Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of Expenditure incurred by assessee association of IAS officers on defending one member in proceedings for contempt of Court was not allowable where object of assessee was to secure equitable service conditions for its members [In favour of revenue] The assessee was a registered society. The members of the respondent society were IAS officers. The main object of the association was to promote the interests of its members to secure equitable service conditions for its members and to take up their grievances. The assessee claimed deduction of Rs. 53,826 said to have been incurred by the assessee as legal expenses to defend the case of one of its members before the Supreme Court who was involved in contempt proceedings for the disobedience of the orders of the Court. Held that, it was beyond the scope of the assessee to incur such expenditure contrary to the memorandum of association and rules and regulations of the respondent-association. Under the guise to take up grievance of a member, the respondent society was not expected to spend amount to defend a person who had violated the orders of the Court. Therefore, it could not be considered as legal expenses which could be incurred by the assessee to promote the objects of the association. CASES REFERRED TO CIT v. BEL Employees Death Relief Fund & Service Benefit Fund Association [1997] 225 ITR 270 (Kar.) (para 3) and CIT v. I.T.I. Employees Death & Superannuation Relief Fund [1998] 234 ITR 308 (Kar.) (para 3). K. V. Aravind for the Appellant. S. Parthasarathi for the Respondent. JUDGMENT K.L. Manjunath, J. - The Revenue has come up in this appeal being aggrieved by the order passed by the Income-tax Appellate Tribunal, Bangalore in I. T. A. No. 650/Bang/2001 dated November 19, 2004. 2. The assessee is a registered society registered under the provisions of the Karnataka Societies Registration Act, 1960. Members of the respondent-society are IAS officers. An application filed under section 12A of the Income-tax Act to grant exemption in respect of voluntary contributions received by it was rejected by the Commissioner of…

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