M/s Hothur Traders , Ballari V. Joint Commissioner of INcome TAx , Ballari

ITA 1889/BANG/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8034 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-08-2020
• Assessment Year: 2011-2012
• Appeal Filed On: 08-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHRA
• Assessee Lawyers: B S BALACHANDRAN
• Keywords: Business expenditure; Commercial expediency; Set aside
• Section: 37(1); 80G; 113; 37

Judgement Text

ITA NO.1889/BANG/2016 M/S. HOTHUR TRADERS, BELLARY IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.1889/BANG/2016 ASSESSMENT YEAR: 2011-12 M/S. HOTHUR TRADERS PLOT NOS.5,6,7 & 8, HOTHUR HOUSE INFANTRY ROAD BESIDE NANDI SCHOOL CANTONMENT BELLARY-583 104. PAN NO : AAAFH6252R VS. THE JCIT BELLARY RANGE BELLARY APPELLANT RESPONDENT APPELLANT BY : SHRI B.S. BALACHANDRAN, A.R. RESPONDENT BY : SHRI PRIYADARSHI MISHRA, D.R. DATE OF HEARING : 18.08.2020 DATE OF PRONOUNCEMENT : 21.08.2020 O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE CIT(A) GULBARGA DATED 31.8.2016 AND IT PERTAINS TO THE ASSESSMENT YEAR 2011-12. THE ASSES SEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE ORDERS OF THE LOWER AUTHORITIES ARE OPPOSED TO THE FACTS OF THE CASE AND LAW, AND THEREFORE LIABLE TO BE A SIT-ASIDE AND CANCELLED. ITA NO.1889/BANG/2016 M/S. HOTHUR TRADERS, BELLARY PAGE 2 OF 11 2. THE LEARNED ASSESSING OFFICER AS WELL AS THE LEARNE D COMMISSIONER OF INCOME-TAX (APPEALS) HAVE FAILED TO APPRECIATE THE FACTS PRESENTED IN THE GROUNDS OF APPEAL IN DECIDING TO DISALLOW THE AMOUNT OF RS.1,79,91,250/-, SPENT ON ACCOUNT OF 'SOCIAL WELFA RE EXPENDITURE' WHICH IS CLAIMED AS AN EXPENDITURE UND ER SECTION 37(1) OF THE INCOME-TAX ACT. 3. AS SUBMITTED BEFORE THE LEARNED ASSESSING OFFICER AND THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) YOUR APPELLANT CRAVES TO SUBMIT THAT THE EXPENDITURE INCURRED WAS AS PER THE CIRCUMSTANCES FACED BY YOUR APPELLANT AND FOR WHICH IT HAD SPENT THE AMOUNT PROVIDING HOUSES FOR DEPRIVED PEOPLE IN PURSUANT OF MOU ENTERED INTO WITH THE LOCAL AUTHORITIES (DEPUTY COMMISSIONER). 4. THE AMOUNT OF RS.1,79,91,250/- SPENT HAS A DIRECT NEXUS TO THE BUSINESS ACTIVITIES CARRIED ON BY YOUR APPELLANT AS IT INCREASES THE CORDIAL RELATIONSHIP WITH THE LOCAL AUTHORITIES WHICH HAS FULL AUTHORITY ON T HE BUSINESS ACTIVITIES CARRIED ON BY YOUR APPELLANT. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) FAILED TO APPRECIATE THE APPLICABILITY OF JUDICIAL PRONOUNCEMENTS THAT ARE REFERRED TO IN THE ASSESSME NT ORDER PASSED BY THE LEARNED ASSESSING OFFICER AS TH EY ARE DISTINGUISHABLE WITH THE FACTS OF YOUR APPELLAN T'S CASE AND THE FACTS-OF JUDICIAL PRONOUNCEMENTS AS REFERRED TO. 6. FOR THE GROUNDS OF ABOVE AND THE WRITTEN SUBMISSION S THAT MAY BE FILED, AND ALSO THE ARGUMENTS THAT MAY BE ADVANCED DURING THE ACTUAL HEARING, THE HON'BLE ITA T, BANGALORE, MAY BE PLEASED TO ALLOW THE APPEAL AND CANCEL THE IMPUGNED ORDER IN THE INTEREST OF EQUITY AND JUSTICE. 2, THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM, WHICH IS ENGAGED IN THE BUSINESS OF ITA NO.1889/BANG/2016 M/S. HOTHUR TRADERS, BELLARY PAGE 3 OF 11 EXCAVATION AND TRADING IN IRON-ORE AND ALSO RUNNING A PETROL PUMP FILED ITS RETURN OF INCOME FOR ASSESSME NT YEAR 2011-12 ON 30.9.2011 DECLARING TOTAL INCOME OF RS.8,84,77,470/-. THE CASE WAS SELECTED FOR SCRUTI NY AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A. O. NOTICED THAT THE ASSESSEE HAS DEBITED A SUM OF RS.1,79,91,250/- UNDER THE HEAD SOCIAL WELFARE EXPENDITURE/CONSTRUCTION OF HOUSES FOR FLOOD VICTIMS AND ACCORDINGLY CALLED UPON THE ASSESSEE TO FILE NE CESSARY EVIDENCES IN SUPPORT OF CLAIM OF EXPENDITURE. IN R ESPONSE, THE ASSESSEE VIDE LETTER DATED 18.1.2014 SUBMITTED THAT IT HAS INCURRED AN AMOUNT OF RS.1,79,91,250/- TOWARDS CONSTRUCTION OF HOUSES FOR FLOOD VICTIMS ON ACCOUNT OF MAJOR FLOOD AFFECTED IN SEVERAL PARTS OF KARNATAKA IN THE YEAR 2009 IN ACCORDANCE WITH REHABILITATION MEASURE S UNDERTAKEN BY GOVERNMENT OF KARNATAKA AND IN THIS REGARD AN MOU WAS ENTERED INTO WITH GOVERNMENT FOR ALLOTTING THE REHABILITATION WORKS TO BE EXECUTED B Y US ON OUR COST. THE ASSESSEE FURTHER SUBMITTED THAT AS P ER THE TERMS OF MOU, THE ASSESSEE NEEDS TO CONSTRUCT REHABILITATION HOUSES FOR FLOOD VICTIMS BY OWN COST AND HAND OVER THE HOUSES TO THE FLOOD VICTIMS. THE ASS ESSEE FURTHER CLAIMED THAT AS PER THE SAID MOU, THE DONAT IONS GIVEN TO THE CHIEF MINISTER RELIEF FUND IS TO BE SA ID TO BE ELIGIBLE FOR EXEMPTION U/S 80G OF THE INCOME-TAX AC T,1961 ['THE ACT' FOR SHORT]. BUT, SINCE THE ASSESSEE HAS NOT RECEIVED THE EXEMPTION U/S 80G OF THE ACT, IT HAS C LAIMED ITA NO.1889/BANG/2016 M/S. HOTHUR TRADERS, BELLARY PAGE 4 OF 11 THE AMOUNT INCURRED FOR SOCIAL WELFARE EXPENDITURE AS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND ALSO OUT OF COMMERCIAL EXPEDIENCY, WHICH IS DEDUCTIBLE U/S 37(1) OF THE AC T. 3. THE A.O. AFTER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO TAKEN NOTE OF MOU BETWEEN THE ASSESSEE AND GOVERNMENT OF KARNATAKA DATED 2.5.2010 OBSERVED THAT THE AMOUNT INCURRED BY THE ASSESSEE TOWARDS CONSTRUCTION OF HOUSES FOR FLOOD VICTIMS IS NOTHING BUT A DONATION TO CHIEF MINISTER RELIEF FUN D AND WHICH IS ELIGIBLE FOR EXEMPTION U/S 80G OF THE ACT, IF SUCH DONATION IS COVERED UNDER THE PROVISIONS OF SECTION 80G OF THE ACT, BUT THE SAME CANNOT BE CLAIMED AS EXPENDIT URE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND IT IS HAVING A NEXUS BETWEEN BUSINESS CARRIED ON BY THE ASSESSEE, THEREFORE, HE OPINED TH AT AMOUNT CLAIMED UNDER THE HEAD SOCIAL WELFARE EXPENDITURE IS NOT ALLOWABLE AS DEDUCTION U/S 37(1) OF THE ACT. ACCORDINGLY, DISALLOWED A SUM OF RS.1,79,91,2 50/- CLAIMED UNDER THE HEAD SOCIAL WELFARE EXPENSES AND ADDED BACK TO THE TOTAL INCOME. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BE FORE THE CIT(A), THE ASSESSEE HAS REITERATED ITS ARGUMENTS M ADE BEFORE THE A.O. THE ASSESSEE FURTHER SUBMITTED THA T ITA NO.1889/BANG/2016 M/S. HOTHUR TRADERS, BELLARY PAGE 5 OF 11 EXPENDITURE INCURRED UNDER THE HEAD SOCIAL WELFARE EXPENDITURE IS HAVING DIRECT NEXUS BETWEEN BUSINES S ACTIVITY OF THE ASSESSEE AND ALSO THERE IS AN ELEME NT OF COMMERCIAL EXPEDIENCY AND HENCE THE SAME CANNOT BE CONSIDERED AS DONATIONS GIVEN TO CHIEF MINISTER REL IEF FUND. THE ASSESSEE FURTHER SUBMITTED THAT SINCE TH E AMOUNT INCURRED FOR CONSTRUCTION OF HOUSES FOR FLOO D VICTIMS IS NOT COVERED FOR EXEMPTION U/S 80G OF THE ACT, IT HAS CLAIMED DEDUCTION U/S 37(1) OF THE ACT AS EXPEN DITURE INCURRED FOR THE PURPOSE OF BUSINESS AND HENCE THE SAME CANNOT BE DISALLOWED AS NOT INCURRED FOR THE PURPOS E OF BUSINESS OF THE ASSESSEE. 5. THE CIT(A) AFTER CONSIDERING THE RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO BY TAKING NOTE OF VARIOUS FACTS INCLUDING MOU BETWEEN THE ASSESSEE AN D THE GOVERNMENT OF KARNATAKA OBSERVED THAT THE ASSES SEE HAD NOT FULLY COMPLIED WITH THE MOU TO CLAIM EXEMPT ION OF THE EXPENDITURE INCURRED AS PER THE MOU. HE FUR THER NOTED THAT ALTHOUGH THE ASSESSEE STATED THAT EXPEND ITURE INCURRED IS ELIGIBLE FOR DEDUCTION AS PER SECTION 3 7 OF THE ACT, BUT FAILED TO OFFER ANY EXPLANATION AS TO HOW AND WHY AMOUNT INCURRED IN THE NATURE OF DONATION TO CHIEF MINISTER RELIEF FUND IS COMES UNDER THE PURVIEW OF PROVISIONS OF SECTION 37 OF THE ACT. THE LD. CIT(A) HAS ALSO TAKEN NOTE OF THE CLARIFICATION ON CSR ACTIVITIES A ND EXPENDITURE INCURRED UNDER CSR FUNDS TO COME TO THE ITA NO.1889/BANG/2016 M/S. HOTHUR TRADERS, BELLARY PAGE 6 OF 11 CONCLUSION THAT EXPENDITURE INCURRED UNDER CSR ACTI VITIES IS NOT FOR THE PURPOSE OF BUSINESS AND HENCE CANNOT BE ALLOWED AS DEDUCTION FOR COMPUTING INCOME UNDER THE RESIDUARY PROVISIONS OF SECTION 37(1) OF THE ACT. ACCORDINGLY, HE OPINED THAT THERE IS NO ERROR IN TH E FINDINGS RECORDED BY THE LD. A.O. WHILE DISALLOWING SOCIAL WELFARE EXPENDITURE. AGGRIEVED BY THE CIT(A)S ORD ER, THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. A.R. FOR THE ASSESSEE, AT THE TIME OF HE ARING SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAV OUR OF THE ASSESSEE BY THE DECISION OF HONBLE KARNATAKA H IGH COURT IN THE CASE OF KANHAIYALAL DHUDERIA VS. JCIT ( 2020) 113 TAXMANN.COM 217 WHERE UNDER IDENTICAL SET OF FA CTS, THE HONBLE HIGH COURT HELD THAT EXPENDITURE INCURR ED FOR CONSTRUCTION OF HOUSES TO REHABILITATE FLOOD VICTIM S WOULD BE IN THE REALM OF BUSINESS EXPENDITURE ALLOWABLE U /S 37 OF THE ACT. THE A.R. FURTHER SUBMITTED THAT THE FA CTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS CONSIDERE D BY THE HONBLE HIGH COURT AND FURTHER THE ASSESSEE HAS ALS O INCURRED EXPENDITURE FOR CONSTRUCTION OF HOUSES TO REHABILITATE FLOOD VICTIMS AND ACCORDINGLY, THE A.O . AS WELL AS THE LD. CIT(A) WERE ERRED IN DISALLOWING SOCIAL WELFARE EXPENDITURE INCURRED FOR CONSTRUCTION OF HOUSES FOR FLOOD VICTIMS. ITA NO.1889/BANG/2016 M/S. HOTHUR TRADERS, BELLARY PAGE 7 OF 11 7. THE LD. D.R. ON THE OTHER HAND STRONGLY SUPPORTI NG ORDER OF THE A.O. AS WELL AS CIT(A) SUBMITTED THAT THE LOWER AUTHORITIES HAVE BROUGHT OUT CLEAR FACTS IN T HE LIGHT OF VARIOUS EVIDENCES FILED BY THE ASSESSEE INCLUDIN G THE COPY OF MOU BETWEEN THE GOVERNMENT OF KARNATAKA TO COME TO THE CONCLUSION THAT EXPENDITURE INCURRED IS IN THE NATURE OF DONATION GIVEN TO CHIEF MINISTER RELIEF F UND BUT NOT IN THE NATURE OF EXPENDITURE INCURRED WHOLLY AN D EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, WHICH CAN BE ALLOWED U/S 37(1) OF THE ACT. THEREFORE, THERE IS N O REASON TO DEVIATE FROM FINDINGS RECORDED BY THE LOWER AUTH ORITIES. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE FACTS BORNE OUT FROM THE RECORDS CLEARLY INDICATES THAT THE ASSESSEE HAS INC URRED SOCIAL WELFARE EXPENDITURE FOR CONSTRUCTION OF HOUS ES TO REHABILITATE FLOOD VICTIMS IN THE AREA OF BELLARY A S PER MOU, ENTERED INTO BETWEEN GOVERNMENT OF KARNATAKA. THE SAID EXPENDITURE HAS BEEN INCURRED ON THE BASIS OF MOU, AS PER WHICH THE AMOUNT INCURRED FOR CONSTRUCT ION OF HOUSES TO FLOOD VICTIMS IS IN THE NATURE OF DONA TIONS GIVEN TO CHIEF MINISTER RELIEF FUND AND ASSESSEE CA N CLAIM THE BENEFIT OF TAXES UNDER THE INCOME TAX ACT . THE A.O. WAS OF THE OPINION THAT EXPENDITURE INCURRED F OR SOCIAL WELFARE EXPENDITURE IS IN THE NATURE OF DONA TION GIVEN TO CHIEF MINISTER RELIEF FUND BUT NOT IN THE NATURE ITA NO.1889/BANG/2016 M/S. HOTHUR TRADERS, BELLARY PAGE 8 OF 11 OF EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, WHICH CAN BE ALLOWED U/S 37(1) OF THE ACT. WE FIND THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE HONBLE HIGH COURT OF KARNATAKA I N THE CASE OF KANHAIYYA LAL DHUDERIA VS. JCIT (SUPRA) WHER E UNDER SIMILAR SET OF FACTS, THE HIGH COURT AFTER CONSIDERING VARIOUS CASE LAWS CONSIDERED BY THE LD. A.O. CAME TO THE CONCLUSION THAT WHERE ASSESSEE ENTERED INTO AN MOU WITH STATE GOVERNMENT WHEREIN ASSESSEE AGREE D TO CONSTRUCT HOUSES TO REHABILITATE FLOOD VICTIMS, SINCE ASSESSEE INCURRED THIS EXPENDITURE NOT ONLY AS A SO CIAL RESPONSIBILITY BUT ALSO KEEPING IN MIND GOODWILL AN D BENEFIT IT WOULD YIELD IN LONG RUN IN EARNING PROFI T, IMPUGNED EXPENDITURE WOULD BE IN REALM OF BUSINESS EXPENDITURE ALLOWABLE U/S 37(1) OF THE ACT. THE RE LEVANT FINDINGS OF THE HIGH COURT ARE AS UNDER:- 26. KEEPING THE ABOVE PRINCIPLES IN MIND, WHEN THE FACT S ON HAND ARE EXAMINED, IT WOULD CLEARLY INDICATE THAT ASSESSEE HAS INCURRE D THE EXPENDITURE TOWARDS CONSTRUCTION OF 169 HOUSES FOR THE VILLAGERS WHO HA D LOST THEIR HOME DUE TO NATURAL CALAMITY. IN ORDER TO CATER TO THE NEEDS OF THOSE DESTITUTE PERSONS WHO HAD LOST THE ROOF OVER THEIR HEAD ON ACCOUNT OF NATURAL CALAMITY, ASSESSEE CONSTRUCTED THE HOUSES BY EXPENDING THE AMOUNT. HOWEVER, ASSESS ING OFFICER AND THE AUTHORITIES HAVE HELD THAT IT WAS NOT INCURRED FOR THE PURPOSE OF BUSINESS. ONE GLARING FACTOR WHICH CANNOT GO UNNOTICED IS, THAT A MOU CAME TO BE ENTERED INTO BY THE APPELLANT ON 01.12.2009 WITH THE GOVERNMENT OF KARNATAKA, AS ALREADY NOTICED HEREIN ABOVE, WHEREUNDER ASSESSEE AGREED TO CONSTRUCT HOUSES TO REHABILITATE THE FLOOD VICTIMS AT THE EARLIEST POSS IBLE TIME AND FOR UNDERTAKING THE SAID TASK, THE APPROPRIATE GOVERNMENT PROVIDED THE ASSESSEE THE LAND FREE FROM ENCUMBRANCES, UPON WHICH THE CONSTRUCTION OF HOUSES CAME TO BE COMMENCED, EXECUTED AND HANDED OVER WITHIN THE TIME LIMIT AGRE ED TO UNDER THE MOU. IT WAS THE TERM OF THE MOU THAT THE DONOR (ASSESSEE) HAS J OINED HANDS WITH THE GOVERNMENT OF KARNATAKA TO BRING A TOTAL RELIEF IN THE, LIVES OF THE PEOPLE WHO WERE WORST AFFECTED BY THE UNPRECEDENTED RAIN AND F LOODS AND THE SAID PROJECT WAS UNDISPUTEDLY A PHILANTHROPIC PROJECT. IN FACT, IT WAS AGREED TO BETWEEN THE PARTIES THAT THE DONOR HIMSELF WOULD INCUR FINANCIA L LIABILITY, MAINTAIN HIGH ITA NO.1889/BANG/2016 M/S. HOTHUR TRADERS, BELLARY PAGE 9 OF 11 STANDARD OF QUALITY CONSTRUCTION AND WOULD CONSTRUC T THE HOUSES AS PER THE DESIGN OFFERED BY THE GOVERNMENT OF KARNATAKA, APART FROM ENSURING QUALITY OF MATERIAL USED FOR THE CONSTRUCTION IS OF THE SUPERIOR QUALIT Y. THAT APART, THE WORK COMPLETION CERTIFICATE HAS BEEN ISSUED BY THE DEPUT Y COMMISSIONER, BALLARY AND IT IS ALSO CERTIFIED THAT A SUM OF RS. 2,22,76,162/ - HAS BEEN EXPENDED BY THE ASSESSEE FOR CONSTRUCTION OF 169 AASARE HOUSES AT G UNDIGANA VILLAGE. THUS, IT BOILS DOWN TO THE FACT THAT CONSTRUCTION OF HOUSES HAS BEEN CARRIED OUT BY THE ASSESSEE AS AGREED TO UNDER THE MOU. 27. TRIBUNAL HAS REJECTED THE CONTENTION OF THE ASSESSE E THAT EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS AND THE ONUS BEING ON THE A SSESSEE HAS NOT BEEN DISCHARGED. IT IS ALSO FURTHER HELD THAT NO FACTUAL CONDITION WAS LAID BY THE ASSESSEE TO ESTAB LISH THE EXPENDITURE SO INCURRED WAS FOR BUSINESS PURPOS E NOR ANY ATTEMPT WAS MADE BEFORE THE LOWER AUTHORITIES. IT FURTHER HELD THAT ASSESSEE HAS MADE A BALD ASSERTION. 28. IN THE LIGHT OF THE ANALYSIS OF THE CASE LAWS ABOVE REFERRED TO, IT CANNOT BE GAIN SAID BY THE REVENUE THAT CONTRIBUTION MADE BY AN AS SESSEE TO A PUBLIC WELFARE CAUSE IS NOT DIRECTLY CONNECTED OR RELATED WITH THE CARRYING ON OF THE ASSESSEE'S BUSINESS. AS TO WHETHER SUCH ACTIVITY UNDERTAKEN AND DISCHARGED BY THE ASSESSEE WOULD BENEFIT TO THE ASSESSEE'S BUSINESS HAS TO BE EXAMINED IN THE LIGHT OF THE OBSERVATIONS MADE BY US HEREIN ABOVE. TRIBUNAL COMMITTED A SERIOUS ERROR IN ARRIVI NG AT A CONCLUSION THAT MOU ENTERED INTO BETWEEN THE ASSESSEE AND THE GOVERNMENT OF KAR NATAKA IS OPPOSED TO PUBLIC POLICY AND VOID UNDER SECTION 23 OF THE CONTRACT ACT. IN F ACT, HON'BLE APEX COURT IN CASE OF SRI VENKATA SATYANARAYANA RICE MILL CONTRACTORS COMPANY 'S CASE REFERRED TO HEREIN SUPRA HAS HELD THAT WHERE A DONATION, WHETHER VOLUNTARY O R AT THE INSTANCE OF THE AUTHORITIES CONCERNED, WHEN MADE TO A CHIEF MINISTERS DROUGHT R ELIEF FUND OR A DISTRICT WELFARE FUND ESTABLISHED BY THE DISTRICT COLLECTOR OR ANY O THER 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. IT CAME TO BE FUR THER HELD MAKING OF A DONATION FOR CHARITABLE OR PUBLIC CAUSE OR IN THE PUBLIC INTERES T RESULTS IN THE 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 H AS BEEN MADE FOR THE PURPOSES OF ASSESSEE'S BUSINESS. IN FACT, IT CAN BE NOTICED UND ER 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 KA RNATAKA IN THE HOUR OF CRISIS TO ALL THE PHILANTHROPIST, INDUSTRIAL AND COMMERCIAL ENTERPRIS ES TO EXTENDED THEIR WHOLE HEARTED SUPPORT AND THE ENTIRE LOGISTIC SUPPORT HAS BEEN EX TENDED 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 F ACT, THE STATE GOVERNMENT HAD ALSO AGREED TO EXEMPT SUCH OF THOSE PERSONS WHO UNDERTAK E TO EXECUTE THE WORK FROM THE PURVIEW OF SALE TAX, ROYALTY, ENTRY TAX AND OTHER R ELATED STATE TAXES 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 GOVERNMEN T OF KARNATAKA IS OPPOSED TO PUBLIC POLICY. 29. IN THE FACTS ON HAND, IT REQUIRES TO BE NOTICED THA T ASSESSEE IS CARRYING OF BUSINESS OF IRON ORE AND ALSO TRADING IN IRON ORE. THUS, DAY IN AND DAY OUT THE ASSESSEE WOULD BE APPROACHING THE APPROPRIATE GOVERNMENT AND ITS AUTH ORITIES FOR GRANT OF PERMITS, LICENSES AND AS SUCH THE ASSESSEE IN ITS WISDOM AND AS PRUDENT BUSINESS DECISION HAS ENTERED INTO MOU WITH THE GOVERNMENT OF KARNATAKA A ND INCURRED THE EXPENDITURE ITA NO.1889/BANG/2016 M/S. HOTHUR TRADERS, BELLARY PAGE 10 OF 11 TOWARDS CONSTRUCTION OF HOUSES FOR THE NEEDY PERSON S, NOT ONLY AS A SOCIAL RESPONSIBILITY BUT ALSO KEEPING IN MIND THE GOODWILL AND BENEFIT I T WOULD YIELD IN THE LONG RUN IN EARNING PROFIT WHICH IS THE ULTIMATE OBJECT OF COND UCTING BUSINESS AND AS SUCH, EXPENDITURE INCURRED BY THE ASSESSEE WOULD BE IN TH E REALM OF 'BUSINESS EXPENDITURE'. HENCE, THE ORDERS PASSED BY THE AUTHORITIES WOULD N OT STAND THE TEST OF LAW AND IS LIABLE TO BE SET ASIDE. 30. HOWEVER, IT REQUIRES TO BE NOTICED THAT WHILE EXAMI NING THE CLAIM FOR DEDUCTION UNDER SECTION 37(1) OF THE ACT THE ASSESSING OFFICE R WOULD NOT BLINDLY OR ONLY ON THE SAY OF THE ASSESSEE ACCEPT THE CLAIM. IN OTHER WORDS, A SSESSING OFFICER WOULD BE REQUIRED TO SCRUTINISE AND EXAMINE AS TO WHETHER SAID DEDUCTION CLAIMED FOR HAVING INCURRED THE EXPENDITURE HAS BEEN INCURRED AND ONLY ON BEING SAT ISFIED THAT EXPENDITURE SO INCURRED IS RELATABLE TO THE WORK UNDERTAKEN BY THE ASSESSEE NA MELY, ONLY ON NEXUS BEING ESTABLISHED, ASSESSING OFFICER WOULD BE REQUIRED TO ALLOW SUCH EXPENDITURE UNDER SECTION 37(1) OF THE ACT AND NOT OTHERWISE. 31. FOR THE REASONS AFORESTATED, WE ARE OF THE CONSIDER ED VIEW THAT SUBSTANTIAL QUESTION LAW FORMULATED HEREIN IS TO BE ANSWERED IN THE NEGA TIVE I.E., AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 9. IN THIS CASE, ON PERUSAL OF FACTS AVAILABLE ON R ECORD, THE FACTS OF THE PRESENT CASE ARE PARI MATERIA WITH THE FACTS CONSIDERED BY THE HONBLE HIGH COURT IN THE A BOVE CASE. THEREFORE, BY RESPECTFULLY FOLLOWING THE DEC ISION OF HONBLE HIGH COURT OF KARNATAKA, WE ARE OF THE CONS IDERED VIEW THAT EXPENDITURE INCURRED UNDER THE HEAD SOCIA L WELFARE EXPENDITURE FOR CONSTRUCTION OF HOUSES TO F LOOD VICTIMS IS IN THE NATURE OF EXPENDITURE INCURRED WH OLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND DEDUCTIBLE U/S 37(1) OF THE ACT. HENCE, WE DIRECT THE A.O. TO DELETE ADDITIONS MADE TOWARDS DISALLOWANCE OF SO CIAL WELFARE EXPENDITURE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA NO.1889/BANG/2016 M/S. HOTHUR TRADERS, BELLARY PAGE 11 OF 11 ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST AUG20 SD/- (N.V. VASUDEVAN) VICE PRESIDENT SD/- (G. MANJUNATHA) ACCOUNTANT MEMBER BANGALORE, DATED: 21 ST AUG, 2020. VG/SPS 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.