M/s The Sandur Manganese & Iron Ores Ltd., Sandur V. JCIT, Bellary

ITA 1516/BANG/2015

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4207 (ITAT-BANGALORE)
• Duration Of Justice: 5 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 02-09-2021
• Assessment Year: 2010-2011
• Appeal Filed On: 29-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUZAFFAR HUSSAIN
• Keywords: Business expenditure; Charitable institution; Principle of natural justice; Commercial expediency; Capital expenditure; Set aside
• Section: 37(1); 205; 13; 37

Judgement Text

ITA NOS.1515 TO 1517/BANG/2015 M/S. THE SANDUR MANGANESE & IRON ORES LTD., SANDUR IN THE INCOME TAX APPELLATE TRIBUNAL BBENCH: BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NOS.1515 TO 1517/BANG/2015 ASSESSMENT YEAR: 2009-10 TO 2011-12 M/S. THE SANDUR MANGANESE & IRON ORES LTD. SANDUR HOUSE, LAXMIPURA TQ. SANDUR PAN NO :AAACT7495D VS. JCIT BALLARI RANGE BALLARI APPELLANT RESPONDENT APPELLANT BY : SHRI S. PARTHASARATHI, A.R. RESPONDENT BY : SHRI MUZAFFAR HUSSAIN, D.R. DATE OF H EARING : 02.09.2021 DATE OF PRONOUNCEMENT : 06.10.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THESE THREE APPEALS CHALLENG ING THE ORDERS PASSED BY LD. CIT(A), GULBARGA AND THEY RELA TE TO THE ASSESSMENT YEARS 2009-10 TO 2011-12. SINCE COMMON ISSUES ARE URGED IN THESE APPEALS, THEY WERE HEARD TOGETHER AN D ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF C ONVENIENCE. 2. THE ASSESSEE IS CARRYING ON BUSINESS OF EXTRACTI ON OF MANGANESE AND IRON ORE. ITA NOS.1515 TO 1517/BANG/2015 M/S. THE SANDUR MANGANESE & IRON ORES LTD., SANDUR PAGE 2 OF 19 ASSESSMENT YEAR : 2009-10 3.0 WE SHALL FIRST TAKE UP THE APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2009-10. THE GROUND NO.1 IS GENERA L IN NATURE. THE GROUND NO.2 AND 3 RELATES TO DISALLOWANCE OF CL AIM MADE UNDER THE HEAD PROVISION FOR MEDICAL ALLOWANCE. 3.1 THE FACTS RELATING TO THE ABOVE SAID ISSUE ARE STATED IN BRIEF. THE A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED EXPE NDITURE OF RS.58.26 LAKHS UNDER THE HEAD PROVISION TOWARDS ME DICAL REIMBURSEMENTS. THE ASSESSEE SUBMITTED THAT IT IS LIABLE TO REIMBURSE MEDICAL EXPENSES UP TO 20% OF BASIC PAY A ND DA OF EMPLOYEES. THE REIMBURSEMENT IS MADE EITHER ON MON THLY OR ANNUAL BASIS BASED ON THE REQUEST MADE BY THE EMPLO YEE. IF THE ASSESSEE HAS NOT CLAIMED FULLY, THEN THE BALANCE AM OUNT WILL BE CARRIED FORWARD TO THE NEXT YEAR. IT WAS SUBMITTED THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND HE NCE PROVISION FOR MEDICAL REIMBURSEMENT SHOULD BE ALLOWED AS DEDU CTION U/S 37(1) OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHO RT]. 3.2 THE A.O. TOOK THE VIEW THAT THE WORD REIMBURS EMENT ITSELF REPRESENTS THAT AMOUNT IS PAYABLE ONLY AFTER INCURR ING OF EXPENDITURE ON MEDICAL TREATMENT BY THE ASSESSEE, T HAT TOO, UPON PRODUCTION OF BILLS. THE A.O. TOOK THE VIEW THAT T HE ASSESSEE CANNOT ANTICIPATE OR EXPECT THAT ANY EMPLOYEE WILL GO SICK AND WOULD MAKE A CLAIM. ACCORDINGLY, THE A.O. TOOK THE VIEW THAT THE CLAIM MADE BY THE ASSESSEE IS A CONTINGENT LIABILITY AND ACCORDIN GLY, DISALLOWED THE SAME. THE LD. CIT(A) ALSO CONFIRMED THE SAME. 3.3 WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED RECORD. IT WAS BROUGHT TO OUR NOTICE THAT AN IDENTICAL CLAIM M ADE BY THE ITA NOS.1515 TO 1517/BANG/2015 M/S. THE SANDUR MANGANESE & IRON ORES LTD., SANDUR PAGE 3 OF 19 ASSESSEE WAS DISALLOWED IN ASSESSMENT YEAR 2008-09 AND THE SAID DISALLOWANCE HAS BEEN CONFIRMED BY THE TRIBUNAL VID E ITS ORDER DATED 11.10.2017 PASSED IN ITA NO.559/BANG/2013. T HE LD. A.R., HOWEVER, PUT AN ALTERNATIVE PLEA BEFORE US THAT ACT UAL REIMBURSEMENT MADE DURING THE YEAR UNDER CONSIDERAT ION SHOULD BE DIRECTED TO BE ALLOWED. THE LD. A.R. SUBMITTED THAT THE ASSESSEE WAS DEBITING THE ACTUAL EXPENSES TO THE ACCOUNT OF PROVISION FOR MEDICAL REIMBURSEMENT, I.E., ACTUAL PAYMENTS WERE NOT DEBITED TO PROFIT AND LOSS ACCOUNT. SINCE THE PROVISION CREAT ED BY THE ASSESSEE HAS BEEN DISALLOWED, THE ACTUAL REIMBURSEM ENT MADE BY THE ASSESSEE DURING THE YEAR SHOULD BE DIRECTED TO BE ALLOWED. 3.4 WE HEARD LD. D.R. ON THIS ISSUE AND PERUSED THE RECORD. IT IS THE CASE OF THE ASSESSEE THAT IT HAS DEBITED THE PR OFIT & LOSS ACCOUNT WITH PROVISION FOR MEDICAL REIMBURSEMENT. THE AC TUAL CLAIM, IF ANY, MADE BY THE EMPLOYEES IS DIRECTLY DEBITED TO PROVISION FOR MEDICAL REIMBURSEMENT ACCOUNT, MEANING THEREBY, TH E ACTUAL REIMBURSEMENT HAVE NOT BEEN DEBITED TO THE PROFIT A ND LOSS ACCOUNT. SINCE THE PROVISION FOR MEDICAL REIMBURSEM ENT CLAIMED BY THE ASSESSEE HAS BEEN DISALLOWED, IT IS PRAYED THAT THE ACTUAL MEDICAL REIMBURSEMENT EXPENSES INCURRED DURING THE YEAR SHOULD BE ALLOWED AS DEDUCTION. WE FIND MERIT IN THIS PRA YER OF THE LD. A.R. THE CLAIM OF PROVISION FOR MEDICAL REIMBURSEM ENT HAS BEEN DISALLOWED ONLY FOR THE REASON THAT THE SAME IS CON TINGENT IN NATURE. IN THAT CASE, THE ACTUAL EXPENSES INCURRED DURING THE YEAR MERITS ALLOWANCE. ACCORDINGLY, WHILE CONFIRMING T HE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE, IN THE INTEREST OF NATURAL JUSTICE, WE DIRECT THE A.O. TO ALLOW ACTUAL MEDICAL REIMBURSEME NT EXPENSES INCURRED BY THE ASSESSEE AND WHICH IS DEBITED TO PR OVISION FOR MEDICAL REIMBURSEMENT ACCOUNT DURING THE YEAR UNDER CONSIDERATION. WE ORDER ACCORDINGLY. ITA NOS.1515 TO 1517/BANG/2015 M/S. THE SANDUR MANGANESE & IRON ORES LTD., SANDUR PAGE 4 OF 19 4.0 THE NEXT ISSUE URGED IN GROUND NOS. 4 TO 7 RELA TES TO DISALLOWANCE OF PROVISION FOR LEAVE TRAVELLING ALL OWANCE. THE A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED A SUM OF RS.4 3.14 LAKHS AS PROVISION FOR LEAVE TRAVELLING ALLOWANCE. THE A.O. TOOK THE VIEW THAT THE SAME IS A FUTURE LIABILITY AND ACCORDINGLY, DIS ALLOWED THE SAME. THE LD. CIT(A) ALSO CONFIRMED THE SAME. 4.1 THE LD. A.R. SUBMITTED THAT THE PROVISION MADE FOR LEAVE TRAVELLING ALLOWANCE IS AN ASCERTAINED LIABILITY AN D THE SAME IS ALLOWABLE AS DEDUCTION AS PER THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS VS . CIT (245 ITR 428). 4.2 WE HEARD LD. D.R. ON THIS ISSUE, WHO SUBMITTED THAT THE COORDINATE BENCH HAS TAKEN IDENTICAL VIEW IN THE AS SESSEES OWN CASE IN ASSESSMENT YEAR 2008-090 (REFERRED SUPRA). 4.3 WE HEARD THE PARTIES ON THIS ISSUE AND PERUSE D THE RECORD. AS IN THE CASE OF PROVISION FOR MEDICAL REIMBURSEMENTS , IN THIS CLAIM ALSO, THE LIABILITY TO PAY WOULD ARISE IN THE HANDS OF THE ASSESSEE ONLY WHEN AN EMPLOYEE MAKES A CLAIM. WE NOTICE TH AT THE CO- ORDINATE BENCH HAS DECIDED AN IDENTICAL ISSUE AGAIN ST THE ASSESSEE IN THE ASSESSEES OWN CASE IN AY 2008-09. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD. CIT(A) IN CONF IRMING THE DISALLOWANCE. HOWEVER, AS HELD IN THE CASE OF P ROVISION FOR MEDICAL REIMBURSEMENTS, THE ACTUAL EXPENDITURE TOW ARDS LEAVE TRAVEL EXPENSES, IF ANY, INCURRED BY THE ASSESSEE A ND DEBITED TO PROVISION FOR LEAVE TRAVELLING ALLOWANCE DURING THE YEAR UNDER CONSIDERATION MAY BE ALLOWED AS DEDUCTION. WE ORDE R ACCORDINGLY. ITA NOS.1515 TO 1517/BANG/2015 M/S. THE SANDUR MANGANESE & IRON ORES LTD., SANDUR PAGE 5 OF 19 5.0 THE LD. A.R. DID NOT PRESS GROUND NO.8 AND THE SAME IS DISMISSED AS NOT PRESSED. 6.0 GROUND NO.9 RELATES TO DISALLOWANCE OF INCIDENT AL EXPENSES OF RS.5,66,703/-. THE A.O. DISALLOWED THE SAME ON THE REASONING THAT THE ASSESSEE DID NOT FURNISH PROPER DETAILS. THE L D. CIT(A) CONFIRMED THE SAME SINCE NO DETAIL WAS FURNISHED BE FORE HIM ALSO. 6.1 WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED THE RECORD. BEFORE US ALSO, THE ASSESSEE DID NOT FURNISH NATURE OF INCIDENTAL EXPENSES CLAIMED BY IT. UNDER THESE FACTS, WE DO N OT HAVE ANY OTHER OPTION BUT TO CONFIRM THE ORDER PASSED BY LD. CIT(A) ON THIS ISSUE. 7.0 GROUND NOS.10 TO 14 RELATES TO DISALLOWANCE OF PAYMENT OF RS.1,40,00,000/- MADE TO BELLARI AGENDA TASK FORCE (BATF). THE A.O. DISALLOWED THE CLAIM OF THE ASSESSEE WITH THE FOLLOWING OBSERVATIONS. DISALLOWANCE OF PAYMENT TO BATF RS.1,40,00,000/- ON VERIFICATION OF THE DETAILS, IT IS NOTICED THAT THE ASSESSEE COMPANY HAS GIVEN A SUM OF RS.1,40,00,000/- TO THE DISTRICT COMMISSIONER BELLARY AGENDA TASK FORCE FOR THE PURPOSE OF IMPROV ING THE INFRASTRUCTURE LIKE ROADS, HEALTH CENTER, DRINKING WATER AND SCHOO LS AT RURAL AREAS. MERELY INCURRING THE EXPENDITURE FOR THE INFRASTRUC TURE AND OTHER DEVELOPMENT WORKS IN THE DISTRICT CANNOT BE TREATED AS BUSINESS EXPENDITURE, WHICH IS NOT AT ALL RELATED TO THE ASS ESSEE COMPANYS NATURE OF BUSINESS AND AT THE MOST IT CAN BE TREATED AS DONAT ION. THE ASSESSEE COMPANYS CONTENTION THAT IT IS A CORPORATE SOCIAL RESPONSIBILITY IS NOT ACCEPTABLE. SINCE THE ABOVE EXPENDITURE IS NOT INC URRED FOR THE PURPOSE OF BUSINESS AND CANNOT BE ALLOWED AS EXPENDITURE U/S 3 7. RELIANCE IS ALSO PLACED ON THE RECENT PRONOUNCEMENT OF HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF INFOSYS WHICH HELD THAT THE ANY EXPENDITURE INCURRED WHICH IS NOT A BUSINESS COMPULSION OR COMM ERCIAL EXPENDITURE CANNOT BE ALLOWED AS BUSINESS EXPENDITURE U/S 37. HENCE, THE SAME IS DISALLOWED AND ADDED TO THE INCOME RETURNED. ITA NOS.1515 TO 1517/BANG/2015 M/S. THE SANDUR MANGANESE & IRON ORES LTD., SANDUR PAGE 6 OF 19 7.1 THE LD. CIT(A) NOTICED THAT THE FINANCE (NO. 2) ACT, 2014 WHICH INSERTED EXPLANATION 2 UNDER 37(1) DECLARING THAT THE EXPENDITURE ON THE ACTIVITIES RELATING TO CORPORATE SOCIAL RESPONSIBILITY SHALL NOT BE DEEMED TO BE AN EXPENDI TURE INCURRED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS OR PROFESS ION. THE LD CIT(A) TOOK THE VIEW THAT THE ABOVE SAID AMENDMENT APPLICABLE TO EXPENDITURE INCURRED IN RESPECT OF CORPORATE SOCIAL RESPONSIBILITY IS APPLICABLE TO THE PRESENT CLAIM ALSO. ACCORDINGLY, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE. 7.2. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED THE RECORD. THE LD. A.R. SUBMITTED THAT THE MINING ACTIVITIES C ARRIED OUT IN BELLARI DISTRICT HAVE BADLY AFFECTED THE ECOLOGY, I NFRASTRUCTURE AND ECOLOGY OF THE DISTRICT. HENCE, THE DISTRICT COMMI SSIONER OF BELLARI HAS FORMED BATF FOR THE PURPOSE OF MEETING THE INFR ASTRUCTURE LIKE ROADS, HEALTH CENTRE, DRINKING WATER AND SCHOOLS AT RURAL AREAS. THE ASSESSEE, BEING IN THE MINING BUSINESS, HAS BEE N REQUESTED TO CONTRIBUTE TO BATF AS PER THE DIRECTIONS GIVEN BY D ISTRICT COMMISSIONER. THE LD. A.R. ALSO INVITED OUR ATTENT ION TO THE COPY OF PROCEEDINGS OF THE MEETING HELD UNDER THE PRESID ENTSHIP OF DEPUTY COMMISSIONER, BALLARI, WHO HAPPENS TO BE THE PRESIDENT OF BATF. HE SUBMITTED THAT THE ASSESSEES CONTRIBUTIO N OF RS.1.40 CRORES FINDS PLACE IN THE MINUTES OF THE MEETING AN D IT HAS BEEN CLEARLY MENTIONED THAT THE SAID AMOUNT WILL BE USED FOR THE DEVELOPMENT WORKS IN SANDUR TALUK. ACCORDINGLY, TH E SAME IS INDIRECTLY CONNECTED WITH THE BUSINESS OF THE ASSES SEE AND IS ALLOWABLE AS DEDUCTION. 7.3 THE LD A.R FURTHER SUBMITTED THAT THE ASSESSE E IS REQUIRED TO HAVE CORDIAL RELATIONS WITH THE DISTRICT ADMINISTRA TION AND HENCE, ITA NOS.1515 TO 1517/BANG/2015 M/S. THE SANDUR MANGANESE & IRON ORES LTD., SANDUR PAGE 7 OF 19 THE AMOUNT PAID AS PER THE DIRECTIONS OF DISTRICT A DMINISTRATION IS RELATED TO THE BUSINESS CARRIED ON BY THE ASSESSEE AND ALLOWABLE AS DEDUCTION AS PER THE DECISION RENDERED BY THE HONB LE KARNATAKA HIGH COURTIN THE CASE OF M/S. KANHAIYALAL DUDHERIA VS. JCIT (2019) 418 ITR 410. THE LD. A.R. ALSO PLACED HIS R ELIANCE ON THE DECISION RENDERED BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. MADRAS REFINERIES LTD. (2004) 266 ITR 17, W HEREIN THE MONEY HAS BEEN SPENT BY THE ASSESSEE FOR ESTABLISHI NG DRINKING WATER FACILITIES OR FOR PROVIDING AID TO THE SCHOOL MEANT FOR RESIDENTS OF THE LOCALITY IN WHICH BUSINESS IS SITUATED IS HE LD TO BE ALLOWABLE AS BUSINESS EXPENDITURE. 7.4 THE LD D.R, ON THE CONTRARY, SUPPORTED THE ORDER PASSED BY LD CIT(A). HE PLACED HIS RELIANCE ON THE DECISION RENDERED BY HONBLE KARNATAKA HIGH COURT IN THE CASE OF WIPRO L TD (2014)(41 TAXMANN.COM 190). 7.5 WE HEARD RIVAL CONTENTIONS AND PERUSED THE R ECORD. WE NOTICE THAT THE FACTS PREVAILING IN THE CASE OF WIPRO LTD ARE DIFFERENT, WHICH IS EVIDENCED BY THE FOLLOWING OBSERVATIONS MADE BY HONBLE KARNATAKA HIGH COURT:- 16. IT IS IN THIS BACKDROP, WE HAVE PERUSED THE ORDERS PASSED BY THE AOS IN THIS APPEAL AND IN ITA NOS.67/07 AND 68/07. THOUGH IN THE PRESENT APPEAL (ITA NO.133/07) THERE IS NO WHISPER REGARDING THE E XACT NATURE OF THE EXPENDITURE INCURRED FOR COMMUNITY DEVELOPMENT BY T HE ASSESSEE, THE AO IN ITA NO.68/08 HAS MADE REFERENCE TO THE NATURE OF EX PENDITURE INCURRED UNDER THIS HEAD BY THE RESPONDENT-ASSESSEE. FROM TH E ORDER OF AO IN ITA 68/07, IT APPEARS THAT THE CONTRIBUTIONS WERE MADE TO VARIOUS RELIGIOUS FUNCTIONS, CHARITABLE INSTITUTIONS, SOCIAL CLUBS AN D CERTAIN ACTS OF CHARITY SUCH AS DONATING A BOREWELL TO THE MUNICIPALITY, ET C. THE RESPONDENT- ASSESSEE HAS NOT PLACED ANY OTHER MATERIALS ON RECO RD IN SUPPORT OF THEIR CLAIM OF EXPENDITURE OVER COMMUNITY DEVELOPMENT, IN OTHER TWO APPEALS, SO TO APPLY THE TEST OF COMMERCIAL EXPEDIENCY. ITA NOS.1515 TO 1517/BANG/2015 M/S. THE SANDUR MANGANESE & IRON ORES LTD., SANDUR PAGE 8 OF 19 17. FROM PLAIN READING OF THE ORDER OF THE AO AND SO A LSO THE ORDER OF THE APPELLATE AUTHORITY IN ITA NO.68/07, IT APPEARS TO US THAT THE EXPENSES CONTRIBUTED FOR RELIGIOUS FUNCTIONS, CHARITABLE INS TITUTIONS, SOCIAL CLUBS AND CHARITY SUCH AS DONATING A BOREWELL TO THE MUNICIPA LITY, ETC. WOULD NOT FALL WITHIN THE EXPENDITURE CONTEMPLATED UNDER SECTION 3 7(1) OF THE ACT. SECTION 37(1) OF THE ACT STATES THAT ANY EXPENDITURE NOT BE ING EXPENDITURE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE, L AID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSI NESS OR PROFESSION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. IT IS NOT THE CASE OF ASSESSEE THAT THE EXPENDITURE INCURRED BY THEM IS COVERED BY SECTIONS 30 TO 36 OF THE ACT, AND EVEN IF THAT WAS SO THE QUESTION OF ALLOWING TH E EXPENDITURE UNDER SECTION 37(1) OF THE ACT WOULD NOT ARISE. 18. IN OUR OPINION, THE EXPENDITURE TOWARDS THE RELIGIO US FUNDS, CHARITABLE INSTITUTIONS, SOCIAL CLUBS OR FOR CHARIT Y DO NOT STAND TO THE TEST OF COMMERCIAL EXPEDIENCY. IN ANY CASE, THE EXPENDITURE UNDER THESE HEADS CANNOT BE STATED TO BE EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OF THE RESPONDENT-ASSESSEE AND TO ALLOW IT. THAT APART, TH E RESPONDENT-ASSESSEE HAS FAILED TO PLACE ANY MATERIAL, IN SUPPORT OF THE IR CASE SO AS TO CLAIM THE AFOREMENTIONED EXPENDITURE UNDER THIS HEAD AS CONTE MPLATED BY SECTION 37(1) OF THE ACT AS BEING COMMERCIAL EXPEDIENCY. IN THE CIRCUMSTANCES, WE ANSWER THE QUESTION IN FAVOUR OF THE REVENUE AND AG AINST THE ASSEESSEE. THE ORDER OF THE TRIBUNAL IS ACCORDINGLY SET ASIDE TO T HIS EXTENT. 7.6 IN THE CASE OF WIPRO LTD (SUPRA), THE EXISTEN CE OF COMMERCIAL EXPEDIENCY WAS NOT PROVED. IN THE INSTANT CASE, TH E ASSESSEE IS ENGAGED IN MINING BUSINESS AND THE BATF WAS FORMED TO CREATE INFRASTRUCTURE FACILITIES IN THE BELLARY DISTRICT B Y THE DISTRICT ADMINISTRATION, WHICH WAS NECESSITY DUE TO LARGE SC ALE MINING OPERATIONS CARRIED THERE. THE MINING COMPANIES SHAL L CONTRIBUTE TO THE BATF, WHICH IN TURN WOULD CARRY OUT VARIOUS DEV ELOPMENT ACTIVITIES. IN THIS REGARD, IT IS RELEVANT TO EXTR ACT RELEVANT MINUTES OF THE MEETING HELD ON 28-02-2009:- 2. ADDRESSING THE MEETING THE PRESIDENT AND DY. COMMISSIONER INFORMED THAT NMDC IS PAYING 18.75 CRORES FOR PURCH ASING LAND TO CONSTRUCT HOUSES UNDER ASHRAYA SCHEME TO THE BENEFI CIARIES WHO ARE BELOW POVERTY LINEDURING 2009-10, NMDC WILL PAY RS.50.0 0 CRORES FOR ITA NOS.1515 TO 1517/BANG/2015 M/S. THE SANDUR MANGANESE & IRON ORES LTD., SANDUR PAGE 9 OF 19 DEVELOPMENT PROGRAMMES. THIS MONEY WILL BE USED TO BUILD COMMUNITY HALLS, ANGANAWADI CENTRES, SCHOOL AND HOSPITAL BUIL DING IN THE VILLAGES. .. 4. THE DY. COMMISSIONER SAID IN HIS SPEECH THAT EV ERY WORK TAKEN BY THE BATF WILL BE TRANSPARENT AS PER KARNATAKA TRANSFERE NCE ACT. AMOUNT OF RS.10.00 CRORES WHICH IS GIVEN BY THE MML WILL USED FOR THE DEVELOPMENT OF ROADS. OUT OF RS.2.00 CRORES CONTRIBUTED BY OBA LAPURAM MINES, RS.1.00 CRORE BY BMM AND RS.1.00 CRORE BY DECCAN MINING CO FOR ROADS IN BELLARY TOWN, R.3.00 CRORES WILL BE USED FOR BELLAR Y RURAL AND KAMPLI RURAL RS.2.00 CRORES EACH AND FOR SIRUGUPPA, HADAGA LI, HAGARIBOMMANAHALLI AND VIJAYANAGAR (HOSPET) ASSEMBL Y CONSTITUENCIES RS.1.00 CRORE EACH. THE AMOUNT OF RS.1.40 CRORES GI VEN BY SMIORE** WILL BE PRESERVED WITH US AND AFTER DISCUSSION IT WILL B E USED FOR THE DEVELOPMENT WORKS IN SANDUR TALUK.. (** ASSESSEE HEREIN) WE NOTICE THAT THE AMOUNT HAS BEEN CONTRIBUTED TO B ATF BY ALL MINING COMPANIES AS PER THE DIRECTION OF DISTRICT A DMINISTRATION. THE QUESTION WHETHER SUCH CONTRIBUTION IS ALLOWABLE AS DEDUCTION HAS BEEN EXAMINED BY THE HON'BLE JURISDICTIONAL KAR NATAKA HIGH COURT IN THE CASE OF KANHAIYALAL DUDHERIA (SUPRA). IN THE CASE BEFORE THE HON'BLE HIGH COURT, THE ASSESSEE WAS CAR RYING ON THE BUSINESS OF EXTRACTION OF IRON-ORE AND ALSO TRADING IN IRON-ORE. THE ASSESSEE HAD INCURRED EXPENSES OF RS.1,61,30,480/- AND RS.55,90,080/- IN FY 2010-11 AND 2011-12 TOWARDS CO NSTRUCTION OF HOUSES IN CERTAIN VILLAGES AS PER MOU ENTERED WITH GOVERNMENT OF KARNATAKA. THE ASSESSEES CLAIM OF ABOVE SAID EXPE NSES WERE DISALLOWED ON THE GROUND THAT IT WAS NOT INCURRED I N THE COURSE OF BUSINESS BUT FOR PHILANTHROPIC PURPOSES. THE HON'B LE HIGH COURT, ITA NOS.1515 TO 1517/BANG/2015 M/S. THE SANDUR MANGANESE & IRON ORES LTD., SANDUR PAGE 10 OF 19 HOWEVER, HELD THAT IT IS ALLOWABLE AS DEDUCTION. T HE RELEVANT OBSERVATIONS MADE BY THE JURISDICTIONAL HIGH COURT ARE EXTRACTED BELOW:- 8. IT IS NOT IN DISPUTE THAT AN MOU CAME TO BE ENT ERED INTO BETWEEN APPELLANTS AND THE GOVERNMENT OF KARNATAKA, REPRESE NTED BY JURISDICTIONAL DEPUTY COMMISSIONER ON 02.07.2010, A COPY OF WHICH HAS BEEN MADE AVAILABLE FOR OUR PERUSAL. IT WOULD CLEARLY INDICAT E ON ACCOUNT OF UNPRECEDENTED FLOODS AND ABNORMAL RAIN WHICH SEVERE LY RAVAGED THE NORTH INTERIOR KARNATAKA DURING LAST WEEK OF SEPTEMBER AN D FIRST WEEK OF OCTOBER, 2009, WHICH CLAIMED MORE THAN 226 HUMAN LI VES AND LOSS OF NEARLY 8000 HEAD OF CATTLE, FLATTENED ABOUT 5.41 LA KHS HOUSES AND DESTROYED STANDING CROPS IN ABOUT 25 LAKH HECTARES OF LAND HU GE DESTRUCTION OF INFRASTRUCTURE, GOVERNMENT OF KARNATAKA WHICH WAS F ACING AN UNDAUNTED TASK OF REHABILITATING THE PERSONS WHO WERE IN DEST ITUTE AND TO RESTORE THE NORMALCY FOR NEARLY ABOUT 7.2 LAKH PEOPLE AND TO BU ILD 5.41 LAKHS HOUSES SPREAD OVER 12 AFFECTED DISTRICTS, AN APPEAL CAME T O BE MADE BY THEN HON'BLE CHIEF MINISTER TO ALL TO LEND THEIR HANDS F OR RESTORING NORMALCY. . 13. A PLAIN READING OF SECTION 37 WOULD ALSO INDICATE THAT EMPHASIS IS ON THE EXPRESSION 'WHOLLY AND EXCLUSIVELY FOR THE PURP OSES OF THE BUSINESS OR PROFESSION'. THESE TWO EXPRESSIONS NAMELY, 'WHOL LY' AND 'EXCLUSIVELY' BEING ADVERB, HAS REFERENCE TO THE OBJECT OR MOTIVE OF THE ACT BEHIND THE EXPENDITURE. IF THE EXPENDITURE SO INCURRED IS FOR PROMOTING THE BUSINESS, IT WOULD PASS THE TEST FOR QUALIFYING TO BE CLAIMED AS AN EXPENDITURE UNDER SECTION 37 OF THE ACT. WHAT IS TO BE SEEN IN SUCH CIRCUMSTANC ES IS, WHAT IS THE MOTIVE AND OBJECT IN THE MIND OF THE TW O INDIVIDUALS NAMELY, THE PERSON WHO SPEND AND THE PERSON WHO RECEIVES THE SA ID AMOUNT. THUS, THE PURPOSE AND INTENT MUST BE THE SOLE PURPOSE OF EXPE NDING THE AMOUNT AS A BUSINESS EXPENDITURE. IF THE ACTIVITY BE UNDERTAKEN WITH THE OBJECT BOTH OF PROMOTING BUSINESS AND ALSO WITH SOME OTHER PURPOSE , SUCH EXPENDITURE SO INCURRED WOULD NOT BE DISQUALIFIED FROM BEING CLAIM ED AS A BUSINESS EXPENDITURE, SOLELY ON THE GROUND THAT THE ACTIVITY INVOLVED FOR SUCH EXPENDITURE IS NOT DIRECTLY CONNECTED TO THE BUSINE SS ACTIVITY. IN OTHER WORDS, THE ISSUE OF COMMERCIAL EXPEDIENCY WOULD ALS O ARISE. 20. IN FACT, THE HON'BLE APEX COURT APPROVING THE O BSERVATION OF ATHERTON'S CASE - 1926 AC 205 IN THE MATTER OF EASTERN INVESTMENT LIMITED VS COMMISSIONER OF INCOME TAX REPORTED IN (1951) 20 ITR 1, HELD: ITA NOS.1515 TO 1517/BANG/2015 M/S. THE SANDUR MANGANESE & IRON ORES LTD., SANDUR PAGE 11 OF 19 '..A SUM OF MONEY EXPENDED, NONE OF NECESSITY AND W ITH A VIEW TO A DIRECT AND IMMEDIATE BENEFIT TO THE TRADE, BUT VOLU NTARILY ON THE GROUNDS OF COMMERCIAL EXPEDIENCY, AND IN ORDER INDI RECTLY TO FACILITATE THE CARRYING ON OF THE BUSINESS, MAY YET BE EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE TRAD E', CAN BE ADOPTED AS THE BEST INTERPRETATION OF THE CRUCIAL W ORDS OF SECTION 10(2)(XV) . THE IMPRUDENCE OF THE EXPENDITURE AND ITS DEPRESS ING EFFECT ON THE TAXABLE PROFITS WOULD NOT DEFLECT THE APPLICABILITY OF THE SECTION. THE ACID TEST, 'DID THE EXPENDITURE FALL ON THE ASS ESSEE IN THIS CHARACTER AS TRADER AND WAS IT FOR THE PURPOSE OF THE BUSINESS'. 21. THE CO-ORDINATE BENCH IN THE MATTER OF CIT & ANOTHER VS INFOSYS TECHNOLOGIES LIMITED REPORTED IN (2014)360 ITR 174(KAR) WHILE EXAMINING THE CLAIM OF THE ASSESSEE TO TREAT THE EX PENDITURE INCURRED BY IT FOR INSTALLING THE TRAFFIC SIGNALS AS BUSINESS EXPE NDITURE UNDER SECTION 37(1) OF THE ACT, HAD HELD ' FOR PURPOSE OF BUSINESS' US ED IN SECTION 37(1) OF THE ACT SHOULD NOT BE LIMITED TO MEANING OF EAR NING PROFIT ALONE AND IT INCLUDES PROVIDING FACILITY TO ITS EMPLOYEES ALSO FOR THE EFFICIENT WORKING . IT CAME TO BE HELD: 24. AS IS CLEAR FROM THE CASE OF MYSORE KIRLOSKAR L TD, THE EXPENDITURE CLAIMED NEED NOT BE NECESSARILY SPENT B Y THE ASSESSEE. IT MIGHT BE INCURRED VOLUNTARILY AND WITHOUT ANY NE CESSITY, BUT IT MUST BE FOR PROMOTING THE BUSINESS. THE FACT THAT S OMEBODY OTHER THAN THE ASSESSEE IS ALSO BENEFITED BY THE EXPENDIT URE SHOULD NOT COME IN THE WAY OF AN EXPENDITURE BEING ALLOWED BY WAY OF DEDUCTION UNDER SECTION 37(1) OF THE ACT, IF IT SATISFIES OTHERWISE THE TESTS LAID DOWN BY LAW. SIMILARLY, THE WORDS 'FOR T HE PURPOSE OF BUSINESS' USED IN SECTION 37(1) OF THE ACT, SHOULD NOT BE LIMITED TO THE MEANING OF EARNING PROFIT ALONE. BUSINESS EXPED IENCY OR COMMERCIAL EXPEDIENCY MAY REQUIRE PROVIDING FACILIT IES LIKE SCHOOLS, HOSPITALS, ETC., FOR THE EMPLOYEES OR THEI R CHILDREN OR FOR THE CHILDREN OF THE EX- EMPLOYEES. THE EMPLOYEES OF TODAY MAY BECOME THE EX-EMPLOYEES TOMORROW. ANY EXPENDITURE L AID OUT OR EXPENDED FOR THEIR BENEFIT, IF IT SATISFIED THE OTH ER REQUIREMENTS, MUST BE ALLOWED AS DEDUCTION UNDER SECTION 37(1) OF THE ACT. EXPENDITURE PRIMARILY DENOTES THE IDEA OF SPENDING OR PAYING OUT OR AWAY. IT IS SOMETHING WHICH IS GONE IRRETRIEVABLY, BUT SHOULD NOT BE IN RESPECT OF AN UNASCERTAINED LIABILITY OF THE FUT URE. EXPENDITURE IN THIS SENSE IS EQUAL TO DISBURSEMENT WHICH, TO USE A HOMELY PHRASE MEANS SOMETHING WHICH COMES OUT OF THE TRADERS POCK ET.' . 23. IN THE MATTEROF SRI VENKATA SATYANARAYANA RICE MILL CONTRACTORS COMPANY VS CIT REPORTED IN (1997) 223 ITR 101 (SC), QUESTION AROSE AS TO WHETHER CONTRIBUTION MADE TO D ISTRICT WELFARE FUND MAINTAINED BY THE DISTRICT COLLECTOR WOULD BE AGAIN ST PUBLIC POLICY OR IS ITA NOS.1515 TO 1517/BANG/2015 M/S. THE SANDUR MANGANESE & IRON ORES LTD., SANDUR PAGE 12 OF 19 AN EXPENDITURE ALLOWABLE UNDER SECTION 37(1) OF THE ACT AND IT CAME TO BE HELD THAT SUCH CONTRIBUTION IS NOT AGAINST PUBLIC P OLICY AND WOULD BE ALLOWABLE UNDER SECTION 37(1) OF THE ACT. IT WAS ALSO HELD 'ANY CONTRIBUTION MADE BY AN ASSESSEE TO A PUBLIC WELFAR E FUND WHICH IS DIRECTLY CONNECTED OR RELATED WITH THE CARRYING ON THE ASSES SEE'S BUSINESS OR WHICH RESULTS IN THE BENEFIT OF THE ASSESSEE'S BUSINESS H AS TO BE REGARDED AS AN ALLOWABLE DEDUCTION UNDER SECTION 37(1) '. IN THE FACTS OBTAINED IN THE SAID CASE, IT WAS NOTICED THAT ASSESSEE WAS DOING BUSINE SS OF EXPORT OF RICE AND CONTRIBUTING 50 PAISE PER QUINTAL TO THE DISTRICT W ELFARE FUND MAINTAINED BY THE DISTRICT COLLECTOR, WITHOUT WHICH CONTRIBUTION, HE WOULD NOT GET PERMIT AND AS SUCH, IT CAME TO BE HELD THAT EXPENDITURE SO INCURRED BY WAY OF CONTRIBUTION IS DIRECTLY CONNECTED WITH THE ASSESSE E'S CARRYING ON THE BUSINESS. IT IS FURTHER HELD: '10. FROM THE ABOVESAID DISCUSSION IT FOLLOWS THAT ANY CONTRIBUTION MADE BY AN ASSESSEE TO A PUBLIC WELFARE FUND WHICH IS DIRECTLY CONNECTED OR RELATED WITH THE CARRYING ON OF THE AS SESSEE'S BUSINESS OR WHICH RESULTS IN THE BENEFIT TO THE ASSESSEE'S B USINESS HAS TO BE REGARDED AS AN ALLOWABLE DEDUCTION UNDER S. 37(1) OF THE ACT. SUCH A DONATION, WHETHER 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 BUSINESS, CANNOT BE REGARDED AS PAYMENT OPPOSED TO PUBLIC POLICY. IT IS NOT AS IF THE PAYMENT IN THE PRESENT CASE HAD BEEN MADE AS AN ILLEGAL GRATIFICATION. THERE IS NO LAW WHICH PROHIB ITS THE MAKING OF SUCH A DONATION. THE MERE FACT THAT MAKING OF A DON ATION FOR CHARITABLE OR PUBLIC CAUSE OR IN PUBLIC INTEREST RE SULTS IN THE GOVERNMENT GIVING PATRONAGE OR BENEFIT CAN BE NO GR OUND TO DENY THE ASSESSEE A DEDUCTION OF THAT AMOUNT UNDER S.37( 1) OF THE ACT WHEN SUCH PAYMENT HAD BEEN MADE FOR THE PURPOSE OF ASSESSEE'S BUSINESS.' 28. IN THE LIGHT OF THE ANALYSIS OF THE CASE LAWS A BOVE REFERRED TO, IT CANNOT BE GAIN SAID BY THE REVENUE THAT CONTRIBUTION MADE BY AN ASSESSEE TO A PUBLIC WELFARE CAUSE IS NOT DIRECTLY CONNECTED OR R ELATED WITH THE CARRYING ON OF THE ASSESSEE'S BUSINESS. AS TO WHETHER SUCH A CTIVITY UNDERTAKEN AND DISCHARGED BY THE ASSESSEE WOULD BENEFIT TO THE ASS ESSEE'S BUSINESS HAS TO BE EXAMINED IN THE LIGHT OF THE OBSERVATIONS MADE B Y US HEREIN ABOVE. TRIBUNAL COMMITTED A SERIOUS ERROR IN ARRIVING AT A CONCLUSION THAT MOU ENTERED INTO BETWEEN THE ASSESSEE AND THE GOVERNMEN T OF KARNATAKA IS OPPOSED TO PUBLIC POLICY AND VOID UNDER SECTION 23 OF THE CONTRACT ACT. IN FACT, HON'BLE APEX COURT IN CASE OF SRI VENKATA SAT HYA NARAYANA RICE MILL CONTRACTORS COMPANY'S CASE REFERRED TO HE REIN SUPRA HAS HELD THAT WHERE A DONATION, WHETHER VOLUNTARY O R AT THE INSTANCE OF THE AUTHORITIES CONCERNED, WHEN MADE TO A CHIEF MINISTE RS DROUGHT RELIEF FUND OR A DISTRICT WELFARE FUND ESTABLISHED BY THE DISTRICT COLLECTOR OR ITA NOS.1515 TO 1517/BANG/2015 M/S. THE SANDUR MANGANESE & IRON ORES LTD., SANDUR PAGE 13 OF 19 ANY OTHER FUND FOR THE BENEFIT OF THE PUBLIC AND WI TH A VIEW TO SECURE BENEFIT TO THE ASSESSEE'S BUSINESS CANNOT BE REGARDED AS PA YMENT OPPOSED TO PUBLIC POLICY. IT CAME TO BE FURTHER HELD MAKING OF A DONA TION FOR CHARITABLE OR PUBLIC CAUSE OR IN THE PUBLIC INTEREST RESULTS IN T HE GOVERNMENT GIVING PATRONAGE OR BENEFIT CAN BE NO GROUND TO DENY THE A SSESSEE A DEDUCTION OF THAT AMOUNT UNDER SECTION 37(1) OF THE ACT, WHEN SUCH PAYMENT HAS BEEN MADE FOR THE PURPOSES OF ASSESSEE'S BUSINESS. IN FA CT, IT CAN BE NOTICED UNDER THE MOU IN QUESTION WHICH CAME TO BE ENTERED INTO BY THE ASSESSEE WITH GOVERNMENT OF KARNATAKA WAS ON ACCOUNT OF THE CLARION CALL GIVEN BY THE THEN CHIEF MINISTER OF KARNATAKA IN THE HOUR OF CRISIS TO ALL THE PHILANTHROPIST, INDUSTRIAL AND COMMERCIAL ENTERPRIS ES TO EXTENDED THEIR WHOLE HEARTED SUPPORT AND THE ENTIRE LOGISTIC SUPPO RT HAS BEEN EXTENDED BY THE GOVERNMENT OF KARNATAKA NAMELY, PROVIDING LAND AND DESIGN OF THE HOUSE TO BE CONSTRUCTED, APPROVAL OF LAYOUT AND TO TAKE CARE OF ALL LOCAL PROBLEMS. IN FACT, THE STATE GOVERNMENT HAD ALSO AG REED TO EXEMPT SUCH OF THOSE PERSONS WHO UNDERTAKE TO EXECUTE THE WORK FRO M THE PURVIEW OF SALE TAX, ROYALTY, ENTRY TAX AND OTHER RELATED STATE TAX ES AND IS SAID TO HAVE EXTENDED TO THE APPELLANT ALSO. IN THIS BACKGROUND IT CANNOT BE CONSTRUED THAT MOU ENTERED INTO BETWEEN THE ASSESSEE AND THE GOVERNMENT OF KARNATAKA IS OPPOSED TO PUBLIC POLICY. 29. IN THE FACTS ON HAND, IT REQUIRES TO BE NOTICED THAT ASSESSEE IS CARRYING OF BUSINESS OF IRON ORE AND ALSO TRADING IN IRON OR E. THUS, DAY IN AND DAY OUT THE ASSESSEE WOULD BE APPROACHING THE APPROPRIA TE GOVERNMENT AND ITS AUTHORITIES FOR GRANT OF PERMITS, LICENSES AND AS S UCH THE ASSESSEE IN ITS WISDOM AND AS PRUDENT BUSINESS DECISION HAS ENTERED INTO MOU WITH THE GOVERNMENT OF KARNATAKA AND INCURRED THE EXPENDITUR E TOWARDS CONSTRUCTION OF HOUSES FOR THE NEEDY PERSONS, NOT O NLY AS A SOCIAL RESPONSIBILITY BUT ALSO KEEPING IN MIND THE GOODWIL L AND BENEFIT IT WOULD YIELD IN THE LONG RUN IN EARNING PROFIT WHICH IS TH E ULTIMATE OBJECT OF CONDUCTING BUSINESS AND AS SUCH, EXPENDITURE INCURR ED BY THE ASSESSEE WOULD BE IN THE REALM OF 'BUSINESS EXPENDITURE'. HE NCE, THE ORDERS PASSED BY THE AUTHORITIES WOULD NOT STAND THE TEST OF LAW AND IS LIABLE TO BE SET ASIDE. 30. HOWEVER, IT REQUIRES TO BE NOTICED THAT WHILE E XAMINING THE CLAIM FOR DEDUCTION UNDER SECTION 37(1) OF THE ACT THE ASSESSING OFFICER WOULD NOT BLINDLY OR ONLY ON THE SAY OF THE ASSESSEE ACCEPT T HE CLAIM. IN OTHER WORDS, ASSESSING OFFICER WOULD BE REQUIRED TO SCRUTINISE A ND EXAMINE AS TO WHETHER SAID DEDUCTION CLAIMED FOR HAVING INCURRED THE EXPE NDITURE HAS BEEN INCURRED AND ONLY ON BEING SATISFIED THAT EXPENDITU RE SO INCURRED IS RELATABLE TO THE WORK UNDERTAKEN BY THE ASSESSEE NA MELY, ONLY ON NEXUS BEING ESTABLISHED, ASSESSING OFFICER WOULD BE REQUI RED TO ALLOW SUCH EXPENDITURE UNDER SECTION 37(1) OF THE ACT AND NOT OTHERWISE. ITA NOS.1515 TO 1517/BANG/2015 M/S. THE SANDUR MANGANESE & IRON ORES LTD., SANDUR PAGE 14 OF 19 31. FOR THE REASONS AFORE STATED, WE ARE OF THE CON SIDERED VIEW THAT SUBSTANTIAL QUESTION LAW FORMULATED HEREIN IS TO BE ANSWERED IN THE NEGATIVE I.E., AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 7.7 THE LD A.R SUBMITTED THAT, IN THE INSTANT CA SE ALSO, THE ASSESSEE HAS CONTRIBUTED FUNDS TO BATF AT THE DIREC TION OF LOCAL ADMINISTRATION, WHICH IS MEANT TO BE USED FOR THE B ENEFIT OF PUBLIC. AS OBSERVED IN THE ABOVE SAID CASE, THE ASSESSEE WO ULD ALSO BE REQUIRED TO APPROACH THE APPROPRIATE GOVERNMENT AND ITS AUTHORITIES FOR GRANT OF PERMITS, LICENSES. HENCE IT IS A PRUDENT DECISION OF THE ASSESSEE TO OBLIGE TO THE APPEAL MA DE BY THE LOCAL ADMINISTRATION AND INCURRED THE EXPENSES FOR PUBLIC PURPOSES. HENCE THE ASSESSEE HAS INCURRED EXPENSES NOT ONLY O N ACCOUNT OF SOCIAL RESPONSIBILITY, BUT ALSO KEEPING IN MIND THE GOODWILL AND BENEFIT IT WOULD YIELD IN THE LONG RUN IN EARNING P ROFIT. HENCE THIS EXPENDITURE WOULD BE IN THE REALM OF BUSINESS EXPE NDITURE. WE ALSO NOTICE THAT THE PAYMENTS MADE TO BATF HAS BEEN HELD TO BE ALLOWABLE EXPENDITURE BY CO-ORDINATE BENCHES IN THE FOLLOWING CASES:- (A) SHRI HIREHAL GAVIPPA RANGAN GOUD VS. ACIT (IT A NO.610/BANG/2018 DATED 25.11.2020) (B) SHRI GOGGA GURUSHANTIAH & BROS (ITA NO.504/BANG/2014 DATED 29.05.2020) FOR THE REASONS DISCUSSED SUPRA, WE HOLD THIS EXPEN DITURE IS ALLOWABLE AS DEDUCTION. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DEL ETE THIS DISALLOWANCE. 8.0 OTHER GROUNDS URGED BY THE ASSESSEE ARE EITHER GENERAL IN NATURE OR CONSEQUENTIAL. ITA NOS.1515 TO 1517/BANG/2015 M/S. THE SANDUR MANGANESE & IRON ORES LTD., SANDUR PAGE 15 OF 19 ASSESSMENT YEAR 2010-11 9.0 GROUND NO. 2 & 3 RELATES TO THE DISALLOWANCE OF CLAIM OF PROVISION FOR MEDICAL REIMBURSEMENT EXPENSES. TH IS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE IN AY 2009-10 IN THE PRECEDING PARAGRAPHS. HOWEVER, WE HAVE DIRECTED THE AO TO AL LOW DEDUCTION OF ACTUAL EXPENSES INCURRED BY THE ASSESSEE DURING THAT YEAR. FOLLOWING THE SAME, WHILE UPHOLDING THE DISALLOWANC E, WE DIRECT THE AO TO ALLOW DEDUCTION OF ACTUAL EXPENSES DURING THE YEAR UNDER CONSIDERATION. 10.0 GROUND NO.4 TO 7 RELATES TO DISALLOWANCE OF CLAIM OF PROVISION FOR LEAVE TRAVEL EXPENSES. THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE IN AY 2009-10 IN THE PRECEDING PARAGRAPHS. HOWEVER, WE HAVE DIRECTED THE AO TO ALLOW DEDUCTION OF ACTUAL EXPENSES INCURRED BY THE ASSESSEE DURING THAT YEAR. FOLLOWING THE SAME, WHILE UPHOLDING THE DISALLOWANCE, WE DIRECT T HE AO TO ALLOW DEDUCTION OF ACTUAL EXPENSES DURING THE YEAR UNDER CONSIDERATION. 11.0 GROUND NO.8 RELATES TO DISALLOWANCE OF INCID ENTAL EXPENSES. IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN AY 200 9-10 IN THE PRECEDING PARAGRAPHS AND WE HAVE CONFIRMED THE DISA LLOWANCE IN THE ABSENCE OF DETAILS RELATING TO INCIDENTAL EXPEN SES. FOLLOWING THE SAID DECISION, WE CONFIRM THE DISALLOWANCE IN THIS YEAR ALSO. 12.0 GROUND NO.9 TO 13 RELATE TO DISALLOWANCE OF CONTRIBUTION TO BELLARY AGENDA TASK FORCE. IDENTICAL ISSUE HAS BEE N CONSIDERED BY US IN AY 2009-10 IN THE PRECEDING PARAGRAPHS AND WE HAVE DELETED THE DISALLOWANCE FOR THE DETAILED REASONS DISCUSSED ABOVE. FOLLOWING THE SAME, WE SET ASIDE THE ORDER PASSED B Y LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THIS DISALLO WANCE. ITA NOS.1515 TO 1517/BANG/2015 M/S. THE SANDUR MANGANESE & IRON ORES LTD., SANDUR PAGE 16 OF 19 13.0 OTHER GROUNDS ARE EITHER GENERAL IN NATURE OR CONSEQUENTIAL. ASSESSMENT YEAR: 2011-12 14.0 GROUND NO. 2 & 3 RELATES TO THE DISALLOWANCE OF CLAIM OF PROVISION FOR MEDICAL REIMBURSEMENT EXPENSES. TH IS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE IN AY 2009-10 IN THE PRECEDING PARAGRAPHS. HOWEVER, WE HAVE DIRECTED THE AO TO AL LOW DEDUCTION OF ACTUAL EXPENSES INCURRED BY THE ASSESSEE DURING THAT YEAR. FOLLOWING THE SAME, WHILE UPHOLDING THE DISALLOWANC E, WE DIRECT THE AO TO ALLOW DEDUCTION OF ACTUAL EXPENSES DURING THE YEAR UNDER CONSIDERATION. 15.0 GROUND NO.4 TO 7 RELATES TO DISALLOWANCE OF CLAIM OF PROVISION FOR LEAVE TRAVEL EXPENSES. THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE IN AY 2009-10 IN THE PRECEDING PARAGRAPHS. HOWEVER, WE HAVE DIRECTED THE AO TO ALLOW DEDUCTION OF ACTUAL EXPENSES INCURRED BY THE ASSESSEE DURING THAT YEAR. FOLLOWING THE SAME, WHILE UPHOLDING THE DISALLOWANCE, WE DIRECT T HE AO TO ALLOW DEDUCTION OF ACTUAL EXPENSES DURING THE YEAR UNDER CONSIDERATION. 16.0 GROUND NO.8 RELATES TO DISALLOWANCE OF INCID ENTAL EXPENSES OF RS.4,54,439/-. IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN AY 2009-10 IN THE PRECEDING PARAGRAPHS AND WE HAVE CON FIRMED THE DISALLOWANCE IN THE ABSENCE OF DETAILS RELATING TO INCIDENTAL EXPENSES. FOLLOWING THE SAID DECISION, WE CONFIRM THE DISALLOWANCE IN THIS YEAR ALSO. 17.0 GROUND NO.9 RELATES TO THE DISALLOWANCE OF RS.10.00 LAKHS, BEING CONTRIBUTION TO BHAGYALAKSHMI YOJANA. THE AO DISALLOWED ITA NOS.1515 TO 1517/BANG/2015 M/S. THE SANDUR MANGANESE & IRON ORES LTD., SANDUR PAGE 17 OF 19 THE SAME ON THE REASONING THAT THE ASSESSEE COULD N OT ESTABLISH THE NEXUS OF THE PAYMENT WITH THE BUSINESS OF THE ASSES SEE. THE LD CIT(A) ALSO CONFIRMED THE SAME. 17.1 BEFORE US, THE LD A.R SUBMITTED THAT THE AB OVE SAID PAYMENT HAS BEEN MADE TO THE DEPUTY COMMISSIONER, BELLARY A ND HENCE THERE IS BUSINESS CONNECTION. ON THE CONTRARY, THE LD D.R SUPPORTED THE ORDER PASSED BY LD CIT(A) ON THIS ISS UE. 17.2 WE NOTICE THAT THE ASSESSEE HAS NOT FURNI SHED ANY DETAIL TO SHOW THAT THERE IS NEXUS BETWEEN THE IMPUGNED PAYME NT AND THE BUSINESS OF THE ASSESSEE. ACCORDINGLY, FOLLOWING T HE DECISION RENDERED BY THE JURISDICTIONAL HON'BLE KARNATAKA HI GH COURT IN THE CASE OF WIPRO LTD (SUPRA), WE CONFIRM THE DISALLOWA NCE. 18.00 GROUND NO. 9 TO 15 RELATE TO DISALLOWANCE OF CONTRIBUTION TO CHIEF MINISTERS RELIEF FUND AMOUNTING TO RS.9.65 C RORES. THE ASSESSEE SUBMITTED THAT THE ABOVE SAID PAYMENT WAS GIVEN TO THE DISTRICT COMMISSIONER, BELLARY TOWARDS CONSTRUCTION OF HOUSES FOR FLOOD VICTIMS IN SIRUGUPPA TALUKA UNDER AASARE YOJA NE. THE AO DISALLOWED THE CLAIM ON THE REASONING THAT THERE IS NO NEXUS BETWEEN THE PAYMENT AND THE BUSINESS OF THE ASSESSE E. THE LD CIT(A) ALSO CONFIRMED THE DISALLOWANCE. 18.1 BEFORE US, THE LD A.R PLACED HIS RELIANCE O N THE DECISION RENDERED BY THE JURISDICTIONAL HIGH COURT IN THE CA SE OF KANHAIYALAL DUDHERIA (SUPRA) AND SUBMITTED THAT THE ASSESSEE BE FORE THE HIGH COURT ALSO CONSTRUCTED 169 HOUSES AND DELIVERED THE M TO THE KARNATAKA GOVERNMENT. THE EXPENDITURE INCURRED ON CONSTRUCTION OF HOUSES WAS CLAIMED AS DEDUCTION AND THE SAME WAS ALLOWED BY HON'BLE KARNATAKA HIGH COURT. ITA NOS.1515 TO 1517/BANG/2015 M/S. THE SANDUR MANGANESE & IRON ORES LTD., SANDUR PAGE 18 OF 19 18.2 THE LD D.R, ON THE CONTRARY, SUBMITTED THA T THERE IS NO PARITY OF FACTS BETWEEN THE CASE OF THE ASSESSEE AN D THE CASE OF KANHAIYALAL DUDHERIA (SUPRA). 18.3 WE HEARD THE PARTIES ON THIS ISSUE AND PE RUSED THE RECORD. WE NOTICE THAT THE ASSESSEE BEFORE THE HON'BLE KARN ATAKA HIGH COURT HAD ENTERED IN A MOU WITH THE KARNATAKA GOVER NMENT FOR CONSTRUCTION OF HOUSES. THE ASSESSEE ALSO PROVED T HE EXISTENCE OF COMMERCIAL EXPEDIENCY IN INCURRING THESE EXPENSES. HOWEVER, IN THE INSTANT CASE, RELEVANT DETAILS ARE NOT AVAILABL E ON RECORD. ACCORDINGLY, WE ARE OF THE VIEW THAT THIS ISSUE REQ UIRES FRESH EXAMINATION AT THE END OF THE ASSESSING OFFICER IN THE LIGHT OF DECISION RENDERED BY HON'BLE KARNATAKA HIGH COURT I N THE CASE OF KANHAIYALAL DUDHERIA (SUPRA). ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND RESTORE THIS ISSUE TO THE FILE OF AO FOR EXAMINING IT AFRESH. 19.0 OTHER GROUNDS URGED BY THE ASSESSEE ARE EITHE R GENERAL OR CONSEQUENTIAL. 20. IN THE RESULT, ALL THE APPEALS OF THE ASSES SEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH OCT, 2021 SD/- (BEENA PILLAI) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 6 TH OCT, 2021. VG/SPS ITA NOS.1515 TO 1517/BANG/2015 M/S. THE SANDUR MANGANESE & IRON ORES LTD., SANDUR PAGE 19 OF 19 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.