Local puja and festival committees donations allowed as business expenditure as those contributions were paid to avoid confrontation and to smooth running of the business.
ABCAUS Case Law Citation:
ABCAUS 2057 (2017) (09) ITAT
Assessment Year : 2011-12
Brief Facts of the Case:
The assessee had claimed expenses under the head “Donation & Subscription”. The Assessing Officer (AO) was of the opinion that these expenses were not supported by any receipt or 80G certificate, therefore, he disallowed the entire expenses claimed on that behalf.
The CIT(A) confirmed the addition made by the AO.
Contention of the appellant assessee:
The assessee contended that the expenses incurred under the head “Donation & Subscription” comprised of subscription to different organizations for puja and social activities. According to assessee, in order to run the business peacefully it is unavoidable necessity to contribute to local religious festivals and social activities. Since the assessee company is engaged in the business of cold storage and to have good relationship with the local residents, the subscription was thus a business necessity.
Observations made by the Tribunal:
The Tribunal noted that the assessee had filed the evidence in the form of copy of ledger and evidence of donation and subscription before the AO which. The ledger in respect to donation and subscription had been supported by the bills of each expenditure.
It was also noted that the subscription and donation was given by the assessee to various organizations to avoid confrontation and to smooth running of its business and, therefore, the ITAT opined that the expenses incurred by the assessee under the head subscription and donation were incidental to assessee’s business and were allowable as business expenditure.
The ITAT observed that this view had been upheld by the High Court wherein it has been held at page 890 that contribution to local puja and festival committees or organizations to avoid confrontation and for smooth running of its business are allowable as business expenditure.
Held:
The Tribunal allowed the expenditure.
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