2017 (6) TMI 779

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....levant to assessment year 2011-12 (ITA No.782/Bang/2016) are stated herein. The assessee raised the following grounds of appeal. "1. The orders of the Learned Lower Authorities are bad in law and contrary to the evidences and facts on record. 2. The Learned CIT(A) has erred in upholding the disallowance of Rs. 10,823/- without appreciating that the expenditure was not prohibited by law or in the nature specified by Explanation under section 37 (1). 3. The Learned CIT-(A) erred in not appreciating that social welfare expense of Rs. 1,61,30,480/- is a legitimate business expenditure and ought not to have been disallowed by the learned Assessing Officer. 4. The Appellant craves leave to add any other ground or modify or revise the grounds ....

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....taka in terms of which the appellant was required to construct houses and deliver same to the Government. Accordingly, the appellant constructed houses and handed 169 houses to the Government. During the previous year relevant to assessment year under consideration, an expenditure of Rs. 1,61,30,48/- was incurred towards construction of 169 houses in Gundiganur village in Siriguppa Taluk and handed over same to the Government of Karnataka. The appellant debited said expenditure to P&L Account and claimed as business expenditure u/s 37(1) of the Act. It is claimed that the said expenditure was incurred to yield benefit in the form of goodwill and therefore the same was allowable as business expenditure. The Assessing Officer (AO) after quoti....

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....Karnataka in the case of CIT v. Infosys Technologies Ltd. [2014] 360 ITR 714. On the other hand, learned Standing Counsel for Revenue submitted that the expenditure cannot be allowed as deduction u/s 37(1) as the expenditure was towards charity. It is nothing but application of income and reliance in this regard was placed on the decision of the Hon'ble MP High Court in the case of Addl. CIT v. Badrinarayan Shrinarayan Akodiya [1975] 101 ITR 817. 7. We heard rival submissions and perused the material on record. The issue in appeal is whether the expenditure incurred in constructing houses in order to help people who were rendered homeless on account of unprecedented floods in Siriguppa Taluk and handed over to the Government of Karnat....

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....xpenditure... laid out or expended wholly, necessarily and exclusively for the purpose of the business or profession shall be allowed...." The introduction of the word 'necessarily' in the above section resulted in public protest. Consequently, when section 37 was finally enacted into law, the word 'necessarily' came to be dropped. The fact that somebody other than the assessee is also benefited by the expenditure should not come in the way of an expenditure being allowed by way of deduction under section 10(2)(xv) of the Act if it satisfied otherwise the tests laid down by law". Again, the words "for the purpose of business" used in section 37(1) should not be limited to the meaning of "earning profit alone". Business expe....