M/s Gogga Gurushanthiah & Bros., Hospet V. ACIT, Bellary

ITA 504/BANG/2014

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1090 (ITAT-BANGALORE)
• Duration Of Justice: 6 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-03-2020
• Assessment Year: 2009-2010
• Appeal Filed On: 15-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A RAMESH KUMAR JCIT BENGALURU
• Assessee Lawyers: B S BALACHANDRAN
• Keywords: Business expenditure
• Section: 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 5 04 /BANG/201 4 ASSESSMENT YEAR : 2009-10 SHRI. GOGGAGURUSHANTIAH AND BROS, P. NO.4, MINE OWNERS AND MINERAL GRINDERS NEHRU CO-OP COLONY, HOSPET. PAN : A ACFG 6895 M VS. ACIT/DCIT, CIRCLE I, BELLARY. APPELLANT RESPONDENT ASSESSEE BY : SHRI. B. S. BALACHANDRAN, ADVOCATE REVENUE BY : SHRI. A. RAMESH KUMAR, JCIT (DR)(ITAT), BENGALURU DATE OF HEARING : 0 4 . 0 3 .20 20 DATE OF PRONOUNCEMENT : 29 . 0 5 .20 20 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 GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), HUBLI IS NOT JUSTIFIED IN REJECTING THE CLAIM FOR EXPENDITURE AMOUNTING TO RS. 10,00,000/- BEING THE AMOUNT OF CONTRIBUTION PAID TO THE DEPUTY COMMISSIONER, BELLARY FOR HAMPI UTSAY. 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. ITA NO. 504/BANG/2014 PAGE 2 OF 4 3. THE COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE APPRECIATED THE FACT THAT THE REJECTING THE CLAIM FOR DEDUCTION OF CONTRIBUTION TO HAMPI UTSAV IS NATIONAL FESTIVAL AND THE HAMPI MONUMENTS ARE UNDER THE UNESCO TAG. THE HAMPI UTSAV IS A CULTURAL FESTIVAL TO BOOST THE MORALE AND CULTURAL DIFFERENCE FOR NATIONAL AND INTERNATIONAL. 4. THE COMMISSIONER OF INCOME-TAX (APPEALS), HUBLI OUGHT TO HAVE APPRECIATED THAT THE WORLD HERITAGE SITE HAMPI IS WITHIN 12 KMS RADIUS OF PLACE OF ASSESSEE'S BUSINESS. THIS CONTRIBUTION WOULD DEFINITELY HELP FOR THE DEVELOPMENT OF LOCAL CULTURE, HERITAGE. 5. ANY OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF APPEAL MAY KINDLY BE TREATED AS GROUNDS OF APPEAL. 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 HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF M/S. KANHAIYALAL DUDHERIA VS. JCIT IN ITA NOS.100016 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 HONBLE ITA NO. 504/BANG/2014 PAGE 3 OF 4 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 HONBLE 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 HONBLE 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 HONBLE 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. ITA NO. 504/BANG/2014 PAGE 4 OF 4 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IN PARA 2 ON PAGE 4 OF THIS ORDER, IT IS NOTED BY LEARNED CIT(A) THAT IN THE PRESENT CASE, THE PAYMENT IS NOT ONLY MADE BY THE ASSESSEE FIRM BUT SIMILAR PAYMENTS HAVE ALSO BEEN MADE BY ALL THE BUSINESS / INDUSTRIAL HOUSES SITUATED IN BELLARY AND NEARBY DISTRICTS DEPENDING UPON THE SCALE OF BUSINESS. IT IS ALSO NOTED BY CIT(A) THAT THE PRESENT PAYMENT HAS HELPED THE FIRM IN GETTING GOODWILL OF LOCAL CITIZENS, BUREAUCRATS, POLITICIANS, PRESS AND OTHERS. IN OUR CONSIDERED OPINION, WHEN THIS IS ADMITTED BY LEARNED CIT(A) THAT THIS PAYMENT IN QUESTION WILL HELP THE FIRM IN GETTING GOODWILL OF LOCAL CITIZENS, BUREAUCRATS, POLITICIANS, PRESS AND OTHERS, THIS WILL DEFINITELY BENEFIT THE ASSESSEE FIRMS BUSINESS ALSO, MAY AT A LATER DATE. THEREFORE, IN OUR CONSIDERED OPINION, THIS EXPENDITURE IS AN ALLOWABLE EXPENDITURE UNDER SECTION 37(1) OF THE INCOME TAX ACT, 1961. WE RESPECTFULLY FOLLOW THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF M/S. KANHAIYALAL DUDHERIA VS. JCIT (SUPRA) AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- (PAVAN KUMAR GADALE) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED: 29 TH MAY, 2020. /NS/* COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.