2014 (11) TMI 947

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....antial question of law:                "(1) Whether the Appellate Tribunal is right in law and on facts in deleting the disallowance of Rs. 14,00,000/- made under Section 40A(9) being contribution to the staff benevolent fund even though such fund was not recognised nor approved in terms of Section 2(5) and (6) of the Income Tax Act?" 3. The facts leading to the present tax appeal in a nutshell are set out as under: 3.1 The assessee had created a staff benevolent fund for the benefit of the staff. The assessee had contributed Rs. 14 lakhs to meet the expenditure of the employees. The Assessing Officer disallowed the same applying provisions of section 40A(9) of the Act....

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....ported in [2011] 337 ITR 482 (Cal). 5. Mr. J.P. Shah, learned advocate appearing for the assessee supported the impugned order and submitted that the same having been passed in accordance with law does not call for any interference by this Court. He submitted that the expenditure incurred by the assessee was for the benefit of the employees as the payment was towards cultural program, death assistance, educational assistance, gifts, honorarium, medical assistance, note books for the children of the employees and sports etc and therefore the said expenditure is rightly allowed to be deducted by the Tribunal. 5.1 Mr. Shah has placed reliance upon the following decisions: (a) Commissioner of Income Tax vs. Bharat Petroleum Corporation Ltd r....

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....Officer. 7.1 The Tribunal has relied upon circular no. 307 issued by CBDT on 06.07.1904 reported in 152 ITR 10 (St.) wherein it is mentioned that expenditure actually incurred on the welfare of employees is also allowed as deduction. The Tribunal has observed that the object of the statute vide the circular was to discourage creation of bogus trust for the purpose of availing deduction only. The Tribunal has considered that the assessee contributed the amount to the staff benevolent fund which was created for the benefit of the staff and family members and therefore relying upon the circular and the decision of Madras High Court in the case of Cheran Engineering Corporation Ltd. vs. Commissioner of Income tax reported in [1999] 238 ITR 892....

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....deduction was disallowed. Being aggrieved, the assessee went in appeal to the Tribunal which took the view that the aforestated amount represented reimbursement of expenses incurred by a society and, therefore, it did not constitute contribution under Section 40A(9). Being aggrieved by the decision of the Tribunal, the Department has come in appeal. Findings on question No. 2 :                6. Bharat Petroleum Corporation is a Central Government undertaking. It has incorporated a club, essentially to carry on staff welfare activities. Under Clause 28, Bharat Petroleum Corporation Limited had a right to issue directives to the club which were binding on the club. At t....