1997 (2) TMI 38 - HC - Income Tax

Court rules on revenue expenditure interpretation & deductions for business funds payments.

Cholan Roadways Corporation Ltd. Versus Commissioner Of Income-Tax

The court ruled against the assessee regarding the interpretation of revenue expenditure, following precedent. However, the court allowed deductions for ... Business Expenditure Issues involved: Interpretation of revenue expenditure and deductibility of payments made to specific funds for business purposes.Interpretation of revenue expenditure: The court addressed whether a sum of Rs. 79,800 paid by the assessee constituted revenue expenditure. The court referred to a previous decision in Anna Transport Corporation Ltd. v. CIT [1995] 215 ITR 800, where a similar issue was decided against the assessee. Following this precedent, the court answered the first question in the affirmative, ruling against the assessee on this issue.Deductibility of payments to specific funds: The second question involved the deductibility of payments made by the assessee to the Tamil Nadu Soldiers and Sailors and Airmen's Board towards Flag Day Fund, and to the Regional Transport Authority towards Chief Minister's Rehabilitation Fund for physically handicapped individuals. Citing the case of CIT v. Cheran Transport Corporation Ltd. [1996] 219 ITR 203, the court noted that contributions to such funds were not in violation of any law or public policy, and were made for business purposes, thus being deductible. This view was supported by the Supreme Court in Sri Venkata Satyanarayana Rice Mill Contractors Co. v. CIT [1997] 223 ITR 101, where a similar payment to a public welfare fund was deemed deductible. Consequently, the court answered the second question in the negative, in favor of the assessee, allowing the deductions for these payments.