Law: Income Tax Act, 1961

Section: 256,37,80

Income-tax---Reference---Capital or Revenue expenditure---Donation to cricket club---Tribunal right in holding that contribution to cricket club cannot be treated as capital in nature and directing Assessing Officer to allow it as Revenue expenditure --No question of law arose---Indian Income Tax Act, 1961, Ss. 37, 80G & 256. The assessee which had given a sum of Rs.2,50,000 as donation to the Gujarat Cricket Club claimed 100 per cent. deduction on the ground that the expenditure was in the nature of staff welfare activity. The assessee claimed the expenditure on the ground of commercial expediency and stated that the amount had been spent in order to facilitate the carrying on of the business indirectly, by satisfying the needs of executives and staff. The Assessing Officer held that a benefit of enduring nature accrued to the assessee-company. On appeal, the Commissioner (Appeals) was not satisfied with regard to the finding of fact recorded by the Assessing Officer and held that out of 12 seats in the event of any event or game, the assessee could reserve six seats for directors, members of their family or their distinguished guests and directed the Assessing Officer to verify the claim and allow deduction under section 80G of the Income Tax Act, 1961. On further appeal, the Tribunal held that in the absence of any. evidence that seats were reserved for the directors or their family members only, merely on the basis of apprehension that they could be used only by them, the Department could not disallow the claim The Tribunal further held that an expenditure could be considered as capital in nature only when any capital asset had been created by the assessee by the expenditure. The Tribunal held that the assessee had no proprietary right on the seats which had been promised by the association to be allotted at the time of any event or game and, therefore, that the capital structure of the company had not been increased by the said contribution and hence the donation could not be treated as, capital expenditure. On an application to direct reference: Held, on the facts, that the Tribunal was right in holding that the amount of Rs.2,50,000 contributed by…

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