote a letter dated 22-7-1976 to the assessee-company mentioning that the District Athletic Association is an organisation entrusted with the responsibility of promoting sports and athletic activities in the district and for this purpose it has been decided to construct a stadium at Dhenkanal. He also wrote that the company has been operating in the district for the last half century and, therefore, it is natural to expect that they would play a significant role in the development of the district by making a generous contribution towards the building of the stadium for promotion of sports and athletic acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stadium in that area and because of its business interest in that area the company considered it commercially expedient to make a contribution of Rs. 5 lakhs. It was further pointed out that the company took into account the fact that more than 300 employees would be able to take part in the games and sports to be organised in the said stadium. A reference was made to the resolution of the board of directors passed in the meeting held on 20-7-1976 wherein it was decided to contribute a sum of Rs. 5 lakhs for the stadium. It was, therefore, claimed that the amount in question was an admissible deduction in view of the following decisions : Eastern Investments Ltd. v. CIT [1951] 20 ITR 1 (SC), CIT v. Malayalam Plantations Ltd. [1964] 53 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a capital expenditure not deductible under section 37 of the Income-tax Act, 1961, in view of the decision of the Calcutta High Court in the case of CIT v. India Tobacco Co. Ltd. [1978] 114 ITR 182 and of the Allahabad High Court in the case of Saru Smelting Refining Corpn. (P.) Ltd. v. CIT [1979] 116 ITR 766. Viewed thus, the Commissioner (Appeals) upheld the disallowance of Rs. 5 lakhs made by the ITO. 4. Against the aforesaid order of the Commissioner (Appeals), the assessee has preferred the present appeal before us. It was contended by the learned counsel for the assessee that to maintain better relationship with the Government of Orissa, it was necessary for the assessee to contribute Rs. 5 lakhs for constructing the stadium i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the facts of the case clearly went to suggest that no advantage of enduring nature in the capital field was acquired by the assessee in making contribution towards construction of the stadium. Reliance was placed on the decision of the Supreme Court in the case of Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1. Reliance was also placed on the decision of the Supreme Court in the case of CIT v. Ashok Leyland Ltd. [1972] 86 ITR 549 wherein it was observed by their Lordships that : ". . . It is true that by terminating the services of the managing agents, the company not only saved the expense that it would have had to incur in the relevant previous year but also for few more years to come. It will not be correct to say that by avoid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered the facts of the case. The claim of the assessee was disallowed by the lower authorities patently on the two grounds : firstly, the expenditure in question was not wholly and exclusively for the purpose of the assessee's business ; and secondly, the said expenditure was in the nature of capital. It was not in dispute that the stadium was constructed at the instance of the Orissa Government for the general welfare of the community at large and the employees of the assessee-company were to be benefited thereby as they happened to be the members of the general public. It was also not in dispute that the assessee-company has been operating in Dhenkanal District of Orissa for the last half century and exploiting the natural resources ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be capital in character. Admittedly, the stadium is a capital asset even though the same did not belong to the assessee. The lump sum contribution made by the assessee for the construction of the stadium formed part of the expenditure that was incurred, which is (sic) a capital asset. The employees of the assessee-company being members of the local general public would have the opportunity of obtaining the advantage or benefit of enduring nature by using the stadium. In the case of India Tobacco Co. Ltd., the assessee contributed a sum of Rs. 50,000 for purchase of equipments for hospital in which the employees of the assessee, not covered by the ESI scheme, became entitled to use the hospital facility. In that case, the Calcutta High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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