A division bench of the Kolkata Appellate Tribunal, in Pioneer Himudyog P. Ltd. V. ACIT, held that payments in respect of “Donation & Subscription”, which are incidental to the business activities are allowable as expenditure under the provisions of the Income Tax Act, 1961, even in the absence of any receipt /80G certificate.
In the instant case, the Assessing Officer disallowed the claim for expenses under the head “Donation & Subscription” on ground that the same was not supported by any receipt or 80G certificate. Assesse claimed that the expenses incurred under the head “Donation & Subscription” comprised of subscription to different organizations for puja and social activities. According to them, the contribution to local religious festivals and social activities were necessary to run the business peacefully. Since the assessee company is engaged in the business of cold storage and to have good relationship with the local residents, the subscription is thus a business necessity.
The bench noticed the fact that the assessee had filed the evidence i.e. copy of ledger and evidence of donation and subscription before the AO which we note from pages 6 and 7 of the paper book. The ledger in respect to donation and subscription has been supported by evidence which is found placed from pages 8 to 28 of the paper book. Thus, we find that the assessee had in fact filed the bills of each expenditure before the AO.
Allowing the contentions of the assessee, the bench observed that “the subscription and donation was given by the assessee to various organizations to avoid confrontation and to smooth running of its business and, therefore, the expenses incurred by the assessee on subscription and donation of Rs.10,747/- is incidental to assessee’s business and are allowable as business expenditure. This view has been upheld by the Hon’ble Calcutta High Court in the case of CIT Vs. Bata India Ltd. reported in (1993) 201 ITR 884 (Cal) wherein it has been held at page 890 that contribution to local puja and festival committees or organizations to avoid confrontation and for smooth running of its business are allowable as business expenditure.”
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