V.K.SINGHAL, J. - (1.) BOTH the abovementioned cases are being disposed of by this common order since the questions of law involved therein are identical. In Ref. No. 34 of 1985, the following questions have been referred by the Tribunal in respect of the asst. year 1982 83 under S. 256(1) of the IT Act, 1961 : "1. Whether, under the facts and circumstances of the assessee's case, the Hon'ble Tribunal was justified in holding that there was no nexus established in this case between giving of donation on the one hand and the business perspective of the firm on the other and, therefore, the same was not allowable as business expenditure under S. 37(1) of the Act and only 50 per cent deduction under S. 80G was allowable ? 2. Whether, under the facts and circumstances of the assessee's case, the Hon'ble Tribunal was justified in holding that the donations given to the several institutions were not given with a view to get either business benefit or for any business purpose and whether it was necessary for the assessee to prove a direct and tangible business benefit arising out of the said donation given by it ? 3. Whether, under the facts and circumstances of the assessee's case, the Hon'ble Tribunal was right in disallowing the claim of the assessee being 100 per cent allowance under S. 37(1) of the Act with respect to the donation made to the following institutions with a view to secure higher goodwill in a small place like Pali and the direct or indirect benefit which definitely arose out of the said donations : In Ref. No. 35 of 1985, the following question has been referred by the Tribunal arising out of its order dt. 14th Dec., 1984, in respect of the asst. year 1982 83 under S. 256(1) of the IT Act, 1961 : "Whether the assessee was entitled to the whole amount of Rs. 30,000 as a business expenditure ?"
(2.) THE facts, in brief, of the case of M/s Jaswant Trading Co. are that the assessee made donations to various parties as have been referred to in question No. 3 above. The assessee claimed that the amount has been paid for business consideration and therefore under S. 37(1) of the Act, the entire amount is allowable. It is submitted that the payment has been made by the assessee as he was a prominent businessman and by making such payments the turnover of the assessee has been increased. The Tribunal found that so far as the payment to drought and flood relief funds are concerned, the decision of the Tribunal relied upon by the assessee is not applicable as in that case there was a scheme/provision for relief of the affected persons due to flood whereas in the present case no such facts have been brought on record by the assessee. In these circumstances, it was held that the assessee is entitled to deduction of 50 per cent as provided under S. 80G of the Act. The submission of learned counsel for the assessee is that by making the donations to the Rotary Club, Pali, Sewa Mandal, Chima Bai Lalchand and the Rajasthan Chief Minister's Drought and Flood Relief Funds are concerned, the assessee has increased his business.
(3.) WE have considered the matter. The Tribunal has found that in the case relied upon by the assessee the donation was made to the Chief Minister's Drought and Flood Relief Fund as there was a scheme/provision of relief to the affected employees of the assessee due to flood. By observing this, the Tribunal said that there was a direct link between the donation and the benefit derived and the nexus was established with the business. In the present case, it was found that there is total lack of such business connection or benefit with the donation made. There was no nexus between the donation and the business, therefore, it was considered not as a business expenditure. The provisions of S. 37 provide that any expenditure (not being expenditure of the nature described in ss. 30 to 36, and not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession". This section has contemplated that it does not apply in respect of expenditure of the nature described in ss. 30 to 36. The requirement of this section is that the expenditure should be laid out or expended wholly and exclusively for the purposes of the business or profession and the burden to prove that the expenditure incurred by the assessee was wholly and exclusively for the purpose of business or profession is on the assessee. The assessee had failed to prove that the expenditure incurred by it was exclusively for the purpose of business.;