Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - (Corresponding to section 10(2)(xv) of the Indian Income-tax Act, 1922) - Business expenditure - Allowability of - Assessment years 1957-58 and 1958-59 - Assessee incurred certain expenditure on pooja and on food and, entertainment of labourers working in assessee's factory, and, also other labourers working under outsiders on last day of working season - Assessee claimed that expenses were incurred to induce labourers to continue work with assessee-company in next season and as such expenses were allowable as labour welfare expenses - Admittedly, assessee-company had paid properly all wages due to labourers as well as bonus due to them and expenditure in question was incurred in addition to such payment - Whether since assessee-company had paid properly all wages due to such labourers, it could not be said that they would not have attended to work in following season, if such annual dinners had not been given to them - Held, yes - Whether, therefore, expenditure in question could not be allowed as deduction under section 10(2)(xv) of 1922 Act, - Held, yes FACTS The assessee incurred expenditure over food and entertainment of labourers, working in the assessee's own sugar factory and farm and, also other who were working under outside canegrowers and those expenses were incurred on the last day of the working season, on which day Satyanarayan Mahapooja was celebrated. The assessee-company claimed that the expenditure was incurred to induce the labourers to continue the work in the assessee-company in the next season and as such the expenditure was in the nature of the labour welfare expenses. The Income-tax Officer as well as the AAC rejected the claim on the ground that the expenses could not be regarded as expenditure having been incurred wholly or exclusively for the business of the company under section 10(2)(xv) of the 1922 Act, and, that the same was not dictated by any business consideration. The Tribunal agreed with the AAC. On reference : HELD The expenses could not be regarded as expenditure having been incurred wholly or exclusively for the business purposes of the assessee-company. In the first place,…

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