1. By this appeal the assessee, a private limited company, carrying on business in the publication of books in the form of novels and pocket books, has raised the objection that the Commissioner (Appeals) was not justified in confirming a disallowance of Rs. 10,000 paid towards medical aid to Shri Gulshan Nanda by the assessee-company. The year involved is 1978-79 for which the relevant accounting period was the year ending 31-3-1978.
2. The assessee-company publishes pocket books in Hindi and Urdu. It paid a sum of Rs. 10,000 towards the medical expenses of one of its writers Shri Gulshan Nanda. The assessee's contention was that the said Shri Nanda was one of the most important writers and was the backbone of the assessee-company. The novels written by Shri Nanda had been selling in lakhs and that because of his books, the assessee had been able to sell novels of other writers as well. According to the assessee the works of Shri Nanda had helped it to develop its business in a big way. The kidneys of Shri Gulshan Nanda had got damaged and it was submitted that the survival of the business of the assessee-company was directly linked with the survival of Shri Nanda and that it was in these circumstances that the assessee-company had agreed to pay Rs. 10,000 towards the medical expenses of Shri Gulshan Nanda. The ITO, however, considered that the said sum of Rs. 10,000 paid to Shri Nanda was in the nature of a charity or a donation and he, therefore, did not allow the deduction of the same.
3. The assessee took the matter in appeal before the Commissioner (Appeals). It was submitted before him that the payment was not by way of charity or a donation and that it was made for business considerations and on commercial expediency. After Shri Nanda recovered, he wrote a novel named "Patita" which was published by the assessee-company. The assessee in support of its contention relied on Shahzada Nand & Sons v. CIT  408 ITR 358 (SC) and Sassoon J.David & Co. (P.) Ltd. v. CIT  118 ITR 261 (SC). The Commissioner (Appeals), however, considered that the payment was not made under a contractual obligation and that the assessee had not shown that it was for commercial expediency. It was a voluntary payment and that it could not be allowed as deduction. The assessee is in further appeal before us.
4. We have heard the parties. We are of the view that the assessee must succeed. It is not necessary that for looking after the welfare of an employee, he must be on the roll of the assessee. It was on record that the beneficiary was writing novels which were published by the assessee-company as publishers and the assessee-company had made considerable profits out of such writings. There was a relationship of author and publishers between the payee and the assessee-company. The payment made for the welfare of an author was not a payment to a stranger. The payee, on recovering from his illness, had again written a novel, named, "Patita", which was published by the assessee-company as publishers and it again made considerable profits out of the same.
In respect of an author, there can be an employer-employee relationship, a contractual relationship, a casual relationship or even a moral relationship. The payee was a known writer and it was in the interest of the assessee-company to keep him on its right side and to look after his health and welfare so that he could do more for the assessee-company and help it in earning profits from his writings. It was not the assessee-company which was in demand but it was the author who in fact was in demand. The assessee was to be benefited and was to be at the receiving end by getting more of the writings from the said well known author and it was, therefore, in the interest of the assessee-company that he was kept in a proper shape and health. Such an obligation to pay would have admittedly been on the assessee-company if the author had been on the rolls of the assessee-company and such a roll did come into existence when the various writings of the author were for the assessee-company. The intervening periods between the writings did not destroy such a relationship. Seen from whatever angle, the payment in question has to be seen as made for commercial expediency and we order its deduction accordingly.