Deduction for welfare contributions requires proven nexus and actual utilisation for workers' welfare; sister-concern payments failed that test.

Deduction for welfare contributions under section 8(2)(f)(vii) of the Assam Agricultural Income-tax Act, 1939 requires a direct and demonstrable nexus between the outlay and earning agricultural income, with actual utilisation for workers' welfare shown on the record. A mere welfare description is insufficient, and the assessee must prove that the spending was made directly or through an agency under its control. On the facts, contributions paid to sister concerns lacked proof of control and of actual use for tea garden workers in the relevant year, so the deduction claim failed and the disallowance was upheld.

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Issues: Whether the assessee was entitled to deduction under section 8(2)(f)(vii) of the Assam Agricultural Income-tax Act, 1939, for contributions made to sister concerns towards workmen and staff welfare schemes as expenditure laid out wholly and exclusively for earning or deriving agricultural income.

Analysis: The governing test under section 8(2)(f)(vii) is whether the expenditure is laid out or expended wholly and exclusively for the purpose of earning or deriving agricultural income, with a direct and demonstrable nexus between the outlay and the claimed welfare object. The Court held that such expenditure cannot be allowed merely because it is described as welfare-related or because a similar claim might have faced restriction under the Income-tax Act, 1961. The assessee was required to show actual utilisation of the funds for the workers' welfare and that the spending was made directly by the assessee or through an agency under its control. On the facts, the contribution of Rs. 4 crores was paid to two sister concerns not shown to be controlled by the assessee, no material was produced to prove actual utilisation for tea garden workers within the relevant year, and the claim lacked the necessary factual nexus and transparency.

Conclusion: The assessee was not entitled to deduction of the contribution under section 8(2)(f)(vii); the claim failed and the impugned disallowance was upheld against the assessee.

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