RAJESH BALIA, J. - (1.) HEARD learned counsel for the appellant.
(2.) THOUGH three questions have been suggested as substantial questions of law arising from the order of Tribunal, Jodhpur Bench, Jodhpur, dt. 14th Oct., 2003, the appeal relates to deduction of one single item by way of amount laid wholly and exclusively for the purpose of assessee's business. Assessee has donated a bus valuing Rs. 5,12,000 to Vivekanand Kendriya Vidhyalaya, Hurda, where the children of employees of the assessee -company are receiving education. The amount spent for purchasing the bus had been debited to the Workman and Staff Welfare Account and it was claimed as expenses incurred wholly and exclusively for the purpose of assessee's business as deduction under Section 37(1) of the IT Act, 1961 as a revenue expenditure. The AO was of the view that since the school is not owned by the company nor it runs under direct control of the assessee -company, and the entry is also not restricted to the wards of workmen and staff members of the company, it is nothing but donation and hence not an admissible expenditure. Since donation is in kind and not in cash, deduction under Section 80G is also not admissible to the assessee. Consequently, the expenditure of Rs. 5,12,000 being donation in kind was disallowed and added to the total income of the assessee. The CIT(A) after referring to the purpose disclosed by the assessee for which the bus was given to the school, relying on the earlier decision of the Tribunal in connection with allowability of the expenses incurred for construction of Maneklal Verma Rajkiya Institute building by the assessee for the asst. yr. 1986 -87 and the decision of this Court in : [2001]249ITR104(Cal) held that the expenses incurred were wholly and exclusively for the business of assessee for the benefits to be derived from such expenses incurred for the benefit and welfare of its employees and, therefore, is required to be allowed as the expenses wholly and exclusively incurred or laid down for the purpose of assessee's business. Consequently, the deduction claimed was allowed as revenue business expenses. On appeal, the order of CIT(A) was affirmed by the Tribunal by following the earlier decision of this Court and decisions of other High Courts. The earlier decision of this Court referred to was about the money spent on construction of Maneklal Verma Rajkiya Institute. The question of claim to deduction of any amount spent by the assessee as revenue expenditure incurred or laid wholly and exclusively for the purpose of assessee's business is not to be decided in the light that the assessee must be entitled to whole benefit accruing from such expenses and nobody else should be sharing this benefit as is derived by the assessee by dint of such expenses. Alike question came up before this Court in assessee's own case in Addl. CIT v. Rajasthan Spinning and Weaving Mills Ltd., IT Appeal No. 15 of 1999 relating to the asst. yr. 1987 -88 decided on 15th Oct., 2003. The question arose about money spent by the assessee for construction of a building for setting up the Maneklal Verma Institution for training textile workers to increase their efficiency. The institute or the building was not to be the property owned by the assessee. Nor it was meant exclusively for training workers of the assessee's factory. But workmen other than employed by the assessee were also to be trained at the institution. This Court after referring to the decision of the Supreme Court in Sassoon J. David & Co. (P) Ltd. v. CIT : [1979]118ITR261(SC) , Eastern Investments Ltd. v. CIT : [1951]20ITR1(SC) , CIT v. Chandulal Keshav Lal & Co. : [1960]38ITR601(SC) and CIT v. Delhi Safe Deposit Co. Ltd. : [1982]133ITR756(SC) . The decision of Calcutta High Court in Andrew Yule & Co. Ltd. v. CIT : [1963]49ITR57(Cal) , Full Bench decision of Madhya Pradesh High Court in Addl. CIT v. Kuber Singh Bhagwandas : [1979]118ITR379(MP) , and the recent decision of the Supreme Court in Sri Venkata Satyanaiayna Rice Mill Contractors Co. v. CIT : [1997]223ITR101(SC) and the decision of House of Lord in Atherton v. British Insulated & Helsby Cables Ltd. (1926) 10 Tax Cas55 , laid down the following principle : 'Undoubtedly, participation in any trade association or fund set up for advancement of business, which is also carried on by the assessee, interest is primarily for advancing the assessee's own business and not for philanthropic purposes. Essentially the finding, whether the expenses have been incurred wholly or exclusively for the purpose of assessee's business, is a finding of fact. The fact that by becoming member of such association or contributing to such fund, such other participant or contributor is also benefited does not mean that the assessee has not spent sum exclusively and wholly for his business. The concept of 'wholly and exclusively' is not that nobody else is to be benefited by making like expenses. Question is why the assessee makes such contribution. If his contribution is motivated by his own interest and there is nexus between the expense incurred and his business interest he has spent the money for his own business exclusively and wholly. The fact that recipient of such contribution viz., the association of fund exists for benefit for other persons also is not relevant. It is well -settled that expression 'wholly and exclusively' does not denote 'necessarily'. The word 'wholly' refers to quantum of expenditure. The word 'exclusively' refers to motive, objective or purpose with which the particular expense has been incurred. Ordinarily, it is for the assessee to decide whether any expenditure should be incurred in the course of its or his business. Such expenses can be incurred voluntarily and without necessity. If it is incurred for promoting the business and to earn the profits, the assessee can claim the deduction.'
(3.) THE AO has not applied the test of expenses incurred wholly and exclusively correctly for the purpose of assessee's business by referring to the expenses incurred by the assessee and the benefit derived by the spender in exclusivity. The motivation which led the assessee to spend the amount on bus and handing over it to the school by CIT(A) in assessee's own language reads as under : 'As per facts of the case this expense is allowable under Section 37(1) because the bus has been given to the school to remove the difficulty of staff/workmen's children in going to the school as the bus available with school was not sufficient to accommodate the children of workmen and as the children of workmen of company were placed at different destination, they entered the bus after others at nearer destination, hence mill -staff children could not get place in the bus and the bus took more time to collect and drop the mill children. Hence to solve these problems of staff children at the request of school, the bus was given to school by the company, thereafter which the bus problem of workmen's children was solved. Since the bus has been surrendered to the school no benefit of enduring nature was derived by the company as the right of ownership was transferred to school and, therefore, it is not a capital expenditure and by incurring this expense the assessee acquired a right from the school for its workmen's children for first point of departure and never the last point of arrival at the mills gate thereby the mill -men's children got first preference in getting into bus, leaving and reaching home in time. This benefited in turn the assessee and has to be, therefore, treated as business expenditure.';