Dy. CIT v. Kolhapur Zilla Sahakari Dudh
Utpadak Sangh Ltd.
A.Ys. : 1993-94, 1995-96 to 1999-2000 and 2001-02 Dated :
28-3-2008
S. 37(1) — For the expenditure to be allowable u/s.37(1),
it may be incurred ‘voluntarily’ and without any ‘necessity’ and if it is
incurred for promoting business and to earn profits, assessee can claim
deduction u/s.37(1), even though there was no compelling necessity to incur
such expenditure.
For the relevant assessment years, the Assessing Officer
disallowed animal husbandry expenditure incurred by the assessee on the
following grounds :
(a) Assessee did not own any cattle.
(b) It did not procure milk directly from cattle owners.
(c) It collected milk from primary societies which, in
turn, collected milk from the cattle owners.
(d) Providing services for animal husbandry was not a
business activity of the assessee.
(e) The animal husbandry expenditure benefited the cattle
owners and not the business of the assessee, particularly because the
assessee-society was not buying milk directly from the cattle owners.
The CIT(A) deleted the disallowance made by the Assessing
Officer on the ground that the expenditure incurred by the assessee resulted
in increasing the quality and productivity of milk which the assessee was
purchasing as part of its business.
The Tribunal upheld the CIT(A)’s order. The Tribunal noted
as under :
(1) Although one might argue that the assessee could have
carried on its business without incurring the above expenditure and that it
was not ‘necessary’ for the assessee to incur that expenditure in order to
carry on its business of purchase and sale of milk, such an argument was not
relevant for deciding the question whether an expenditure was allowable
u/s.37(1).
(2) The expression ‘wholly and exclusively’ used in S.
37(1) does not mean ‘necessarily’.
(3) An expenditure may be incurred ‘voluntarily’ and
without any ‘necessity’ and if it is incurred for promoting the business and
to earn profits, the assessee can claim deduction u/s.37(1) even though
there was no compelling necessity to incur such expenditure. The fact that
somebody other than the assessee is also benefited by the expenditure should
not come in the way of an expenditure being allowed by way of deduction
u/s.37(1).
