CIT v. Rajasthan Spinning and Weaving Mills Ltd. (2006)

The assessee-company donated a bus to a school where the employee’s children were studying and debited the same to the Workmen and Staff Welfare Account. It claimed the expenditure as deduction on the ground that it was incurred wholly and exclusively for the purpose of the assessee’s business. The Assessing Officer rejected the claim of the assessee. However, the Commissioner (Appeals) and the Tribunal allowed it. The assessee contended that such expenses were incurred for the welfare of the children of staff/workmen of the company as part of the employee welfare expenses for the purpose of securing efficient services of such employees. The High Court observed that the contention of the assessee was true. Since the assessee had not acquired any asset, it was not a capital expenditure. Therefore, the expenditure was deductible. Note – This case is a forerunner in allowing donation of a capital asset as revenue expenditure on the ground that the same was for employee welfare.