Subash Agarwal, Advocate
CA Swati
Baid
INTRODUCTION
In India, people have
immense faith in God and thus some amount of money is always deployed by people for Him. People, on regular basis, expend certain amount of money in performing
different types of puja. These expenses are debited while preparing the Profit
and loss account of the business concern of a person. But whether the same is
allowed as deduction while computing the total income of the assessee for the
Income Tax purpose? This question has always been in controversy and various
judgements have been pronounced, both in favour and against the view that the
expenses incurred in relation to the any puja can be claimed as deduction under
the Income Tax Act.
EXPENSES ALLOWABLE UNDER THE INCOME TAX ACT
In Income Tax Act, a
person can claim the deduction of an expense from the income derived from business
and profession. The expenses which are incurred for the
business purpose are only allowed as deduction u/s 30 to 44 DB of the I.T.Act,
1961. Not all but specific expenses are only allowed as deduction as business
expenses in the Income Tax. However, there is a residuary section, sec 37(1), under
which the expenses not covered under the specific sections 30 to 36, the
deduction for those expenses can be claimed under this section provided certain
other conditions are fulfilled.
As per sec. 37(1) Any expenditure
(not being expenditure of the nature described in sections 30 to 36 and not
being in the nature of capital expenditure or personal expenses of the
assessee, laid out or expended wholly and exclusively for the purposes of the
business or profession shall be allowed in computing the income chargeable
under the head “Profits and gains of business or profession”.
Thus,
for claiming the deduction u/s 37(1) of the Act following conditions are to be
fulfilled:
·
Such
expenditure should not be covered under the specific sections i.e. sections 30
to 36
·
The
expenditure should not be of capital nature
·
The
expenditure should be incurred during the previous year
·
The
expenditure should not be of personal nature
·
The
expenditure should have been incurred wholly and exclusively for the purpose of
the business or profession
·
The
business should be commenced.
The expenses incurred by the assessee in
relation to any puja performed especially during the inauguration of the new
office and at the time of Diwali Pujan do not fall under any specific Sec of
the I.T.Act where the deduction of the same can be claimed. But, the same can
be claimed as deduction under the residuary sec 37(1) of the Act provided the
abovementioned conditions are fulfilled.
ADVERSE
VIEW
However, various courts have taken a contrary view and have upheld
disallowance of expenses relating to any puja treating them either as a
personal expense of the director of the company and not the business
expenditure. The High Court of Karnataka in the case of Sanghameshwar Coffee Estates Ltd. [1986] 160 ITR 203 and the Bombay
High Court in the case of Kolhapur Sugar
Mill Ltd. [1979] 119 ITR 387 has held that pooja is performed by the
followers of a particular religion or faith. A company, which is only a
juristic person, cannot claim to profess, practice, or follow any religion or
faith. It was held that a company, which is a creation by legal fiction and not
a real person made up of flesh and blood, cannot profess any religion and
therefore, performance of pooja cannot be said to be the need of business.
However, the High Courts in the above cases did not consider the fact
that any expenditure incurred by the director for or on behalf of the company
has to be treated as a business expense. The pooja performed would motivate the
employees and workers to contribute to the development and progress of the
business of the company.
FAVOURABLE VIEW
The
Punjab and Haryana High Court in the case of Atlas Cycle Industries Ltd. [1982] 134 ITR 458 has held that “no curbs can be placed on the discretion of
the assessee to provide the type of recreation, which, according to it, would
best advance the interest of the business. If the recreation provided, even if
it is in the nature of the religious activity, has direct nexus with the
welfare of a class of workers engaged by the assessee, it is wholly immaterial
if the recreation provided is directly or indirectly connected with the
religious tenets of a section of the society”.
Reliance
can be placed in the case of Brijramandas
and Sons [1983] 142 ITR 509 wherein the Allahabad High Court has held that
Ganeshjiki Pooja expenses, which Hindu traders do in a customary way at the
time of Mahurat or opening of their account books on the auspicious occasion of
Diwali, are to be treated as expenditure laid out wholly and exclusively for
the purpose of assessee’s business and is therefore allowable u/s 37(1) of the
Income Tax Act, 1961.
AMBIGUOUS CBDT CIRCULAR
CBDT in its Circular no. 13/A/20/68-IT(A-II) dated 3.10.1968 has stated
that as the
expenses incurred on the occasion of Diwali and mahurat are in the nature of
business expenditure, it has been decided not to lay down any monetary limits
for the purpose of their allowance in the income-tax assessments subject to the
Income-tax Officer being satisfied that the expenses are admissible as a
deduction under the law and are not expenses of a personal, social or religious
nature.
CONCLUSION
In our opinion, puja expenses incurred by the
assessees are not personal expenses and are
incurred wholly and exclusively for the business and should be allowed as
deduction u/s 37(1) of the Act. Judiciary has taken different views on different
occasions and CBDT circular has confounded the problem by giving the discretion
to the assessing officer in the matter.
Thus, one has to wait for the authoritative pronouncement from the Supreme
Court in the matter to clinch the issue. It is better that the business associations/ chambers of commerce can request the CBDT to
unambiguously clarify the allowability of the same. After all, people’s faith in
the providence to bring prosperity through business has inextricable linkage with the business
of the assessee and as rightly held by the Punjab & Haryana High Court, puja is a sort of recreation provided to the employees.
