COMMISSIONER OF INCOME TAX Vs. INDIA RADIATORS LIMITED

JUDGEMENT

(1.) PURSUANT to the direction of this court, the Appellate Tribunal has stated a case and referred the following question of law for the opinion of this court under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") :

(2.) THE assessee is a company, during the course of the previous year relevant to the assessment year 1973-74, the assessee made a contribution of a sum of Rs. 35,000 to the Panchayat, where its factory and its premises are situate. THE assessee made the said expenditure for upgrading the elementary school of the Panchayat as High School. THE assessee claimed the contribution made to the Panchayat as a revenue expenditure. THE Income-tax Officer held that the expenditure was not incurred wholly and exclusively for the purpose of the assessee's business and that the expenditure cannot be regarded as staff welfare expenditure on the basis that the school or the Panchayat, not only served the wards of the employees of the assessee but it was open to the general public as well.

(3.) THE Supreme Court in a subsequent decision, viz., Sri Venkata Satyanarayana Rice Mill Contractors Co. v. CIT [1997] 223 ITR 101, has also taken the same view. In that case, the Supreme Court held that where any contribution was made by the assessee to a welfare fund, which is directly connected with the carrying on of the business or which results in a benefit to the assessee's business, the expenditure has to be regarded as allowable deduction under the provisions of section 37(1) of the Act.