Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1992-93 - Assessee-company provided funds for establishing drinking water facilities to residents in vicinity of its business and also provided aid to school run for benefit of children of those local residents - Assessing Officer declined to allow that expenditure on ground that it was not an item of expenditure incurred by assessee for earning income earned by it in that year - Whether since winning goodwill of people of locality, helps in boosting business in many ways, entire amount claimed should be allowed as a deduction - Held, yes - Whether monies spent in question could not be regarded as being wholly outside ambit of business concerns of assessee, especially where undertaking owned by assessee was one which was to some extent a polluting industry - Held, yes - Whether, therefore, Tribunal was right in allowing deduction of entire expenditure as business expenditure - Held, yes Mrs. Pushya Sitharaman for the Appellant. P.P.S. Janardhana Raja and Subbaraya Iyer for the Respondent. JUDGMENT R. Jayasimha Babu, J. - The assessment year is 1992-93. The assessee, Madras Refineries Limited, is a public limited company. As a good corporate citizen and as a measure of gaining goodwill of the people living in and around its industry which is to some extent a polluting industry, it provided funds for establishing drinking water facilities to the residents in the vicinity of the refinery and also provided aid to the school run for the benefit of the children of those local residents. It incurred an expenditure of Rs. 15,32,000 for that purpose. 2. The Assessing Officer declined to allow that expenditure on the ground that it was not an item of expenditure incurred by the assessee for earning the income earned by it in that year. 3. On appeal, the Commissioner held that the assessee may have been obliged to incur that expenditure for the good of and in the interest of the community in and around its place of business, and that activity was one…

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