TaxTMI 
TaxTMI 
2008 (8) TMI 286
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....drainage system. In its return of income for the assessment year 1985-86, the assessee had claimed deduction of Rs. 10,00,000 towards staff welfare expenses. According to the assessee, the said amount was paid by the assessee as a conditional donation to SAPDJ Pathashala, Solapur (hereinafter referred to as "the trust"). The said trust is running Walchand Institute of Technology at Solapur. (ii) It appears that the said trust was entitled to give admissions to 18 students per year as per its discretion. The trust had put up a proposal to the assessee for transfer of such rights of nomination for consideration of Rs. 5,00,000 per seat. (iii) It is the case of the assessee that after receiving the said proposal of the trust the assessee passed the following board resolution dated June 18, 1984. " Resolved that the company shall pay forthwith a sum of Rs.10,00,000 (rupees ten lakhs only) to Shri A. P. D. J. Jain Pathashala of Solapur to enable the company to acquire the right of nomination of two students every year for admission to the Walchand Institute of Technology, who shall be its employees or their children or any other relatives nominated by the employees and acceptab....
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....ntion of the resolution dated June 18, 1984, passed by the board of directors of the assessee-company nor is it mentioned in the agreement as to which students will be nominated by the assessee. The claim of the assessee, therefore, that the donation was made to secure admissions to the children of the employees of the assessee-company is not supported by the agreement dated July 28, 1986. (vi) During the course of assessment proceedings, a query was raised about the deductibility of this expenditure and by its letter dated December 17, 1987, the assessee-company, inter alia, submitted that : ". . . it was, therefore, thought by the company that it would be in the interest of business of the company as also in the interest of its employees and other associates if the company could secure special privilege of nomination of two seats so that the deserving children of the employees would get chance of qualifying themselves in the engineering discipline. This sort of provision is bound to create an identity between the workers, staff on the one hand and the company on the other". The assessee had, therefore, in no uncertain terms stated that for the said two reserved seats every yea....
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..... (ix) Being aggrieved by the order of the Commissioner of Income-tax (Appeals), dated August 22, 1991, the assessee preferred an appeal before the Appellate Tribunal being ITA No. 8506/Bom/1991. (x) Before the Tribunal, the Departmental representative made the following submissions which are recorded in para 6 of the Tribunal's order and are reproduced hereunder. "The learned Departmental representative, on the other hand, contended that the said trust comes under the same management as that of the assessee-company. The payment has been made to the trust not for the sole consideration of the assessee-company but for the group companies, as well. Right of nomination is solely not restricted to the employees of the assessee-company ; but the same is general in nature. The assessee has failed to produce any evidence to show that the nominations made by the company are in conformity with the business expediency as contended by the assessee. According to him, there is no element of business expediency involved and in the absence of any material to come to a conclusion that the payment was made solely for business consideration, the order of the Com-missioner of Income-tax (App....
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....o the conclusion that payment was made solely for business considerations, the order of the Commissioner of Income-tax (Appeals) was well reasoned. It is obvious that in lieu of such wide and general rights given to the company to nominate two candidates and in the absence of any mention in the agreement as to whom the asses-see can nominate, the assessee could have satisfied the Commissioner of Income-tax (Appeals) and the Tribunal that the payment made by the company was for furtherance of the business interest of the company, only by showing that the nominations made by the company are in conformity with the business expediency as contended by the assessee. Though an express contention was raised by the Departmental representative before the Tribunal that the assessee has failed to produce any evidence or material pertaining to the nominations made by the company, the assessee admittedly did not produce any material pertaining to the nominations made by it. 4. It is pertinent to note that the order of the Tribunal is dated May 27, 1999, and the 15 years' period under the agreement was getting over only in June, 1999. By this time, the assessee had made 28 nominations and only....