DY.COMMISSIONER OF INCOME-TAX,(ASSTT)SR-1, BARODA vs. M/S. GUJARAT NARMADA VALLEY FERTILIZERS CO. LTD.

O/TAXAP/1332/2006 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1332 of 2006 With TAX APPEAL NO. 1333 of 2006 FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE KS JHAVERI

and HONOURABLE MR.JUSTICE K.J.THAKER ============================================================ ==== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ DY.COMMISSIONER OF INCOME-TAX,(ASSTT)SR-1, BARODA....Appellant(s) Versus M/S. GUJARAT NARMADA VALLEY FERTILIZERS CO. LTD.....Opponent(s) ================================================================ Appearance: MR KM PARIKH, ADVOCATE for the Appellant(s) No. 1 MRS SWATI SOPARKAR, ADVOCATE for the Opponent(s) No. 1 ================================================================ Page 1 of 6

O/TAXAP/1332/2006 JUDGMENT CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 01/12/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. By   way   of   these   appeals,   the   appellant­ revenue   has   challenged   the   common   order   dated 06.03.2006 passed by the Income Tax Appellate Tribunal [for short “the Tribunal] in ITA No.1131/Ahd/1998 and 1132/Ahd/1998,   whereby   the   appeals   filed   by   the revenue were partly allowed by the Tribunal. 2. The facts of both these appeals as well as the question of law are identical, therefore, we are discussing only the facts of Tax Appeal N0.1132 of 2006 for our convenience. 3. The   facts   in   brief   are   that   the   assessee filed its return for the Assessment Year 1994­95 on 30.12.1994, declaring   nil income after set off of carried forward investment allowance. A revised return is filed on 29.11.1995.   Thereafter, the return was processed under Section 143(1)(a) of the Income Tax Act. The Assessing Officer, after scrutiny passed an order   under   Section   143(3)   of   the   Income   Tax   Act. Against the said order of the Assessing Officer, the assessee filed an appeal before the commissioner of Income   Tax(Appeals),   Baroda.   The   CIT(A)   vide   order dated   23.03.1998   partly   allowed   the   appeal   of   the Assessee. Page 2 of 6

O/TAXAP/1332/2006 JUDGMENT 3.1. Being   aggrieved   and   dissatisfied   with   the order   of   the   CIT(A),   the   revenue   filed   an   appeal before the Income Tax Appellate Tribunal. The Tribunal vide impugned  order dated  06.03.2006 partly  allowed the appeals of the revenue. Hence, these appeals are filed at the instance of the revenue. 4. While admitting Tax Appeal No.1332 of 2006, the   Court   had   formulated   the   following   substantial questions of law:­ “Whether the Hon'ble ITAT was right in law and   on   facts   in   allowing   the   assessee's claim of contribution of Rs. 1,10,00,000/­ for   A.Y   1994­95   made   to   Chief   Minister's Earthquake Relief Fund and State Government, as expenditure incurred for the purpose of business allowable u/s 37(1) of the IT Act, 1961?” 4.1. While admitting Tax Appeal No.1333 of 2006, the   Court   had   formulated   the   following   substantial questions of law:­ “Whether the Hon'ble ITAT was right in law and on facts   in   allowing   the   assessee's   claim   of contribution of Rs. 22,15,000/­ for A.Y 1995­96 made to Chief Minister's Earthquake Relief Fund and State Government, as expenditure incurred for the purpose of business allowable u/s 37(1) of the IT Act, 1961?” Page 3 of 6

O/TAXAP/1332/2006 JUDGMENT 5. Learned   counsel   for   the   appellant­revenue has submitted that the Tribunal has committed error in passing the impugned order. He further submitted that the Tribunal has not properly appreciated the material on   record.     He,   therefore,   urged   to   allow   these appeals. 6. Learned   advocate   for   the   respondent   has supported   the   impugned   order   of   the   Tribunal   and contended that the question of law involved in these appeals is covered by the decision of the Apex Court in the case of  Sri Venkata Satyanarayana Rice Mill Contractors   Co.   v.   Commissioner   of   Income   Tax reported in 223 ITR page 101 and the decision of this Court   rendered   in  Tax   Appeal   No.457   of   1999   on 13.11.2014. 7. We have heard learned advocate for both the parties and perused the material on record as well as the decisions relied upon by the learned advocate for the appellant. The  question of law involved in these appeals is already answered by the Apex Court in the case   of Sri   Venkiata   Styanarayan   Rice   Mill Contractors Co.(supra), wherein it is held that any contribution made by an assessee to a public welfare fund which is directly connected or related to the carrying on the assessee’s business or which results in   benefit   to   the   assessee’s   business   has   to   be regarded as an allowable deduction under section 37(1) of the Income Tax Act, 1961. Such a donation, whether Page 4 of 6

O/TAXAP/1332/2006 JUDGMENT voluntary   or   at   the   instance   of   the   authorities concerned,   when   made   to   a   Chief   Minister’s   Drought Relief Fund or a District Welfare fund established by the   District   Collector   or   any  other   fund   for   the benefit   of   the   public   and   with   a   view   to   secure benefit to the assessee’s business, cannot be regarded as payment opposed to public policy. The mere fact that making of a donation for a charitable or public cause or in public interest results in the Government giving patronage or benefit can be no ground to deny the assessee a deduction of that amount under Section 37(1) of the Act when such payment had been made for the   purpose   of   the   assessee’s   business.   This   Court also   in   Tax   Appeal   No.1181   of   2014   (supra)   has answered the issue involved in these appeals in favour of the assessee and against the revenue. 8. In the  present case  also  the  donation  was made   by   the   assessee   to   the Chief   Minister's Earthquake   Relief   Fund,   therefore,   it   has   to   be regarded as an allowable deduction under section 37(1) of the Income Tax Act, 1961. 9. In view of the above, the question of law posed in these appeals is answered in favour of the assessee and against the revenue. Both these appeals are, accordingly, dismissed. (K.S.JHAVERI, J.) Page 5 of 6

O/TAXAP/1332/2006 JUDGMENT (K.J.THAKER, J)

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