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1978 Supreme(Del) 55
High Court Of Delhi
COMMISSIONER OF INCOME TAX - Appellant
Versus
DELHI CLOTH AND GENERAL MILLS COMPANY LIMITED - Respondent
I.T.R. 172 of 1974
Decided On : 04/19/1978
D.N.Mishra, M.L.VARMA, V.S.DESAI
Expenditure incurred wholly and exclusively for the purpose of business, profession or vocation, including costs of advertisement, is allowable as deduction under Section 10 (2) (xv) of the Income-tax Act, 1922.
Headnote:
INCOME TAX - Expenditure incurred by assessee in organizing Football and Hockey Tournaments - Whether allowable deduction under Section 10 (2) (xv) of the Income-tax Act, 1922 - Held, yes.
Fact of the Case:
The assessee, Delhi Cloth and General Mills Co. Ltd., incurred expenses in organizing Football and Hockey Tournaments. The assessee claimed the deduction of the said expenses under the head of advertisement, contending that the tournaments had a great advertising value for the company.
Finding of the Court:
The court held that the expenditure incurred by the assessee in organizing Football and Hockey Tournaments was an allowable deduction under Section 10 (2) (xv) of the Income-tax Act, 1922.
Issues: Whether the expenditure incurred by the assessee in organizing Football and Hockey Tournaments was an allowable deduction under Section 10 (2) (xv) of the Income-tax Act, 1922.
Ratio Decidendi: The court held that the expenditure was incurred wholly and exclusively for the purpose of the assessee's business, as it brought the name of the D. C. M. Group into prominence and provided opportunities to the employees of the Mills to participate and witness the tournaments.
Final Decision: The court answered the question referred in the affirmative, holding that the expenditure incurred by the assessee in organizing Football and Hockey Tournaments was an allowable deduction under Section 10 (2) (xv) of the Income-tax Act, 1922.
( 1 ) THESE six references can be disposed of by a common judgement. They relate to the respective assessment years as stated below :-
I. T. R. No. 197 of 1974 1956-57
I. T. R. No. 172 of 1974 1957-58
I. T. R. No. 104 of 1973 1958-59
I. T. R. No. 105 of 1973 1959-60
I. T. R. No. 106 of 1973 1960-61
I. T. R. No. 107 of 1973 1961-62
( 2 ) THE Income-tax Appellate Tribunal, Delhi Bench, has referred to this Court the following question which is common to all the six assessment years :-
"whether on the facts and in the circumstances of the case the expenditure incurred by the assessee in organising Football and Hockey Tournaments was an allowable deduction under Section 10 (2) (xv) of the Income-tax Act, 1922 ?"
( 3 ) THE Assessee Company, M/s. Delhi Cloth and General Mills Co. Ltd. , Delhi, owns a number of mills referred to as Delhi Cloth Mills Group (hereinafter referred to as "the D. C. M. Group" ). The company conducts annually All India hockey and football tournaments for which teams from various parts of the country are invited. The tournament is open to general public on payment. The assessee claimed a deduction of the expenses incurred for the conduct of the tournaments in the aforesaid assessment years. The expenses for the assessment years 1956-57 and 1957-58 came to Rs. 53,172. 00, while the amounts for the assessment years 1958-59, 1959-60, 1960-61 and 1961-62 came to Rs. 26,103. 00, Rs. 21,734. 00, Rs. 12,814. 00 and Rs. 31. 406. 00 respectively.
( 4 ) THE assessee claimed the deduction of the said expenses under the head of advertisement. According to the assessee, the staging and sponsoring of these tournaments had a great advertising value for the company as day after day the newspapers reported about the D. C. M. Tournaments, thus bringing the name of the D. C. M. Group into prominence. The assessee claimed that the said expenses were incurred wholly and exclusively for the purpose of business, and deducation of the same was, therefore, allowable under Section 10 (2) (xv) of the Income-tax Act, 1922.
( 5 ) THE Income-tax Officer refused to allow the deduction taking the view that the holding of the tournaments could hardly be said to have any connection with the business of the assessee, that there was no direct connection between the business and the conduct of the tournaments, and even if there might be some remote connection between the two, the same wa. s not enough for claiming the deduction of the expenditure, as such deduction could be claimed only if the expenditure was incurred wholly and exclusively in the carrying on of the business, and that the readers of the reports in the newspapers would not be connecting in their minds the name of the tournament with the name of the company.
( 6 ) ON appeals by the assessee, the Appellate Assistant Commissioner allowed the claim for deduction to the extention of Rs. 20,000. 00 only, following his orders for the prior years.
( 7 ) ON further appeal by the assessee, the Appellate Tribunal held that by holding the tournaments the assessee gets publicity, that the headlines to the reports in the newspapers about the tournaments go a long way to make the company a house-hold word, that it also provides opportunities to the employees of the Mills to participate and also to witness such tournaments which is an amenity which was very necessary in modern times, and that the holding of the tournament was thus very helpful to the business. In that view, the Tribunal allowed the deduction of the expenditure in each of the assessment years in full.
( 8 ) THEN, at the instance of the Commissioner of Income-tax, Delhi, the Tribunal referred to this court the question which we have already set out earlier in this judgment.
( 9 ) AS stated earlier, the assessee claims deduction of the expenditure under Section 10 (2) (xv) of the Income-tax Act, 1922, which reads as under :
" (XV) any expenditure (not being an allowance of the nature described in any of the clauses (
