Tribunal allows Assessee's appeal, deems contributions to SPARSH Trust and Vikas Yojna Fund as business expenses

The Tribunal allowed the Assessee's appeal, deleting both disallowances. Regarding the contribution to SPARSH Trust, it was deemed a business expenditure directly linked to milk procurement, allowable under section 37(1). The Tribunal emphasized the expenditure's business purpose and benefit to the Assessee. Similarly, the payment to Vikas Yojna Fund was considered a business expense for ensuring regular milk supply, also allowed under section 37(1). The Tribunal found the disallowances unjustified and ordered their deletion, pronouncing the decision on 15.3.2012.

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Issues Involved:
1. Sustaining the disallowance of Rs. 89,67,627/- being contribution made to Pasudhan Kalyan and Upbhokta Samvardhan Trust (alias SPARSH).
2. Confirming disallowance of Rs. 3,23,670/- being payment made to Vikas Yojna Fund.

Summary:

Issue 1: Sustaining the disallowance of Rs. 89,67,627/- being contribution made to Pasudhan Kalyan and Upbhokta Samvardhan Trust (alias SPARSH)

The Assessee, a co-operative society engaged in milk procurement and processing, contributed Rs. 89,67,327/- to SPARSH Trust for animal productivity enhancement. The AO disallowed this amount, arguing it was a donation and not an expenditure u/s 37(1). The ld. CIT (A) confirmed the disallowance but allowed deduction u/s 80G after verification. The Tribunal found that the contribution was directly linked to the procurement of better quality milk and was thus an expenditure incurred wholly and exclusively for business purposes, allowable u/s 37(1). The Tribunal noted that the Trust's expenditure was for the benefit of the Assessee's business, and the contribution was not a mere donation but a business expenditure. Consequently, the addition made by the lower authorities was deleted.

Issue 2: Confirming disallowance of Rs. 3,23,670/- being payment made to Vikas Yojna Fund

The Assessee incurred Rs. 3,23,670/- for registering members and societies at the village level to ensure regular milk procurement. The AO disallowed this amount, stating it was not incidental to the business. The CIT (A) confirmed the disallowance, questioning the benefit derived by the Assessee. The Tribunal found that the expenditure was for business purposes, ensuring regular milk supply, and was thus allowable u/s 37(1). The Tribunal also noted that the Assessee received a grant for the same purpose, which was offered for taxation. Therefore, the disallowance was unjustified, and the addition was deleted.

Conclusion:

The appeal of the Assessee was allowed, with both disallowances being deleted. The order was pronounced in the open court on 15.3.2012.

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