Law:

Section:

OCTOBER 15, 2003 Contribution towards export promotion fund is deductible under section 37(1) Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Whether participation in any trade, association or fund set-up for advancement of business, which is also carried on by assessee, is primarily for advancing assessee's own business and not for philanthropic purposes - Held, yes - Whether fact that by becoming member of such association or contributing to such fund, other participants or contributors are also benefited does not mean that assessee has not spent sum exclusively and wholly for his business - Held, yes - Whether mere fact that making of a donation for a charitable or public cause or in public interest results in Government giving patronage or benefit, can be no ground to deny assessee a deduction of that amount under section 37(1) - Held, yes - Assessee, manufacturer of textiles, made contribution towards export promotion fund which was set up to promote export of textiles and other products - Whether contribution to export promotion fund, by assessee in its business expediency for promoting its business interest, to augment export was wholly and exclusively for purpose of assessee's business and, hence, was allowable as deduction under section 37(1) - Held, yes Words and Phrases - Words 'wholly and exclusively' as occurring in section 37 of the Income-tax Act, 1961 FACTS The assessee was a manufacturer of textiles who made contribution towards export development fund and claimed deduction on account of the same. The Assessing Officer initially allowed the claim of the assessee by way of deduction as an expense incurred wholly and exclusively for the purpose of its business. However, exercising powers under section 263, the Commissioner opined that the said expenses could not be said to be wholly and exclusively incurred for the purpose of assessee's business because the objects of export promotion fund were all charitable and did not relate exclusively to the business of assessee. However, the Tribunal found that in order to augment its own export sales and give competitive edge to its marketing, the assessee had…

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