M/S GOGGA GURUSHANTHIAH & BROS.,HOSPET vs. ACIT, BELLARY

O R D E R

Per A.K. Garodia, Accountant Member This appeal is filed by the assessee and the same is directed against the order of learned CIT(A), Hubli, dated 22.01.2014 for Assessment Year 2009-10.

2. The learned Commissioner of Income-tax (Appeals), Hubli is not justified in treating the expenditure of contribution paid to The Deputy Commissioner, Bellary for Hampi Utsav as not incurred for the purpose of business as provided U/s 37 of IT Act 1961.

3. The brief facts are that it is noted by the AO in the Assessment Order that the assessee has given a sum of Rs.10 lakhs to the District Commissioner for the purpose of Hampi Utsav. The AO held that this expenditure is not incurred for the purpose of business and therefore, cannot be allowed as expenditure under section 37 of the Income Tax Act, 1961. By making this observation, he made the disallowance and when the assessee carried the matter in appeal before the learned CIT(A), learned CIT(A) upheld the Assessment Order and now the assessee is in further appeal before us.

4. In the course of hearing, the learned AR of the assessee placed reliance on the judgment of Hon’ble Karnataka High Court rendered in the case of M/s. Kanhaiyalal Dudheria Vs. JCIT in and 100017/2018 dated 31.07.2009, copy available on pages 16-50 of the Paper Book. In particular, our attention was drawn to page 19 of the Paper Book and it was pointed out that the issue in dispute was regarding disallowance of a sum of Rs.1.61 Crores incurred towards construction of 169 houses for the villagers who had lost their homes due to natural calamity on the ground that it was not an allowable expenditure under section 37 of the Income Tax Act, 1961. It was pointed out that in para 23 of this judgment, the judgment of Hon’ble Apex court rendered in the case of Sri. Venkatasathyanarayana Rice Mills Contractors Co. Vs. CIT, 223 ITR 101 was noted and it was also noted that in that case, question arose was this as to whether contribution made to district welfare fund maintained by the District Collector would be against public policy or is an expenditure allowable under section 37 of the Income Tax Act, 1961, and it was held that such contribution is not against public policy and would be allowable under section 37(1) of the Income Tax Act, 1961. He submitted that the issue in the present case is squarely covered in favour of the assesse by this judgment of Hon’ble Apex Court rendered in the case of Sri. Venkatasathyanarayana Rice Mills Contractors Co. Vs. CIT (supra). Our attention was also drawn to para 21 of the same judgment of Hon’ble Karnataka High Court rendered in the case of M/s. Kanhaiyalal Dudheria Vs. JCIT (supra) and it was pointed out that in this para, the judgment of Hon’ble Karnataka High Court rendered in the case of CIT Vs. Infosys Technology Ltd., 360 ITR 174 (Karnataka) was noted and it was also noted that in this case, the issue in dispute was regarding the expenditure incurred by the assessee for installing the traffic signals as business expenditure under section 37(1) of the Income Tax Act, 1961 and it was held that for the purpose of business used in section 37(1) of the Income Tax Act, 1961, it should not be limited to meaning of earning profit alone and it includes providing facility to its employees also for the efficient working.

5. As against this, learned DR of the Revenue supported the order of CIT(A) and in particular, our attention was drawn to para 2 on page 4 of the order of CIT(A) and it was pointed out that in this para, it is noted by learned CIT(A) that the payment should result in benefit of business to the assessee whether directly or indirectly and the benefit may accrue immediately or at later part.