Leila Seth, J.
(1) These three references at the instance of the assessce, pertain to the assessment years 1958-59, 1960-60 and 1961-62. The common question of law, referred by the Tribunal for our opinion, is :
'WHETHERon the facts and in the eimcumstances of the case. the payments of Rs. 5,67,000. Rs. 5,000 and Rs. 5,000 are permissible deductions under Section 10(2)(xv)of the Indian Income-tax Act, 1922 for the assessment years 1958-59, 1960-61 and 1961-62?'
(2) The assessed-company runs a manufacturing unit. During the assessment, year 1958-59. it paid a sum of Rs. 5,67,000 to the Indian National Congress. It also made payments to the Indian National Congress of Rs, 5000 in each of the assessment years 1960-61 and 1961-62.
(3) The asscssee claimed these amounts as permissible deductions under Section 10(2) (xv) of the Indian Income-tax Act. 1922. The asscssee contended before the Income-tax Officer that the donation to the Indian National Congress was incurred wholly and exclusively for the purpose of its business. The Income-tax Officer did not accept this contention, and disallowed the deductions.
(4) On appeal by the assessed. the Appellate Assistant Commissioner confirmed the view of the Income-tax Officer. On further appeal to the Income-tax Appellate Tribunal, the Tribunal concurred with the decision of the Appellate Assistant Commissioner. In coming to its conclusion, the Tribunal derived support from an earlier order passed by a Full Bench of the Tribunal dated 5th October, 1963, in I.T.A. No. 11907 of 1960-61. The Tribunal's viewpoint was that before an expenditure could be allowed as a permissible deduction, it must be established that the expenditure was for the purpose of the business, the purpose being such as would establish a positive link between the expenditure incurred and the assessed's business.
(5) The assessed's contention before the Tribunal was that the payments were made on grounds of commercial expediency. Three reasons were given in support of the contention. First, it was the return of the Congress Party to power in the Centre and States alone which would ensure stablised conditions in the country suitable for the conduct of business. Secondly, the assessed's business could not function properly unless the assessed retained the goodwill of the party which constituted the Government for the time being. Thirdly. the Ministers of the Congress Government had sought funds from the Company for the purpose of their election and other party expenses, and the management had no option but to comply with their wishes.
(6) The Tribunal found that the facts did not support the assessed's contention that the expenses were incidental to the conduct of the business or were necessitated or justified on grounds of commercial expediency. It held that there was no direct or intimate connection between the business and the expenditure.
(7) Mr. G. C. Sharma, learned counsel for the asscssee has formulated before us the following propositions,
1.A sum of money expended voluntarily on the ground of commercial expediency to indirectly facilitate the carrying on of the business, may be expended wholly and exclusively for the purposes of the trade. It is not necessary for such an expenditure to b-; directly related to the process involved in the carrying on of the business. 2. The expenditure may be admissible as a deduction under Section 10(2) (xv) even if the primary motive for incurring it is not directly to earn income thereby.
(8) Learned counsel, thereforee, urges us to accept that the payment to the Indian National Congress was to indirectly further the trade, as it protected or advanced the business interest of the assessed.
(9) The argument appears to be attractive, but when examined B closely we find that it has been considered by this Court in Orissa Cement Ltd. v. Commissioner of Income-tax, Delhi, : 73ITR14(Delhi) (1). and not accepted.
(10) In Orissa Cement Ltd. (supra), the assessed-company claimed a deduction of a sum of Rs. 1,00,000 contributed to the Congress Party, under Section 10(2) (xv) as expenditure laid out wholly and exclusively for the purpose of its business. The basis of the claim was that : (i) the factory of the assessed was situated far away from Calcutta and other places and the supply of coal, packing bags and cement entailed problems which were solved by the Government ruled by the Congress Party; (ii) the Government had given the assessce an interest free loan of Rs. 50 lakhs ; (iii) it had subscribed for Rs. 40 lakhs worth of preference capital in the company; and (iv) it had agreed to buy the entire cement for the Hirakud Dam from the assessed-company. This Court held :
'WHILE it is true that the expenditure incurred need not necessarily yield results or be incurred to directly benefit the business or be directly related to the earning of income. yet it must be incidental to the business and must bo necessitated or justified by commercial expediency. Before, an expense can be allowed under Section 10(2) (xv), it must be directly and intimately connected with the business and be laid out by the taxpayer in his character as a trader. The assessed had to establish a direct and intimate connection between the expenditure and the business, i.e., between the expenditure and the character of the assessed as a trader. In short, only such expenditure can be allowed which is really incidental to the trade, itself. An expenditure remotely connected with the trade does not qualify for permissible deduction.'
The Court agreed with a decision of the Allahabad High Court in J.K. Cotton Spg. & Wvg. Mills Co. Ltd. v. Commissioner of Income- tax U.P. : 62ITR813(All) where a similar contribution made to the Congress Parliamentary Board had been disallowed on the ground of absence of direct nexus between the business of the assessed and the contribution. It was, however, observed that an expenditure incurred voluntarily but wholly and exclusively for the expender's trade may, in given circumstances, be a permissible deduction even though it enures to some extent to a third party's benefit. A payment for political purposes may be for the purposes of the trade, but in such a case the link between the trade and the. payment had to be established. The case decided by the House of Lords in Morgan (Inspector of Taxes) v. Tate & Lyle Ltd., 26 I.T.R. 195 was distinguished, as in that case the assessed incurred the expenditure in carrying out a 'campaign' against the nationalization of the sugar refining industry. The Commissioners had recorded a finding that the money had been spent on this campaign and was wholly and exclusively expended for the purpose of the company's trade and thus deductable. The House of Lords, by a majority, held, that as the purpose of the expenditure was to preserve the very existence of the Company's trade, the finding of the Commissioners was correct. S. K. Kapur, J. speaking for the Court observed that the case of Morgan v. Tate & Lyle (supra) was of no assistance as it was expenditure incurred to prevent seizure of the Company's assets.
(11) On the other hand, we may point out, Morgan's case has been applied in an analogous situation by this Court in Delhi Cloth and General Mills Ltd. v. Commissioner of Income-tax, : 85ITR261(Delhi) (4). which has been followed by the Punjab and Haryana High Court in Ambala Bus Syndicate (P) Ltd. v. Commissioner of Income-tax, . A full Bench of the Madhya Pradesh High Court has, in Additional Commissioner of Income-tax v. Kuber Singh Bhagwan Das : 118ITR379(MP) relied on these decisions and held that the amount of donation to the Chief Minister's Drought Relief Fund was an allowable deduction under Section 37 of the Income-tax Act, 1961. The particular facts being, that though the donation was voluntary, the permit for foodgrains was directly related to the amount of donation paid by the trader. In fact, the original receipt showing deposit of the donation was to be annexed to the application for the permit. There was, thereforee, a direct nexus between the business and the donation. However, a general donation as in the present case, leaves the nexus too remote and will, thereforee, not qualify for deduction.
(12) The Calcutta High Court in Indian Steel and Wire Products Ltd. v. Commissioner of Income-tax, : 69ITR379(Cal) has taken a similar view as the Allahabad High Court in J. K. Cotton Spg. & Wvg. Mills Co. Ltd.'s (supra). These decisions along with Orissa Cement Ltd. (Supra) have been accepted and followed in Commissioner of Income-Tax v. Elphistone Spinning and Weaving Mills Co. Ltd. : 100ITR139(Bom) by the Bombay High Court. Recently, in Shadi Lal Sugar & General Mills Ltd. v. Commissioner of Income-tax : 103ITR748(All) (9), the Allahabad High Court has followed its earlier decision in J.K. Cotton Spg. & Wvg. Mills Co. Ltd.'s case (supra).
(13) In a more recent decision of the Madras High Court in Southern and Rajamani Transports (P) Ltd. v. Commissioner of Income-tax Madras-11, : 107ITR470(Mad) , that Court has considered the various decisions of the different High Courts. It has followed, inter alia, the above-mentioned decision of this Court in Orissa Cement Ltd. and disallowed the claim for deduction of a sum of Rs. 20,000 paid to the Congress Party. The Court came to the conclusion that there was no material to indicate what was the link or benefit, that was intended to be derived by the business of the assessed from the donation. However, it observed, that in a given case a donation to a political party by a businessman may be an allowable deduction, expended wholly and exclusively for the business, provided a nexus or link is established between the donation and the business carried on by the donor.
(14) Mr. G. C. Sharma also sought to contend that the Orissa Cement Ltd.'s case (supra) had relied on Travancore Titanium Product Ltd. v. Commissioner of Income-Tax, Kerala : 60ITR277(SC) and that, since the latter had been overruled in Indian Aluminium Co. Ltd. v. Commissioner of Income-tax. West Bengal : 84ITR735(SC) , the decision in Orissa Cement Ltd. needs reconsideration. We do not agree. Indian Aluminium Co. Ltd.'s case (supra) has no doubt overruled the decision in Travancore Titanium Product Ltd.'s case (supra). But the former has not overruled the test of 'direct and intimate connection between the expenditure and the business', which the latter had enunciated. It only points out. that the latter had erred in thinking that the payment of a tax by an owner of assets cannot be said to be incidental to the business, even where the assets subjected to the tax are the business assets of the said owner. The test was modified only to this extent. (see at page 747).
(15) On the basis of the decision of this Court in Orissa Cement Ltd. (supra) with which we concur, and the practically unanimous view of the several High Courts referred to above and in view of the fact that, in the present case, apart from generalizations with regard to stability etc., as above noticed, no link between the payment to the Indian National Congress and the business of the assessed has either been pleaded or established, we are of opinion that the deduction claimed was rightly disallowed. We, thereforee, answer the question in the negative and against the assessed. We, however, make no order as to costs.