TaxTMI 
TaxTMI 
2004 (12) TMI 719
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....ing from the agreements between the assessee and its employees which were in operation during the relevant period and obligating the assessee to incur such expenses at the pains of punishment for non-compliance thereof under the Industrial Disputes Act. 2. However, the audit report submitted by the auditors of the company shows that there was auditors' note that the expenses are not eligible for deduction for computing the total taxable income of the assessee under Section 40A(9) of the IT Act, 1961. The said provision reads as under: "40A(9) No deduction shall be allowed in respect of any sum paid by the assessee as an employer towards the setting up or formation of, or as contribution to, any fund, trust, company, AOP, BOI, so....
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.... claimed as deduction under Section 37 by him, is not by way of contribution to any fund but such amount has been spent as expenses for labour welfare activities for securing and advancing its own business interest, both the authorities have not gone into the question and decided it in accordance with law but has merely disallowed the claim by referring to the auditors' note, which in our opinion, cannot be substituted for adjudication by the AO and CIT(A). It amounts to abdication of jurisdiction vested in these authorities to decide issues raised before it in the light of relevant law and material before it, merely on the opinion of the auditor. The opinion of audit or may serve the purpose of drawing the attention of AO to it, but it....
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....esaid distinction by adverting to relevant law and has held all the activities referred by the assessee as the employees' welfare activities, without examining the true nature of the amount laid down by the assessee, to be as expenditure wholly and exclusively for business purposes. Whether the same was by way of contribution or by way of amount spent during the year in welfare activity, has not been examined. 10. As the nature of expenses referred to above by us suggests that all expenses are for different purposes, for different activities and some of them are for the activities directly carried out by the employees, some by the employer and employee jointly and some of the expenses have been outright payment to another institution, ....