Donation to Mosque providing Free Lunch to Employees cannot be allowed as Business Expenditure: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the amount of donation paid to the Mosque providing free lunch to the employees cannot be treated as business expenditure under section 37 of the Income Tax Act, 1961.

the assessee was running a proprietorship business named and styled as M/s ‘M.D. Nooruddin Zariwala’ and was engaged in the business of Zari (embroidery) and hand embroidery. During the relevant assessment year, the Assessing Officer disallowed Rs.1,00,000/- paid to the mosque for providing free lunch to the assessee’s employees.

The department contended that no bill has been raised by the mosque on the assessee and it was the assessee who has voluntarily paid a donation to the mosque and which can only be considered u/s 80G of the Act and not in terms of section 37(1) of the Act.

A bench of Shri Om Prakash Kant (Accountant Member) and Shri Sandeep Singh Karhail (Judicial Member) observed that “It is evident from the letter of mosque produced by the assessee that the free lunch used to be provided by the mosque labourers/artisan etc. in that area. The facility of the assessee happened to be in the vicinity of the mosque so those employees were availing free lunch provided irrespective of whether they were employed in the facility of the assessee or not. By way of making payment of Rs.1,00,000/- by the assessee to the mosque, it could not be established that the payment was a quid pro quo for the free lunch facility extended to the labourers/Karagirs of the assessee. The mosque was not under the control of the assessee and free lunch was provided to the other persons and not exclusively to the labourers of the assessee. Therefore, in such circumstances, it could not be treated that the payment made by the assessee was wholly and exclusively for the purpose of the business of the assessee and accordingly the action of the Ld. CIT(A) in disallowing the ground is upheld.”

To Read the full text of the Order CLICK HERE

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