Contributions made to political parties to prevent nationalisation of business are allowable deductions under Section 37 of the Income-tax Act, 1961, if they are incurred wholly and exclusively for the purpose of saving the business from annihilation.

1. This order will dispose of Income-tax References Nos. 13and 14 of 1973. They pertain to the assessment years 1969-70 and 1970-71, respectively. The question which is referred for our opinion is the same and may now be stated:

"Whether, on the facts and in the circumstances of the case, the contributions by the assessee to the political parties through the Punjab Motor Union, Chandigarh, were allowable under Section 37 ?"

2. It will appear from the frame of the question that it is admitted that there were contributions by the assessee to the political parties through the Punjab Motor Union, Chandigarh, and the only question is whether they were allowable deductions.

3. The assessee is a transport company. Its route permits were to expire on June 30, 1969. There was a threat of complete nationalisation of the transport business and in this connection reference may be made to the Notification No. 12748-IHT-69, dated 19th November, 1969, Transport Department, published in the Punjab Gazette (Extraordinary), dated November 19, 1969. The relevant clauses of the notification are 2, 3, 4 and 6 arid are quoted below :

"2. (a) All further operations on the existing local routes not exceeding twelve miles in length in the Punjab territories as well as on monoply routes, namely, Jullundur-Amritsar and Ferozepore-Fazilka, shall be undertaken exclusively by the Punjab Roadways.

(b) Sixty percent, of the operations on the new local routes not exceeding ten miles in length in the Punjab territories shall be undertaken by the Punjab Roadways and the remaining forty per cent. by the existing private operators and new entrants in the ratio of thirty to ten, respectively.

3. Sixty per cent. of the overall operations that are being undertaken on or immediately before 30th June, 1959, on the routes specified in annexure A shall be undertaken by the Punjab Roadways.

4. All operations on new routes or on account of increase in traffic on the existing routes specified in annexure A shall be undertaken as under : (i) Sixty per cent. ot the operations :-

- (a) on existing and new intra-State routes ;

(b) on such routes as were intra-State immediately before the appointed day but have become inter-State on the appointee day as a result of the reorganisation of the State of Punjab ;

and

(c) accruing to the Punjab territories on inter-regional routes ; shall be undertaken by the Punjab Roadways.

(ii) Further operations on inter-State routes (whether existing or new) other than those specified in (i)(b) above, shall be undertaken by the Punjab Roadways exclusively.

6. The provisions of this scheme shall have effect for a period of seven years from the date of publication of this notification in the Official Gazette, whereafter one-third of the operations of the private operators shall be taken over by the Punjab Roadways each year."

4. In the face of this, the transporters formed a common forum to prevent nationalisation. This forum was styled as the Punjab Motor Union. According to the assessee, all the transporters contributed funds to that forum and that forum donated the money so collected to different political parties. It is stated by the assessee that these parties exercised their weight with the Government and ultimately the total nationalisation was prevented. The assessee got an extension of seven years for its route permits. The assessee had paid a sum of Rs. 10,000 to the Punjab Motor Union and it claimed it as revenue expenditure. This claim was not allowed by the Income-tax Officer and by the Appellate Assistant Commissioner on appeal. Even the Income-tax Appellate Tribunal rejected the assessees claim in a further appeal. The Tribunal, while dealing with this matter, observed as follows:

"We have given our careful thought to the contentions of both the sides and we are of the view that the assessee has no case. The assessee does not know the details of the donations to the political parties. He only gave the amounts to the Punja