Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1967-68 - Assessee met a part of cost of construction of a building on land belonging to Employees' Housing Co-operative Society - On completion of building it was handed over to Municipality to be run as a school for children of assessee's employees - Amount spent by assessee was transferred to labour welfare account during close of accounting year - Whether since school building w as not intended to be an asset of assessee, but it was intended to be part of a welfare scheme for educational facilities of children of its employees, conclusion of authorities below that expenditure was in nature of capital expenditure was erroneous and amount was allowable as revenue expenditure - Held, yes Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1967-68 - Assessee had advanced between 1959 and 1963 certain amount to some of its employees for construction of houses - Amount was originally debited as 'Staff house construction advance' but at close of relevant accounting year amount was written off by creating a charge to 'Staff Welfare account' - Amount in question was not spent in relevant accounting year and write off was not in relation to trading transaction - Whether on facts, amount in question was not deductible as business expenditure - Held, yes FACTS On the land belonging to Employees' Housing Co-operative Society a building was constructed which was handed over to the Municipality to be run as a school for the benefit of the children of employees of the assessee. Part of expenditure on construction was met by the assessee and the balance was met by the said society. Amount spent by the assessee, was transferred to 'Labour Welfare Account' by the assessee during the close of the year relevant assessment year and was claimed as revenue expenditure. The ITO, treated the amount as capital expenditure. The assessee also made certain advances to about forty-nine employees for construction of houses through a co-operative society during 1959 to 1963, and they were debited in the account of the assessee as 'Staff house…

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