Case Law Details
Assessee-company under the tripartite agreement, in particular, clause 4.1 was under no obligation whatsoever to contribute any money to its wholly owned subsidiary YRMPL. The facts as found also show that whatever was spent by the assessee-company by way of advertisements towards liability to advertisers such as O&M and HTA etc. was allowed. Furthermore, the facts also reveal that the total contributions received during the period by YRMPL was Rs 2.64 crores out of which it had admittedly spent Rs 2.19 crores and the balance Rs 44.44 lacs remained unspent. The point to be noted is that what the assessee-company in law could not have claimed directly, that is, by making a provision for advertising expenditure could it then be allowed to claim an amount as an expense merely on account of the fact that it had set up an intermediary in the form of a wholly owned subsidiary
In our opinion as rightly held by the authorities below, it cannot be so. For any expenditure to be permitted as deduction under Section 37(1) of the Act the twin conditions which are required to be fulfilled are that the expenditure in issue should not be of a capital nature, and that, it should have been expended wholly for the purposes of business. It is well-settled that the expression “for the purposes of business‟ in Section 37 of the Act has been held to mean an expenditure which is voluntary in nature and commercially expedient. In the present case the Tribunal has returned a finding of fact that the assessee-company has not been able to prove that the contributions to the subsidiary were made in the course of business or on account of commercial expediency. The principle laid down by the two judgments of the Supreme Court in our view would not apply to the facts obtaining in the present case.
THE HIGH COURT OF DELHI AT NEW DELHI
ITA No. 192/2009
YUM! Restaurants (India) Pvt. Ltd.…….Appellant
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