Case Law Details
Kanhaiyalal Dudheria Vs JCIT (Karnataka High Court)
Assessee has incurred the expenditure towards construction of 169 houses for the villagers who had lost their home due to natural calamity. In order to cater to the needs of those destitute persons who had lost the roof over their head on account of natural calamity, assessee constructed the houses by expending the amount. However, assessing officer and the authorities have held that it was not incurred for the purpose of business. One glaring factor which cannot go unnoticed is, that a MOU came to be entered into by the appellant on 01.12.2009 with the Government of Karnataka, as already noticed herein above, whereunder assessee agreed to construct houses to rehabilitate the flood victims at the earliest possible time and for undertaking the said task, the appropriate Government provided the assessee the land free from encumbrances, upon which the construction of houses came to be commenced, executed and handed over within the time limit agreed to under the MOU. It was the term of the MOU that the donor (assessee) has joined hands with the Government of Karnataka to bring a total relief in the lives of the people who were worst affected by the unprecedented rain and floods and the said project was undisputedly a philanthropic project. In fact, it was agreed to between the parties that the donor himself would incur financial liability, maintain high standard of quality construction and would construct the houses as per the design offered by the Government of Karnataka, apart from ensuring quality of material used for the construction is of the superior quality. That apart, the work completion certificate has been issued by the Deputy Commissioner, Ballary and it is also certified that a sum of Rs.2,22,76,162/- has been expended by the assessee for construction of 169 Aasare houses at Gundigana village. Thus, it boils down to the fact that construction of houses has been carried out by the assessee as agreed to under the MOU.
In the facts on hand, it requires to be noticed that assessee is carrying of business of iron ore and also trading in iron ore. Thus, day in and day out the assessee would be approaching the appropriate Government and its authorities for grant of permits, licenses and as such the assessee in its wisdom and as prudent business decision has entered into MOU with the Government of Karnataka and incurred the expenditure towards construction of houses for the needy persons, not only as a social responsibility but also keeping in mind the goodwill and benefit it would yield in the long run in earning profit which is the ultimate object of conducting business and as such, expenditure incurred by the assessee would be in the realm of “business expenditure”. Hence, the orders passed by the authorities would not stand the test of law and is liable to be set aside.
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