Hon'ble S.C. Chaurasia,J.
(Delivered by Hon'ble Devi Prasad Singh, J.)
1. The instant appeal under Section 260-A of the Income Tax Act, 1961 (in short the Act) has been preferred against the order dated 23.3.2007 passed by the Income Tax Appellate Tribunal, Lucknow (in short Tribunal). It relates to the assessment year 1996-97. The Tribunal declined to allow as deduction from the business income of the appellant under Section 37(1) of the Income Tax Act with regard to contribution of Rs. 1 lac and Rs. 10 lacs in pursuance to the instructions issued by the State Government for the purpose of books for P.C.S. coaching centre and construction of residential houses made by estate department for the senior officers deputed in various corporations, companies of the State Government, whose work is carried out by the appellant.
2. The appeal was admitted on 17.1.2008 on the following substantial questions of law.
"Admit on the following substantial question of law.
Whether on the facts and under the circumstances of the case, the contributions of Rs. 1 lac and Rs. 10 lacs made by the appellant ( a Govt. Company) under the instructions of the State Government on account of the commercial expediency are allowable as deduction under Section 37(1) of the Income Tax Act from the income of the appellant ?"
3. The assessing authority disallowed the deduction for the reasons that deduction of Rs. 1 lac for library with regard to PCS officer does not fall under business expediency. Before the assessing officer, defence taken by the appellant was that the contributions were made for the benefit of weaker sections, hence they should be allowed as deductions from business income. It is stated before the assessing authority that the appellant is carrying out welfare activity for weaker sections. Relevant portion of the order of assessing authority is re-produced as under:-
"Regarding the contribution to Library of P.C.S. coaching centre and the contribution to U.P. Government for construction of Flats at Lucknow amount to Rs. 1,00,000/- and Rs. 10,00,000/- respectively it has been pleased by the assessee that both the contributions were made for the benefit of weaker sections, therefore, they should be allowed as deductions from the business income as the assessee is carrying out welfare activities for the weaker sections. This submission of the assessee is not acceptable. Though, it is a fact that part income of the assessee derived from the projects related for the weaker sections is exempt as per directions of the Hon'ble High Court, yet the same principle of exemption if income pertaining to the weaker sections cannot be applied or hold good for the deductions on account of contribution for the welfare of weaker sections. It is a settled law that from the business income only the expenditure incurred for the business purposes are allowed deductions. Since the contribution for the library for P.C.S. coaching centre as well as contribution to U.P. Government for the construction of Flats has nothing to do for the purposes of the business of the assessee, hence the same shall not be allowed as a deduction from the business income, hence this claim of the assessee is rejected."
4. The appellate authority also took the view that the contributions have been made on the direction of the State Government but the same is not allowable because the appellant is a company incorporated under the Companies Act. The Government should have no say regarding utilization of fund. It appears that against the order of the appellate authority, the tribunal remanded the matter to reconsider the controversy on the ground that the contributions were allowable as deduction out of income derived from the work relating to Scheduled Castes and Schedule Tribes in view of section 14A of the Act. The order of the tribunal dated 11.5.2005 was set aside by this Court in Income Tax Appeal No. 167 of 2005 by judgment and order dated 23.12.2005 and the matter was remanded to the Tribunal to record reason and decide again in accordance to law in pursuance to the order passed by this Court. The appeal was re-heard and has been dismissed by the Tribunal by the impugned judgment and order dated 23.3.2007. The tribunal while dismissing the appeal noted that the contributions were not for the benefit of Scheduled Castes, Scheduled Tribes and other backward classes. The contribution is not hit by the provision contained in Section 14-A of the Act. The observation made by the Tribunal while dismissing the appeal is reproduced as under:-
"Therefore, this contribution was also not for the benefit of Scheduled Castes, Scheduled Tribes and other backward classes. Therefore, the assessee's plea that this contribution is not hit by provisions of section 14A is accepted. However, for the same reasoning regarding disallowability of Rs. 1 lakh contribution to P.C.S. Library, this contribution of Rs. 10 lakh is also not allowable being given only in pursuance of directions of State Government only without having regard to assessee's business. Merely because the contribution was for construction activity, it cannot be held that it was for business purpose of assessee because the main object of assessee's business has to be kept in mind. The expenditure which is merely connected with the business activities of assessee cannot be allowed unless it was also incidental to assessee's business activities. The contribution even if made under some obligation cannot qualify for deduction unless made wholly and exclusively for the business purposes. The ground is dismissed.
In the result, the appeal of the assessee is dismissed."
5. Since the aforesaid contribution was solely on the direction issued by the State Government, it shall be appropriate to reproduce the letter dated 31.7.1993 sent by the Principal Secretary, Lok Nirman and Estate Department to the Managing Director, Scheduled Castes and Scheduled Tribes, Weaker Sections Inhabitation Corporation.
fofHkUu [email protected]|eksa esa rSuke ofj"B vf/kdkfj;ksa ds fy, y[kuÅ esa jkT; lEifRr foHkkx }kjk vkoklh; lqfo/kk miyC/k djkus ds lEcU/k esa fnuakd 20 ebZ] 1993 dks eq[; lfpo dh v/;{krk esa gqbZ cSBd esa ;g fu.kZ; fy;k x;k Fkk fd fofHkUu lkoZtfud m|eksa }kjk vkoklksa ds fuekZ.kkFkZ jkT; lEifRr foHkkx dks foRrh; lgk;rk miyC/k djk;h tk;sA jkT; lEifRr foHkkx }kjk xkserh uxj ;kstuk Qst&2 ds vUrxZr miyC/k Hkwfe ij Js.kh 5 RkFkk 6 ds vkoklh; Hkouksa ds fuekZ.k dh ;kstuk 'kh?kz gh izkjEHk dh tk jgh gSA m0 iz0 jktdh; fuekZ.k }kjk fd;s x;s vkadyu ds vuqlkj fodkl dk;ksZ dks lfEefyr djrs gq, Js.kh 5 rFkk 6 ds ,d vkoklh; Hkou dh vuqekfur ykxr dze'k% 10-00 yk[k rFkk 14-12 yk[k :0 vkrh gSA fodkl dk;ksZ vkfn ds O;;ksa dks n`f"Vxr j[krs gq, rFkk vkids foHkkx dks jkT; lEifRr foHkkx }kjk miyC/k djk;s x;s vkoklh; Hkouks dh la[;k ds vuqlkj jkT; lEifRr foHkkx dks miyC/k djk;h tkus okyh /kujkf'k ds fooj.k laayXu gSA d`i;k eq>s vkils ;g vuqjks/k djus dh vis{kk dh xbZ gS fd [email protected]|eksa ds lEeq[k vafdr /kujkf'k iz'uxr vkoklksa ds fuekZ.kkFkZ jkT; lEifRr foHkkx dks fnukad 30-8-93 rd miyC/k djkus dh dk;Zokgh izkFkfedrk ij lqfu'fpr dh tk;s rkfd ;kstuk dks vfUre :i nsrs gq, bldk dk;kZUo;u lqfuf'pr fd;k tk ldsA Hkonh;
gLrk0 ¼jke d`".k½ Jh ,y0 ,y0 mik/;k;
izcU/k funs'kd] vuqlwfpr tkfr ,oa vuqlwfpr tutkfr fucZy oxZ vkokl fuxe ys[kjkt ekdsZV bfUnjk uxj] y[kuÅ l[a;k&[email protected]&93 rn fnuakd fiz; egksn;] mi;qZDr dh izfrfyfi vkidks lwpukFkZ ,oa vko';d dk;Zokgh gsrs izsf"krA Hkonh;
gLrk0 ¼jke d`".k½ Jh ,0 ds tSu] lfpo] lkoZtfud m|e C;wjks] m0 iz0 'kkluA A plain reading of the aforesaid letter reveals that the contribution of Rs. 10,00,000/- was for construction of residence or accommodation to be occupied by officers of the different Corporations/Nigam during their posting in the capital Lucknow.
6. The assessee is a government company under Section 617 of the Companies Act, 1956. According to its Memorandum of association under Article 125, all control of the Company's affairs vests in the Board. Under Chapter XVII, the Chairman is possessed with supervisory control and under Chapter XVIII, subject to the provisions of the Act and subject also to the control superintendence of the Board, the business and affairs of the Company shall be carried out and managed by the Managing Director for the time being of the Company. For convenience, Chapter XVI Articles 125 and 126 and XVII Articles 129, 130 and Chapter XVIII Article 131 are reproduced as under:-
"Article 125:-Subject to the provisions of the Act, the control of the Company's affairs shall be vested in the Board, who shall pay all expenses incurred in promoting and registering the Company, and shall be entitled to exercise all such powers and to do all such acts and things as the Company is authorised to exercise and do: Provided that the Board shall not exercise any power or do any act or thing which is directed or required, whether by Act or any other Act or by the memorandum of Association of the Company in general meeting ; Provided further that in exercising any such power or doing any such act or thing, the board shall be subject to the provisions contained in that behalf in the Act or any other Act or in the memorandum of Association of the Company or in these Articles, or in any regulations not inconsistent therewith duly made thereunder, including regulations made by the Company in general meeting but no regulation made by the Company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation had not been made :Provided also further that the board shall not transfer whether by way of sale, gift or mortgage or otherwise dispose of any immovable property of the Company without prior approval in writing of the Government of Uttar Pradesh.
Article 126- Without prejudice to the general powers conferred by Article 125 and by or under any other Article or the Provisions of the Act, the Board shall have the following specific powers:
(i) To carry out the objects of the Company and exercise the powers contained in clause III of the Memorandum of Association of the Company.
(ii) To have the superintendence, control and direction over Managers or Managing Directors, whole-time Director and all other officers of the Company.
(iii) To carry on business on the vacation of office by the managing Director or Manager of the Company, if any,
(iv) To delegate, subject to the provisions of section 292 of the Act, by a resolution passed at a meeting of the Board to any Committee of the Board and/or Managing Director of the Company.
(a) power to borrow moneys otherwise than on debentures;
(b) the power to invest the funds of the Company;
(c) the power to make loans;
(d) the power to carry out the objects of the Company as contained in clause III of the Memorandum of Association of the Company in respect of any particular unit owned, managed or run by the Company:
Provided that every resolution delegating power under clause (a) shall specify the total amount outstanding at any time up to which money can be borrowed by the delegate ; every resolution delegating the power referred to in clause (b) shall specify the total amount up to which the funds may be invested and the nature of investments, which may be made by the delegate ; and every resolution delegating the power in clause (c) shall specify the total amount up to which loans may be made by the delegate, the purpose for which the loans may be made and the maximum amount of loans which may be made for each purpose in individual cases :
Provided further that nothing in this Article shall be deemed to effect the right of the Company in general meeting to impose restrictions and conditions on the exercise by the Board of any of the powers specified above.
(v) To appoint at any time and from time to time by a power of attorney under seal, any person to be the Attorney of the Company for such purposes and with such powers, authorities and discretions (not exceeding those which are delegatable by the Board under the Act or these Articles) and for such period and subject to such conditions as the Board may from time to time think fit, with powers for such Attorney(s) to sub-delegate all or any of the powers, authorities and discretions vested in the Attorney(s) for the time being.
(vi) To acquire by lease, mortgage, purchase or exchange or otherwise any property, rights or privilege which the Company is authorised to acquire at such price and generally on such terms and conditions as the Board may think fit.
(vii) Subject to the provisions of section 293 of the Act, to sell, let, exchange, or otherwise dispose of absolutely or conditionally any property, rights or privileges and undertaking of the Company upon such terms and conditions and for such considerations as the Board may think fit.
(viii) To open any account or accounts with such Bank or Banks as the Board may select or appoint, to operate on such accounts, to make, sign, draw, accept, endorse or otherwise execute all cheques, promissory notes, drafts, hundies, bills of exchange, bills of lading, and other negotiable instruments, to make and give receipts, releases and other discharges for moneys payable to the Company and for the claims and demands of the Company; to make contracts and to execute deeds.
(ix) To appoint officers, clerks and servants for permanent, temporary or special service as the Board may from time to time think fit and to determine their powers and duties and to fix their salaries and emoluments and to require security in such instances and to such amount as the Board may think fit and to remove or suspend any such officers, clerks and servants :
Provided, however, that no post the basic pay of which, either exceed Rs. 2,500 p.m. or the maximum of the scale of which exceeds Rs. 2,500 p.m. shall be created and filled without the prior approval of the governor of Uttar Pradesh, but in case it is found useful to avail the services of retired Government servants of good competence and experience, this limit of Rs. 2,500 may be raised to Rs. 3,000 inclusive of pension :Provided further that appointment of any foreign national shall not be made without the prior approval of the Governor of Uttar Pradesh except the appointment of foreign technical personnel to any post without any ceiling of salary to such personnel and also when such appointment is in broad conformity with the policy of the Government.
(x) To sanction, pay and reimburse the officers and employees of the Company in respect of any expenses incurred by them on behalf of the Company.
(xi) To invest and deal with any of the moneys of the Company, to vary or release such investments subject to the provisions of section 49, 77, 292, 295, 370 and 372 of the Act.
(xii) To refer claims or demands, by or against the Company to arbitration.
(xiii) To institute, conduct, defend, compound or abandon any legal proceedings by or against the Company or its officers, or otherwise concerning the affairs of the Company and also to compound and allow time for payment or satisfaction of any debts due and of claims or demand by or against the Company and to appoint Solicitors, Advocates, Counsel and other legal practitioners or advisors for such purposes or for any other purposes and settle and pay their remuneration.
(xiv) To act on behalf of the Company in all matters to insolvency in which the Company is interested.
(xv) To pay and give gratuities, pensions and allowances to any person or persons including any director, to his widow, children or dependents, that may appear to the Board just or proper whether any such person, widow, children or other dependents have or have not a legal claim upon the Company any whether such person is still in the service of the Company or has any funds and pay premium for the purchase or provision of any such gratuity, pension or allowance.
(xvi) To establish, maintain, support and subscribe to any charitable or public object or any institution, society or club which may be for the benefit of the Company or its employees.
(xvii) To set aside portions of the profits of the Company to form a fund or funds, before recommending any dividends, for the objects mentioned above.
(xviii) To make and alter rules and regulations concerning the time and manner of payment of the contributions of the employees, and the Company respectively to any such fund and accrual, employment, suspension and forfeiture of the benefits of the said fund and the application and disposal thereof and otherwise in relation to the working and management of such fund as the Board may form time to time think fit.
(xix) To exercise the powers conferred by section 50 of the Act with respect to having an official seal for use abroad.
(xx) To exercise powers conferred on the Company by sections 157 and 158 of the act, with regard to keeping of branch and foreign registers.
(xxi) To sell any goods or articles manufactured or produced by the Company or to purchase, obtain or acquire machinery, stores, goods or materials for the purpose of the Company or to sell the same when no longer required for those purposes.
(xxii) To determine by resolution from time to time the person or persons by name of office who shall be entitled to do all or any of the acts mentioned in these articles, of the Company; and (xxiii) To accept the surrender of any share by way of compromise of any question as to the holder being properly registered in respect thereof subject to section 100 to 104 of the Companies Act, 1956.
Article 129. (a) Subject to the provisions of section 269 of the Act, the Board shall, form time to time with the concurrence of the Governor of Uttar Pradesh appoint any of the Directors to be the Chairman or the same Director as the Chairman-cum-Managing Director of the Company.
(b) Subject to the provisions of the Act and the superintendence, control and direction of the Board, the Chairman shall exercise such powers and carry out such duties as may be conferred or imposed upon him by a resolution or resolutions of the Board passed in that behalf.
Article 130. Subject to the provisions of section 255 of the Act, the Chairman of the Board shall not, while he continues to hold that office, be subject to retirement by rotation, and he shall not be reckoned as a Director for the purpose of determining the rotation of retirement or Directors or in fixing the number of Directors to retire, but he shall be subject to the same provisions as to removal, etc. as the other Directors appointed by the Governor of Uttar Pradesh and he shall, ipso facto, and immediately, cease to be the Chairman if he ceases to hold the office of Director from any cause.
Article 131:- Subject to the provisions of the Act and subject also to to the control and superintendence of the Board, the business and affairs of the Company shall be carried out and managed by the Managing Director for the time being of the Company."
In view of the aforesaid provision contained in the memorandum of association, all business of affairs should be dealt with by the Board and Managing Director and not by the Government. The power of the Government has been dealt with under Chapter XXXIV Article 202 which is reproduced as under:-
"Article 202:- (a)The Governor of Uttar Pradesh in keeping with the statutory requirements of the Companies Acts, may from time to time issue directives to the Company as to the exercise and performance of its functions in matters involving the security of the State or substantial public interest and such other directives as he may consider necessary in regard to the finances and the conduct of business and affairs of the Company and in the like manner may vary and annul any such directive(s). The Company shall give immediate effect to the directive(s) so issued.
(b) The Governor of Uttar Pradesh may call for such returns, accounts and other information with respect to the property and activities of the Company as may be required by him from time to time."
7. Thus, the State Government has got general supervisory power to formulate policy and issue directions with regard to the affairs of the Company keeping in view the statutory requirements under the Companies Act and Memorandum of Association to exercise and perform its functions in matters involving the security of the State or substantial public interest and such other directives as it may consider necessary in regard to the finances and the conduct of business and affairs of the Company. However, any direction issued by the State Government shall be subject to approval of the Board and its business expediency. The power of the Government is to issue direction in the form of policy decision to the assessee. But it does not seem to empower to issue direction to the assessee to make contribution for raising fund with regard to library for PCS officer or for the construction of residential accommodation for the use of officer of the different corporations including the assessee. Under the Rules of business, decision should have been processed by the Board of Director keeping in view the business expediency. It is for the managing director to discharge obligations with regard to business transaction subject to approval of Board under Article 125 readwith 129 and 131.
8. Apart from above, business expediency is a matter which falls within the domain of assessee and not under the Government. Whether expenditure or contribution of fund is necessary to meet out the business requirement or not, is a question, which should be adjudicated by the Company itself in appropriate manner provided by the Article of association framed under the Companies Act. Government cannot adjudicate a question or an issue with regard to business expediency by issuing direction. In case government is permitted to do so, it shall generate corruption in the system of governance of the assessee. Government may take policy decision with regard to government companies but may not issue direction with regard to investment of fund in a particular manner or in the form of contribution with applying mind to business expediency.
9. In (1996) 219 ITR 521 CIT vs. Bombay Dying and Manufacturing Co. Ltd. their Lordships of Supreme Court affirmed the contribution to State Housing Board for constructing tenements for companies workers in spite of the fact that the assessee-company acquired no ownership. The tribunal held that the expenditure was incurred merely with a view to carry on the business of the assessee-company more efficiently by having a contended labour force. The Bombay Dying and Manufacturing case (supra) is not applicable in the present case for the reasons that in that case, a decision was taken by the company itself to meet out the requirements of its workmen. It was company's board of director which applied its mind with regard to business expediency. It was not a decision taken mechanically in pursuance to the direction of the State Government or any other authority.
10. In (1990) 183 ITR 367 Commissioner of Income Tax vs. Mysore Cements Ltd. also the question cropped up whether a expenditure is of the nature of capital expenditure or revenue expenditure, the test of enduring nature applied to the purpose for which a particular expenditure is incurred, it is held that an expenditure attributable to a welfare scheme, resulting in a permanent benefit, under a given set of circumstances, may be a capital expenditure, while under another set of circumstances where the welfare scheme is of a limited duration, it will be a revenue expenditure. Deduction was claimed under the agreement with the Central Government for construction of workers' quarter which was allowed by the tribunal and the High Court. The facts and circumstances are entirely different from the present one and hence not applicable.
11. In (1972) 86 ITR 11 (SC) Aluminium Corporation of India Ltd. vs. Commissioner of Income Tax, West Benga, the question cropped up with regard to payment of commission in terms of agreement as well as the significance of the deduction given in the earlier assessment years and the Supreme Court arrived to the conclusion that the commission paid was extended wholly and exclusively for the purpose of assessee's business Thus, the commission paid was in terms of agreement between the company and selling agent wholly or exclusively for the purpose of assessee's business. In the present case, there is nothing like agreement.
12. Learned counsel for the appellant has relied upon the cases reported in (2006) 280 ITR 519 (Cal) Ravi Marketing P. Ltd. vs. Commissioner of Income Tax, (2004) 266 ITR 170(Mad) C.I.T. vs. Madras Refineries Ltd., (1997) 223 ITR 101 Sri Venkata Satyanarayana Rice Mill Contractors Co. vs. Commissioner of Income Tax, (1987) 166 ITR 836 (Kar) Mysore Kirloskar Ltd. vs. Commissioner of Income Tax, (1996) 219 ITR 203 (Mad) Commissioner of Income Tax vs. Cheran Transport Corporation Ltd., (204) 268 ITR 507 (Mad) Commissioner of Income Tax vs. Kattabomman Transport Corporation Ltd., (1983) 142 ITR 185 Income Tax Appellate Tribunal vs. B. Hill and Co. (P) Ltd., (1979) 118 ITR 261 Sassoon J. David And Co. P. Ltd. vs. Commissioner of Income Tax, Bombay, (1968) 69 ITR 783 (SC) J.R. Patel & Sons (P) Ltd. vs. Commr. Of Income Tax, (1979) 118 ITR 606 (orissa) Commissioner of Income Tax vs. Industry and Commerce Enterprises (P) Ltd, (1977) 108 ITR 358 Shahzada Nand And Sons vs. Commissioner of Income Tax, Patiala.
In all the aforesaid cases, broadly the agreement was entered into or business expenditure was wholly or exclusively for the business purpose and the decision was taken by the assessee/company itself, in pursuance to the agreement or otherwise. None of the cases reveals that the assessee followed the direction of the government or any other authority mechanically without appreciating the business expediency at its end. The assessee which is a company though bound by the policy decision of the government, but so far as business expediency is concerned, no decision has been taken by the assessee itself, hence conclusive finding recorded by the assessing authority or the three Forums below that expenditure in question is not a business expenditure, does not seem to suffer from any impropriety or illegality.
13. Business expediency is a wide term and includes all those decisions or actions which are taken by the company itself wholly or exclusively for the business purpose. The decision should be taken by the company itself and not by the outsider.
14. The Explanation 37(1) of the Act provides that any expenditure incurred by an assessee, which is prohibited by law shall not be deemed to be business expenditure. For convenience, Section 37 (1) of the Act is reproduced as under:-
"37(1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purpose of the business or profession shall not be in computing the income chargeable under the head "Profits and gains of business or profession".
[Explanation- For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure".
In view of aforesaid facts and circumstances and provision contained in Section 37 (1) of the Act, the decision with regard to business expenditure must be taken by the assessee itself and that too for the purpose of business or profession in conformity with the law.
15. Under the Companies Act or Income Tax Act, no privilege has been conferred on the government except exemption granted in pursuance to the provision contained therein. So far as running of business by the government companies incorporated under Section 617 of the Act is concerned, it must be done by the Company itself and not by the government. Government may take policy decision but does not seem to have got right to interfere with the routine functioning of the government companies with regard to business expediency.
16. In Srong & Co of Romsey Ltd. vs. Woodifield (1906) 5 TC 215 (HL), the taxpayer, a brewery company, owing an inn, was compelled to pay damages by a court of law to a customer who, while sleeping in the inn, suffered injury caused by the falling of a chimney upon him. It was held by the House of Lords that the damages were paid by the taxpayer in his capacity as a house owner and not as a trader.
17. In (1957) 32 ITR 138, 151 (Mad) Senthikumara Nadar & Sons (MSP) vs. CIT, it was held by the Madras High Court that the damages paid by a trader to a rival in his trade for malicious libel of the latter has been held to fall upon the trader in his character of a caluminator. So also, payment of a penalty imposed upon a trader for his having committed an offence in the carrying on of his business would not have been incurred by him in his capacity as a trader. All such expenditure as aforementioned would not be allowable.
18. In view of above, keeping in view the mandate of section 37 unless conscious decision is taken by the assessee itself in pursuance to the power conferred by statutory provisions, rules and regulations and Memorandum of association or in terms of policy decision of the government with regard to expenditure incurred in the capacity of a trader for business expediency, the expenditure made like in the present case on the direction of the government shall not be business expenditure and deduction shall not be allowable. Diversion of fund by the government to meet out the requirement of a government departments seems to be not permissible.
19. In the system of mixed economy, the government establishes companies under Section 617 of the Companies Act as a welfare activity. The companies so established engage themselves under the respective memorandums in business or trade. Subject to statutory provision under the Act or Memorandum of association, no privilege can be accorded to such companies to convert themselves as a personal assets for the authorities of the Government. They have to follow the business norms and rules of the trade. Their decision must be within the four corner of law like other businessmen subject to latitude given by the statute. As observed (supra), no decision was taken by the assessee itself. The order was followed mechanically with regard to contribution. It was not a policy decision to secure business interest of the assessee but the decision to meet out the requirement of 'estate department'. No decision was taken by the Board of assessee in terms of letter of government (supra) that it requires houses for its officers at Lucknow to meet out the business expediency. In the absence of any decision by the Board or the Managing Director, the expenditure incurred seems to be not business expenditure and no deduction is allowable.
20.In view of above, appeal fails. Impugned order of Tribunal affirmed and question answered against the assessee appellant and in favour of revenue.
(Hon'ble S.C.Chaurasia, J.) (Hon'ble Devi Prasad Singh, J.) Order Date :- 23.03.2012 Rizvi