Donation to Local Clubs/Bodies during Festival/Sports to have Good Relation with them is allowable Expenditure: ITAT allows 50% Deduction [Read Order]

The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) has held that the donation made to the local clubs/bodies during festival/sports to have good relations with them for the smooth running of the business shall be allowable at the rate of 50% under the relevant provisions of the Income Tax Act, 1961.

Earlier, the department rejected the claim made by the assessee for the payments made towards these expenses. On first appeal, the CIT(A) has given partial relief by allowing 50% of expenditure claimed as donation.

After considering arguments from both the sides, the Tribunal bench comprising Judicial Member Mr. Mr. Aby T Varkey and Accountant Member Mr. Rajesh Kumar found that the assessee has made a claim of deduction regarding donation made to the tune of Rs. 27,27,000/- but the AO disallowed the claim.

Allowing the claim, the bench quoted a similar issue i.e. donation/ expenditure claimed by an assessee in respect of donation given to the local clubs during Durga Puja etc. the Hon’ble Calcutta High Court in CIT vs. Bata India Ltd. in 201 ITR 884 (Cal) held that the same was an allowable expenses.

“However we note that in the present case in hand, since the assessee could not submit materials/evidence before the authorities below in respect of its claim of donation given to the local clubs, we direct the assessee to submit materials to substantiate the fact of donation it gave to local clubs/bodies during festival/sports in order to have good relations with them for smooth running of its business. And if the assessee produce evidence/material as directed by us, the AO may verify the same and allow balance 50% of the expenses which are shown to have been made by the assessee to the local clubs for smooth functioning of its business of extraction of coal and its transportation. With the aforesaid direction this issue is set aside back to the file of AO and the AO is directed to pass a fresh order on this issue after verification as observed supra,” the bench said.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.