RAASI CEMENT LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) Heard Mr. S. Ravi, learned counsel for the assessee and Mr. S. R. Ashok, learned senior standing counsel for the Revenue.

(2.) The instant reference arises out of an order of the Income -tax Appellate Tribunal in I. T. A. No. 1237/Hyd. of 1992 pertaining to the assessment year 1984 -85. It is at the instance of the assessee that the following two questions have been referred to us for our opinion : "1. Whether, on the facts and in the circumstances of the case, the Income -tax Appellate Tribunal was correct in law in holding that the contributions made by the applicant in M/s. Raasi Cement Executives Welfare Trust was not deductible in computing the income of the applicant ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the Executive Welfare Trust was hit by the provisions of Section 40A(9) of the Income -tax Act ?"

(3.) The brief facts relevant to the questions as posed for our consideration are : the assessee is a company engaged in the manufacture and generally to deal in all kinds of Portland cement. The claim of the assessee for the assessment year in question in the sum of Rs. 1,50,00,000 which represented initial contributions made by it to M/s. Raasi Cement Employees' Welfare Trust and M/s. Raasi Cement Executives Welfare Trust, debited to staff welfare expenses account was disallowed by the Income -tax Officer on the ground that the same was capital contribution in terms of Section 40A(9) of the Income -tax Act (for short "the Act"). The disallowance was confirmed by the first appellate authority. On further appeal, the Income -tax Appellate Tribunal (ITAT) allowed the claim of the assessee for deduction regarding the contribution to M/s. Raasi Cement Employees' Welfare Trust. However, as regards the contribution to M/s. Raasi Cement Executives Welfare Trust, the Tribunal rejected the claim of the assessee. It held that the contribution neither pertained to the staff and workers union so as to be covered by the Act nor was pursuant to any agreement between the assessee and its executives.