INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Contract benevolent fund (CBF) expenses - AO alleged no business purpose -

Assessee Class-I Contractor executing major portion of contract works for the State Government claimed deduction of contract benevolent fund (CBF) expenses. AO disallowed deduction holding that contribution made by assessee was purely out of benevolence and not for the purpose of business of assessee.Held:<./i> Matter remanded for verification as to whether the contribution to CBF was made in accordance with notification issued by Government of Karnataka whereby several contractors were obligated to contribute CBF. If it was so contribution to CBF was to be allowed as business expenditure.