Payment to Federation of Indian Mineral Industries is Deductible Business Expenditure since Business Interest was involved: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Bangalore bench has held that the payment made to the federation of Indian Mineral Industries is deductible from the business income since such a payment was made to protect the business interests of the assessee.

The assessee, M/s Zeenath Transport Company has made a payment of Rs.10 lakhs and 20 lakhs towards membership fee and legal fund respectively to Federation of Indian Mineral Industries. The Federation of Indian Mineral Industries is an association of industries i.e engaged in the business of minerals and is a nonprofit corporate body registered under the Companies Act 1956 to promote the interest of the mining and mineral processing, metal making, and other mineral-based industries and to attend to the problems faced by them in lease grants, tenure, production, taxation, trade export labor, etc.

While filing its return for the relevant assessment year, the assessee claimed deduction of the amount paid to FIMI. However, the Assessing Officer restricted the claim to 50% of the expenditure incurred on account of legal fees under section 80G of the Act.

On the second appeal filed by the assessee, the Tribunal bench comprising Judicial Member Beena Pillai and Accountant Member Chandra Poojari held that the said amount is deductible under the Income Tax law.

“The legal payment incurred by the assessee is towards representing case filed of FIMI against which TDS has been deducted as observed by the Ld.CIT(A). It is also an admitted fact that this organization has been formed to safeguard the rights of mine owners and to protect the interests of industries, present in this spear of mineral exploration and production. In our opinion, the said amount does not qualify to be considered a donation. It is an expenditure incurred to safeguard the assessee’s business interests and has to be considered under the provisions of sec.37(1) of the Act. In our view the decision of a coordinate bench of this Tribunal reproduced hereinabove squarely covers the issue under consideration,” the bench said.

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