Case Law Details
The Himalaya Drug Company Vs DCIT (ITAT Bangalore)
The admitted facts are that the children and grand children of Mr. Meeraj Alim Manal, has studied/studies in the school in which the assessee has contributed for construction of swimming pool. It is the contention of the assessee that its name is displayed alongside of the swimming pool and hence the same will promote the brand name of the assessee. However, it is not the case of the assessee that it is making such type of contributions to other schools also as a strategy to promote its brand, meaning thereby, the assessee firm has made the contribution to the impugned school only for the reason that the children/grand children of Mr. Meeraj Alim Manal has studied/studies in this school. There should not be any dispute that Mr. Meeraj has full control over the assessee firm. Looking at these facts and the circumstances surrounding the contribution, we are of the view that there is merit in the contentions of Ld DR that the impugned contribution has been made on account of personal considerations only and not on commercial considerations. Hence, we are of the view that the main objective of making contribution could not be related to the business activity carried on by the assessee.
Before us, the ld AR placed his reliance on the decision rendered by the Hon’ble Karnataka High Court in the case of Infosys Technologies Ltd. (supra). The facts available in the above said case are that the assessee before the Hon’ble High Court had incurred expenditure on installation of traffic signals at various parts of the city. It was mentioned that the purpose of incurring such expenditure was to secure free movement of employees so that they reach office in time. The Hon’ble High Court noticed that the absence of traffic signals or traffic police at important junctions would lead to congestion which is a regular phenomenon in the Bengaluru City. Accordingly, the Hon’ble High Court accepted the plea of the assessee that the expenditure incurred on erection of traffic signals would help the employees of the assessee to reach the office in time, which would in turn, facilitate the business of the assessee. Hence, it was held the said expenditure in installing traffic signal is allowable as deduction. It can be noticed that the assessee before Hon’ble Karnataka High Court could establish the commercial consideration in incurring expenses on the construction of traffic signals.
On the contrary, we have noticed that the main objective of making contribution to the school was on account of personal consideration & gesture of the ultimate owner of the assessee firm and no commercial consideration relating to the assessee herein was attached thereto. Accordingly, we are of the view that the AO was justified in treating the expenditure as not related to the business activity carried on by the assessee. Accordingly, we confirm the disallowance made by the AO.
FULL TEXT OF THE ITAT JUDGEMENT
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