TaxTMI 
TaxTMI 
2022 (12) TMI 67
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....raised by the AO in proceeding under section 154 of the Act which is highly debatable and which was not raised by the AO in the original assessment proceedings. 3. The learned Commissioner of Income Tax (Appeals) is not correct in appreciating the fact that the learned Assessing Officer has no power to review his entire assessment order and to make certain additions in the order under section 154 of the Act. The appellant has declared all particulars regarding computation and assessment to be framed under section 143(3) of the Act. When the AO has consciously taken the view to frame regular assessment and made certain additions, AO is not empowered to take contrary view to review entire assessment order already framed. It is against the spirit of provision of section 154 of the Act. 4. The learned Commissioner of Income Tax (Appeals) has failed to appreciate the fact that the learned Assessing Officer was wrong in passing order U/s. 154 on a debatable and contentious issue. 5. The learned Commissioner of Income Tax (Appeals) has failed to understand the fact that the learned Assessing Officer was wrong in passing order u/s. 154 on an issue which requires ....
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....as passed by making disallowances of Rs.11,01,192/- in respect of community development expenditure by observing that this expenditure is not related to the business activity of the assessee and is not admissible expenditure under the provision of sec. 37(1) of the Act. The assessee submitted reply and stated that the some facilities were provided to government schools in the form of furnitures so that the assessee will get benefit in regard to passing through the entire pipe lines stretch from Mangalore to Bangalore and details of expenditure were filed as per Annexure - A. The AO was not satisfied and he noted that the supply of bench and desk to government schools cannot be construed as expenditure relating to its nature of business, accordingly he passed order u/s 154 of the Act by disallowing the expenditure u/s 37(1) of the Act on 12/06/2018. 3. Against the order of the AO, the assessee filed appeal before the CIT(A), who confirmed action of the AO by holding as under:- "5.4 It is noticed that the assessment u/s 143(3) was competed at the returned income. However, assessee appellant has not at the single stage (in reply to 154 notice or during appellate stage) add....
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.... [SC]. He further relied on the decision of the coordinate bench of this Tribunal at para 47 in the case of Bosch Ltd., in ITA No.1629/Bang/2018 vide dated 01.09.2022. 6. On the other hand, the ld.DR relied on the orders of the lower authorities and he submitted that the expenditure incurred by the assessee is not wholly and exclusively for the purpose of business. The assessee's business expenditure incurred towards supply of bench and desk to the school is not related to his activity and the assessee also unable to demonstrate how the assessee company will get the benefits towards supply of these items to the schools where the companies pipe lines runs to 363 kms and in what way it will improve the business of the assessee. 7. We have heard the rival submissions and perused the material on record and also the orders of the authorizes below and we note that the assessee's case was completed u/s 143(3) of the Act and later on, the AO noted that the community development expenditure incurred by the assessee of Rs.11,01,192/- has been added back by the AO by passing rectification u/s 154 of the Act by holding that the expenditure is not wholly and exclusively for the purpose of....
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....rely because some of these expenses are incurred voluntarily, i.e. without there being any legal or contractual obligation to incur the same, those expenses do not cease to be deductible in nature. In other words, it is not necessary that the businessman alone would incur any furtherance of his business pursuits. We find guidance from a passage from the judgment of the House of Lords in the case of Atheron v. British Insulated & Helsbey Cables Ltd. [1925] 10 Tax Cases 155, referred to with approval by the Supreme Court in the case of CIT v. Chandulal Keshavlal & Co. [1960] 38 ITR 601, which reads as follows : "It was made clear in the above cited cases of Usher's Wilshire Brewery v. Bruce (supra) and Smith v. Incorporated Council of Law Reporting [1914] 6 Tax Cases 477 that a sum of money expended not with a necessity and with a view to direct immediate benefit to the trade, but voluntarily and on the grounds of commercial expediency and in order to indirectly facilitate, carrying on of business may yet to be expended wholly and exclusively for the purpose of trade; and it appears to me that the findings of the CIT in the present case, bring the payment in question wit....
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.... of the Act if it satisfies otherwise the tests laid down by law.' 8.2 The words used in section 37(1) of the Act are "wholly and exclusively for the purpose of business". In normal legal parlance the word "wholly" would mean entirely and the word "exclusively" would mean solely. Thus, it gives an impression or it could be argued that any element of expenditure not laid out entirely and solely for the purpose of profession or business would not be covered by section 37(1) of the Act. One needs to examine this from the perspective of the assessee who does make the expenditure. However, as explained by the Supreme Court the expression "wholly and exclusively" does not mean "necessarily". It is for the assessee to decide whether any expenditure should be incurred in the course of its business. 8.3 We have noticed that Section 57(iii) of the Act contains similar phrases "wholly and exclusively for the purpose". Section 57 of the Act is with regard to the deductions. Section 57(iii) reads as under : "Section 57(iii) :- any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of makin....
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....be made in this connection to the decision of this court in Commissioner of Expenditure Tax v. Mrs. Manorama Sarabhai [1966] 59 ITR 262 (Guj.). In that case, it was pointed out that the words "for the purpose of" were used in s. 5(a) of the Expenditure-tax Act, 1957, in connection with the words "the business, profession, vocation or occupation" and also in conjunction with the words "earning income from any other source" and it was observed that (p. 266) : "The legislature has thus provided disjunctively for different categories of expenditure and it is not right that the concept underlying one category should be imported into the other." These observations, though they are made in a different context, are apposite in judging the relative scope of ss. 37(1) and 57(iii). Even apart from authority, on a comparison of the language of s. 37(1) and s. 57(iii), it becomes clear that the scope of the former section is essentially wider than that of the latter. The word "business" used in s. 37(1) in association with the expression "for the purposes of" is a word of wide connotation. As observed by the Supreme Court in Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax [1....
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.... should be relevant for examining this aspect of the matter, we may only refer to the observations of Hon'ble Supreme Court in the case of Sri Venkata Satyanarayna Rice Mill Contractors Co. v. CIT [1997] 223 ITR 101 : " ...... any contribution made by an assessee to a public welfare fund which is directly connected or related with the carrying on of the assessee's business or which results in the benefit to the assessee's business has to be regarded as an allowable deduction under section 37(1) of the Act. Such a donation, whether voluntary or at the instance of the authorities concerned, when made to a Chief Minister's Drought Relief Fund or a District Welfare Fund established by the District Collector or any other fund for the benefit of the public and with a view to secure benefit to the assessee's business, cannot be regarded as payment opposed to public policy. It is not as if the payment in the present case had been made as an illegal gratification. There is no law which prohibits the making of such a donation. The mere fact that making of a donation for charitable or public cause or in public interest results in the Government giving patronage or benefit ....