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Advocate Akhilesh Kumar Sah

Akhilesh Kumar SahThe Puja Expenses incurred by an assessee can be allowed as an expenditure, depending on the facts & circumstances of the case as per section 37(1) of the Income Tax Act, 1961 (for short ‘the Act’).

Recently, in Deloitte Haskins & Sells vs. ACIT (2017) 155 TR (A) 609 (Mum ‘L’- Trib), it had been observed that on the facts of the case that “Satyanarayan puja” was done at the business premises for the larger interest of the professional and employees of the assessee firm. It was more in the nature of goodwill gesture and keeping good relationship and environment amongst the colleagues. The Mumbai ITAT held that if any expenditure which is incurred for the general benefit of the professionals and employees, the same cannot be held to be incurred for non-business purposes.

The Gujarat High Court in Commercial Ahmedabad Mills Co. Ltd. vs. CIT (1993) 114 Taxation 165; 204 ITR 505 (Guj.) has taken the view that it is for the assessee to decide as to what is in the interest of its business and, therefore, if the nexus between the expenditure and business of the assessee or welfare of a class of his workers is established, then it can be said that the expenditure incurred by him for the purpose of his business. In the above case temple in the mill premises was maintained by the assessee. The assessee claimed deduction of expenditure incurred by way of salary to a pujari who was employed in the temple for performing puja. The Court held that the expenditure was neither personal in nature nor purely of religious nature but was incurred for the purpose of and in the interests of the business of the assessee and was deductible as business expenditure. The Court found that there was nothing to show that the said temple was maintained with the help of a pujari for personal benefit of any person and the temple appeared to have been maintained by the assessee mill company for the general benefit of its employees. However, it is to be noted that where it is contended that the pujari was employed for invoking the blessings of Gods and Goddesses for the benefit of the assessee and the expenses are incurred by the assessee because of his belief in supernatural blessings, such expenses can’t be regarded as expenses incurred for the purposed of carrying on business and spent by assessee as a businessman (CIT vs. Bhannamal & Co. P. Ltd. (1971) 82 ITR 138 (Del.)

If an assessee proves that the building of the temple is owned by him and the same is for the welfare of the employee and that on account of commercial expediency also the claim of depreciation will be allowed.

In CIT vs. Associated Flour Mills Pvt. Ltd. (1996) 133 Taxation 145 (Gau.), the assessee claimed depreciation on temple building constructed in business premises. The Court confirmed the order of the Tribunal by holding that depreciation was rightly allowed. While delivering the judgment the Court  relied on a decision of Punjab & Haryana High Court reported in Atlas Cycle Industries Ltd. vs. CIT (1982) 134 ITR 458 (P&H). In the above case the assessee company, which derived its income from the manufacture and sale of cycles and spare parts, constructed a temple primarily and directly for the benefit of its employees inside the factory premises and claimed before the ITO that the temple was a business asset entitled to depreciation under section 32 of the Act. The ITO rejected the claim of the assessee. On appeal the AAC (now referred to as CIT (Appeals) held that the depreciation claimed on the temple building was not allowable as it was not a business asset and that the expenditure incurred for the maintenance for the temple was not an admissible deduction. On further, appeal, the Tribunal affirmed the order of AAC. Then on a reference the P&H High Court held that since the temple had been erected for the purpose of the labor and this was a measure to keep them happy. it was a business asset and depreciation was allowable thereon under section 32 and accordingly it held temple maintenance expenditure as the expenditure laid out or expended wholly and exclusively for the purpose of the assessee’s business and was an admissible deduction under section 37. The Court while delivering the judgment observed at page 465 :

“It cannot be disputed that a satisfied worker is a great asset to the business and the satisfaction of the worker not only depends upon the packet which he receives at the end of the month but also on the other amenities provided to him by his employer…….if the workers can overcome their boredom by playing cards in a club, we see no reason for holding that they cannot achieve the same result by singing hymns in a temple. Besides, we see no reason to place any curbs on the discretion of the assessee to provide the type of recreation, which according to it, would best advance the interests of its business. What we have to see is whether the recreation provided, even if it be in the nature of religious activity, has a direct nexus with the welfare of a class of the workers engaged by the assessee or not. If the answer to this proposition is in the affirmative, it is wholly immaterial if the recreation provided is directly or indirectly connected with the religious tenets of a section of the society.”

In the same (above) assessee’s case Atlas Cycle Industries Ltd. vs. CIT (1990) Taxation 96(3) – 12; 181 ITR 18 (P&H), pertaining to another financial year, the P&H High Court again relying on its own decision (cited as above (1982) 134 ITR 459, held that depreciation under section 32(1)(ii) of the Act was admissible in respect of the building of Ram Mandir (temple) and the amount spent on the maintenance of temple was deductible under section 37(1) of the Act.

In respect of pooja expenses, here a direct circular in Diwali & customary pooja expenses may be taken. According to (that) Central Board of Direct Taxes (CBDT) circular No. 17 of 1943 dt. 6-5-43 & its further letter dated 30-10-1968 in respect of the above circular, expenses incurred on the occasion of Diwali and Mahurat (i.e. the auspicious day of starting new accounts) are in the nature of business expenditure and no monetary limit has been laid down (earlier limit of Rs. 200 in the circular has been removed by above CBDT letter dt.  30-10-1968). Relying on the above circular & letter the Allahabad High Court in Brijraman Das & Sons vs. CIT (1983) 142 ITR 509 allowed under section 37(1) of the Act the expenditure incurred by the assessee on the Ganeshji ki puja.

Onus of proof:

The Supreme Court has held in CIT vs. Calcutta Agency Ltd. (1951) 19 ITR 191 (SC) that if an amount is contended to be an expenditure falling under section 10(2)(xv) of the IT Act 1922(corresponding to section 37(1)of the Act), the burden of proving the necessary facts in that connection is on the assessee.

Bottom line:

The expenditure incurred in the maintenance/ puja of temple which is wholly and exclusively connectable with the purposes of the business and is not in the nature of capital expenditure or personal expenses, the same can be claimed as deduction under section 37(1) of the Act.

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(Republished with Amendments)

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April 2024