2009 (8) TMI 732 - HC - Income Tax

Court affirms denial of puja expense deduction for company under Income-tax Act

The High Court of Chhattisgarh upheld the decision of the Income-tax Appellate Tribunal, dismissing the appeal of a company seeking a deduction for puja ... Business expenditure - expenditure incurred in puja/Vishwakarma puja by a company cannot be treated as expenditure incurred wholly and exclusively for the purposes of business or profession of a company, and the assessee cannot be allowed any deduc-tion under section 37(1) of the Act towards such expenditure – appeal dismissed The High Court of Chhattisgarh, in the 2009 case of Dhirendra Mishra and Chandrakar R. N. JJ., addressed an income-tax appeal concerning the entitlement of a company to claim a deduction under section 37 of the Income-tax Act, 1961. The appellant, engaged in the manufacture and sale of ferro manganese and silico manganese, claimed an expenditure of Rs. 9,097 incurred on performing puja during the financial year. The Assessing Officer disallowed the claim, asserting that a company cannot profess any religion. The Commissioner of Income-tax (Appeals) allowed the appeal, but the Income-tax Appellate Tribunal reinstated the dis allowance.The appellant argued that the puja expenditure was for the welfare of laborers and employees, acting as a morale booster, and thus associated with the business. Citing various judgments, the appellant contended that such expenses are deductible as they are incurred for commercial expediency and the benefit of the company. Conversely, the respondent argued that a company, being a juristic person, cannot profess any religion, and puja expenses are not incurred wholly and exclusively for business purposes.The court considered various legal precedents and ultimately held that expenditure on puja by a company cannot be considered as being wholly and exclusively for business purposes under section 37(1) of the Act. The tribunal's decision to restore the Assessing Officer's order was upheld, and the appeal was dismissed. The judgment highlighted the distinction between personal and business expenses, emphasizing that puja expenses by a company cannot be allowed as a deduction.