Business expenditure — Whether aid given to the residents living in the vicinity of the factory of the assessee is a business expenditure allowable u/s.37 of the Act is a question on which finding of fact should be given by the Tribunal.

[CIT v. Madras Refineries
Ltd., (2009) 313 ITR 334 (SC)]

During the previous year
relevant to the A.Y. 1993-94, the assessee’s claim with respect to social and
welfare community expenses was disallowed by the Assessing Officer. Aggrieved
by the said order, the assessee filed an appeal before the Commissioner of
Income-tax (Appeals), who allowed the appeal deleting the disallowance.
Against the said order, the Revenue preferred an appeal before the Income-tax
Appellate Tribunal, which dismissed the appeal.

Further on an appeal,
following the decisions in CIT v. Madras Refineries Ltd., (2004) 266
ITR 170 and Cheran Engineering Corporation Ltd. v. CIT, (1999) 238 ITR
892, the Madras High Court held that the social and welfare community expenses
were deductible as business expenditure.

On an appeal before the
Supreme Court by the Revenue, it was argued on behalf of the assessee that the
aid given to the residents living in the vicinity of the factory of the
assessees was a business expenditure allowable u/s.37 of the Income-tax Act.
The Supreme Court, however, did not find any finding on this aspect in the
judgment of the Tribunal as well as in the judgment of the High Court and
therefore, set aside the impugned judgment of the High Court and remitted the
matter to the Tribunal for de novo examination of this point in
accordance with law.