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Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1962-63 - Whether where there was no link or nexus between donation made by assessee to political party and business of assessee, donation could not be allowed as business expenditure under section 37(1) - Held, yes FACTS The assessee, carrying on business in bus transport, claimed deduction of certain amount paid by it to political party as donation. The ITO disallowed the claim on the ground that the expenditure was not incidental to the assessee's business. The AAC and the Tribunal confirmed the disallowance. On reference : HELD There was absolutely no material to show what was the advantage or the benefit which the assessee intended to obtain by making the donation and for what purpose the assessee made the donation with reference to its business interests. Apart from the bald claim that the donation made to a political party could not be disallowed, the assessee had not established that the donation made by it to the political party in question constituted an item of expenditure laid out solely and exclusively for the purpose of its business. In other words, the link or the nexus between the donation and the business of the assessee not having been established, the assessee was not entitled to claim the amount in question as an allowance or deduction under section 37(1). Note : The case was decided against the assessee. CASES REFERRED TO Ambala Bus Syndicate (P.) Ltd. v. CIT [1974] 95 ITR 383 (Punj.), CIT v. Elphistone Spinning & Weaving Mills Co. Ltd. [1975] 100 ITR 139 (Bom.), CIT v. Malayalam Plantations Ltd. [1964] 53 ITR 140 (SC),Addl. CIT v. Badrinarayan Shrinarayan Akodiya [1975] 101 ITR 817 (MP), Indian Iron & Steel Co. Ltd.,In re [1957] 27 Comp. Cas. 361 (Cal.), Indian Steel & Wire Products Ltd. v. CIT [1968] 69 ITR 379 (Cal.),J.K. Cotton Spg. & Wvg. Mills Co. Ltd. v. CIT [1966] 62 ITR 813 (All.) and Orissa Cement Ltd. v. CIT[1969] 73 ITR 14 (Delhi). JUDGMENT Ismail, J.-The question referred to this court by the Income-tax Appellate Tribunal, Madras Bench, under section 256(1) of the Income-tax Act, 1961, for its opinion, relates to…

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