Law: Income Tax Act, 1961

Section: 37,80-G,256

Income-tax----Business expenditure---Provisions of S.37 are general and those of S.80-G, Indian Income Tax Act, 1961 specific---Amount deductible under S.80-G cannot be claimed as deduction under S.37 of Indian Income Tax Act, 1961---Assessee, a businessman, making donations and claiming increased turnover in business--¬No nexus established between donations made and business of assessee--¬Expenditure not allowable deduction under S.37 (1) Indian Income Tax Act, 1961---Fifty per cent of expenditure allowable as deduction under S.80-G--¬Indian Income Tax Act, 1961, Ss.37(1) & 80-G. The provisions of section 37 of the Income Tax Act, 1961, are general in nature and the, provisions of section 80-G are specific. Applying the maxim generalia specialibus non derogant if an amount is liable for deduction under section 80-G, it cannot be claimed under the general provisions of section 37(1) of the Act. If a particular amount of expenditure falls within the category of donation, then the deduction as provided under section 80-G alone is applicable. For the purpose of claiming the benefit under section 37(1), it has to be proved that the expenditure was wholly and exclusively for the purpose of business. There may be a circumstance where an expenditure falls within the category of "wholly and exclusively for the purpose of business or profession" and also under section 80-G. In that case the option remains with the assessee to claim the expenditure under either of the aforesaid sections. But where there is no direct nexus to prove that it is wholly and exclusively for the purpose of business or profession, then it cannot be claimed under section 37(1). A future hope for advantage is in the nature of an expectation. The requirement of the section is that there must be a business in existence and the expenditure is wholly and exclusively for the purpose of business. The assessee, who claimed to be a prominent businessman of a locality, made donations to various institutions like the Rotary Club, a sewa mandal, a trust and to the Chief Ministers Drought and Flood Relief Fund and claimed deduction of the same as business expenditure under section 37 of the Act as, by…

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