T.D. POWER SYSTEMS LIMITED,BANGALORE vs. DCIT, BANGALORE

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ITA 607/BANG/2016Status: DisposedITAT Bangalore22 December 2017AY 2011-123 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the expenditure was not allowable as it was incurred outside India and there was no evidence to show how it benefited the business operations of the Japan branch. Mere reliance on judicial decisions without a factual foundation was insufficient.

What were the facts?

The assessee claimed a deduction for a contribution of Rs. 15,44,850/- made to the Japanese Red Cross Society for tsunami victim relief. The contribution was made by the company's Japan branch. The Assessing Officer and the CIT(A) disallowed the claim.

What were the issues?

Whether a contribution made by a foreign branch of an Indian company to a foreign charity is an allowable business expenditure. Whether the expenditure incurred outside India can be allowed as a deduction without establishing a direct benefit to the business.

Which sections of the Income-tax Act were involved?

Section 37

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, ‘C’ BENCH, BENGALURU

Before: SHRI VIJAY PAL RAO & SHRI INTURI RAMA RAO

For Appellant: Shri Satyanarayana Murthy, CA
For Respondent: Shri S.Nambirajan, Addl.CIT(DR)
Hearing: 25/09/2017Pronounced: 22/12/2017

Date of hearing : 25/09/2017 Date of pronouncement : 22/12/2017 O R D E R

Per INTURI RAMA RAO, AM :

1.

This is an appeal filed by the assessee directed against the order of the Commissioner of Income-tax (Appeals)-14, LTU [CIT(A)], Bengaluru, dated 27/01/2016 for the assessment year 2011-12.

2.

The assessee raised the following grounds of appeal:

3. The only issue in the present appeal is whether an amount of contribution of Rs.15,44,850/- made to Japanese Red Cross Society towards Tsunamy victim relief in Japan is allowable deduction or not. It was claimed that this contribution was made by the Japan Branch of the company and it is an allowable expenditure u/s 37 of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short]. In this connection, reliance was placed on the decision of the Hon’ble Supreme Court in the case of Sri Venkata Satyanaraya Rice Mills Contractors Co. vs. CIT (223 ITR 101). The AO disallowed the claim.

4. On appeal before the CIT(A), the same came to be confirmed as the expenditure was incurred outside India.

5. We heard rival submissions and perused the material on record. The issue in the present appeal is whether the amount of contribution made to Red Cross Society, Japan is an allowable expenditure while computing income under the head ‘business income’. It is claimed that the contribution was made by Japan branch of the assessee and it is not clear from the record whether any profits earned by Japan Branch of the appellant or not. Even if so, no evidence was brought on record as to how the contribution had benefited the business operations of the branch of the assessee-company and mere reliance on the judicial decision without laying factual foundation does not come to the rescue of the assessee. Therefore, claim made by assessee cannot be allowed.

6.

In the result, the appeal filed by the assessee is dismissed.

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