December 2015
Business expenditure – Section 37(1) – A. Y. 2009- 10 – Payment made by the assessee law firm to the Indian branch of the International Fiscal Association towards the cost of constructing one of its meeting halls on the understanding that the hall would be named after the assessee firm was deductible as business expenditure
By K.B. Bhujle Advocate
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CIT vs. Vaish Associates; 280 CTR 605 (Del): The assessee, a law firm, had agreed to contribute Rs. 50 lakh to the Indian branch of the International Fiscal Association (IFA) on progressive basis towards the cost of constructing one of its meeting halls on the understanding that the hall would be named after the asessee firm. In the relevant year, i.e. A. Y. 2009-10, the assessee had paid Rs. 19 lakh and the same was claimed as business expenditure. The Assessing Officer disallowed the claim. However, he allowed 50% deduction u/s. 80G of the Income-tax Act, 1961. The Tribunal allowed the full claim u/s. 37(1) of the Act.
On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under:
“i) T he Tribunal has accepted the explanation of the assessee that the IFA is a professional body and a non-profit organization engaged in the study of international tax laws and policies. It, inter alia, undertakes research, holds conferences and publishes materials for the use of its members. Mr. Ajay Vora, one of the partners of the assessee firm, was also a member of the executive body of the IFA.
ii) T he contribution made by the assessee to the IFA was held to be for inter alia creating greater awareness of the assessee firm’s activities and therefore an expenditure incurred for the purposes of the profession of the assessee. It was accordingly held to be allowable as a deduction u/s. 37(1) of the Act.”
