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Varadhalakshmi Mills Ltd. Vs. Additional Income-tax Officer. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberIT APPEAL NO. 1947 (MAD.) OF 1983 [ASSESSMENT YEAR 1979-80]
Reported in[1984]8ITD644(Mad)
AppellantVaradhalakshmi Mills Ltd.
RespondentAdditional Income-tax Officer.
Cases ReferredTonnoch v. Brownieside Coal Co. and
Excerpt:
.....as a man, as he is entitled to do, of the condition of things in durham, he has found that the failure to obtain employment is largely due to the state of the labour market in durham, and not wholly or mainly due to the consequences of the injury, i cannot possibly sat that he is wrong in coming to that view when it is a matter of fact for him whether in the evidence, plus his local knowledge, there is evidence on which he could find that it was the state of the labour market in durham which causes the man to be unemployed. 263) in a similar way we can say, with our local knowledge as persons intelligently concerned in the relevant local affairs, that the assessee could well act under the impression that contributions to the chief ministers relief fund goes a long way in speeding..........of the business. the correct approach, in our view, is quite different. there is no doubt the local knowledge that is, knowledge which is derived by judges or members of the tribunal as having come to their possession as persons in the locality or as persons who were independently concerned with the relevant local affairs, is not inadmissible in evidence and could be relied on to decide an issue. an example of such local knowledge is given in the case of mothersdale v. cleveland bridge & engg. co. [1930] 99 lj (kb) 261 :'if the learned country court judge had properly directed himself, and was referred to tonnoch v. brownieside coal co. and had read it, and using his local knowledge, and his knowledge as a man, as he is entitled to do, of the condition of things in durham, he has.....
Judgment:
ORDER

Per Shri T. N. C. Rangarajan, Judicial Member - This appeal relates to the computation of income of the assessment year 1979-80.

2. [This para is not reproduced here as it involves a minor issue.]

3. The second point relates to the donation made by the assessee to the Chief Ministers Public Relief Fund. The authorities below were of the view that the assessee would not be entitled to the deduction of this amount as an expenditure incurred for the purpose of the business and the deduction under section 80G of the Income-tax Act, 1961 (the Act) would not be available unless these are vouchers to support the payments. In this appeal, the assessee has claimed that vouchers are available for verification land it is also stated that the donation itself was made because there was flood in the hereby Vaigai river which affected the workmen of the assessee-company and it was in inducement to get relief to the workmen who were affected by the floods. The contention of the revenue was that the assessee had not strictly proved the nexus between the donation and the business of the assessee, inasmuch as, no public official would support the claim of the assessee that any pressure was brought on the assessee to make a donation for the purpose of granting any legitimate relief to the assessee which was due. We are of the opinion that it is not a question of proof because the very statement of the assessee that the donation was made for business expendiency and also to get the benefit to the workmen, supports the claim, for it cannot be rejected out of hand. Such claims are incapable of strict proof. But according to the revenue, it would not mean that we would accept heresay evidence to show any pressure being brought on the assessee for making such donations so as to consider the donation which should normally be a voluntary philanthropical gesture as a calculated payment laid out for the purposes of the business. The correct approach, in our view, is quite different. There is no doubt the local knowledge that is, knowledge which is derived by judges or Members of the Tribunal as having come to their possession as persons in the locality or as persons who were independently concerned with the relevant local affairs, is not inadmissible in evidence and could be relied on to decide an issue. An example of such local knowledge is given in the case of Mothersdale v. Cleveland Bridge & Engg. Co. [1930] 99 LJ (KB) 261 :

'If the learned country Court judge had properly directed himself, and was referred to Tonnoch v. Brownieside Coal Co. and had read it, and using his local knowledge, and his knowledge as a man, as he is entitled to do, of the condition of things in Durham, he has found that the failure to obtain employment is largely due to the state of the labour market in Durham, and not wholly or mainly due to the consequences of the injury, I cannot possibly sat that he is wrong in coming to that view when it is a matter of fact for him whether in the evidence, plus his local knowledge, there is evidence on which he could find that it was the state of the labour market in Durham which causes the man to be unemployed.' (p. 263)

In a similar way we can say, with our local knowledge as persons intelligently concerned in the relevant local affairs, that the assessee could well act under the impression that contributions to the Chief Ministers Relief Fund goes a long way in speeding up the transactions of the assessee with the authorities concerned. It is also apparent from the facts on record that this contribution was made for the purpose of getting relief to the workers who are also affected by the floods and apart from being an expenditure laid out for the purpose of the business was also an expenditure made for the welfare of the workmen. It was submitted on behalf of the revenue that when a particular deduction is allowable under section 80G, the same amount a particular deduction is allowable under section 80G, the same amount could not be considered for deduction under section 37 of the Act. We find that the deduction under section 80G is for all the assessee who may or may not have business whereas the same amount if it is an expenditure laid out for the purpose of business must necessarily come within the admissible deduction under section 37. The deduction under section 80G is only for a donation simpliciter and when the amount ceases to be a donation and takes the form of an expenditure laid out for the purpose of the business, section 80G will have to be excluded and the deduction has to be given under section 37. We, therefore, direct the ITO to allow this deduction subject, of course, to the verification of the vouchers for payment which, according to the assessee, are available.

4. [This para is not reproduced here as it involves a minor issue.]

5. In the result, the appeal is partly allowed.


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