Law:

Section:

Section 37(1), read with section 80G, of the Income-tax Act, 1961 - business expenditure - Allowability of - Whether if contribution by an assessee is in form of donations of category specified under section 80G, but if it could also be termed as an expenditure of category falling under section 37(1), then right of assessee to claim whole of it as allowance under section 37(1) can be denied - Held, no Facts The assessee-company had constituted a trust with an object to provide education for the children of its employees and ex-employees. The place where the assessee had established its industry was not a developed city and, therefore, to attract the technocrats and men of managerial skill, the trust was constituted to provide facilities for them and their children's education. In furtherance of the aforesaid object, the trust had established a school at the aforesaid place. To that school the children of the employees and ex-employees of the assessee and also from public were admitted. In the accounting year relevant to the assessment year in question the assessee had donated certain amount to the said trust and claimed 61 per cent out of it as business expenditure under section 37(1) on the ground that 61 per cent of the school children were the children of the employees and ex-employees of the assessee The ITO disallowed the assessee's claim and allowed 50 per cent of the aforesaid donation as deduction under section 80G. On appeal, the Tribunal also upheld the order of the ITO on two grounds; first that section 80G was applicable and not section 37(1) in respect of the donation made by the assessee and second that since the school run by the trust was also open to the children of the persons who were not exclusively the employees or ex-employees of the assessee, the assessee could not ask for the said deduction. On reference: Held The basic requirements for invoking sections 37(1) and 80G are quite different, but nonetheless, the two sections are not mutually exclusive. If the contribution by an assessee is in the form of donation of the category specified under section 80C, but if it could also be termed as an expenditure of the category falling under…

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