Operational Expenses are alowable.

S. 37(1) : Business expenditure – Operational expenses- Held to be allowable.

The assessee-company was engaged in business of mobilization of deposits from the General public at

large. The assessee-company had entered into an MoU with Sahara India whereby Sahara India agreed to

work as an agent to the assessee-company for collecting money, leading money, supply of receipts and

documents and communicating various schemes and proposals launched by the assessee-company from

time to time. The assessee-company claimed the expenses paid to Sahara India as operating expenses. The

AO found that operational expenses paid by assessee accounted for 18.85 per cent of the total collection

made during the year and he allowed only 3 per cent of the collection on estimate basis. On appeal, the

CIT(A) as well as the Tribunal allowed the expenditure upto the extent of 4.5 per cent of the total deposit.

Hence the revenue was in appeal before HC. The High Court held that these expenditure were likely to be

incurred by the assessee-company, or to be paid to the Sahara India. The expenses so claimed pertained to

the establishment, travelling, and printing, advertisement and publicity and business development and

these expenses were related to the business of the assessee. The same fund were allocated as per MOU

between the parties. The said expenses were duly supported by the vouchers as observed by the CIT(A) in

his order. But since these expenses were incurred by Sahara India, so the vouchers were in possession of

that firm and that the assessee after having satisfied itself about the correctness of these expenses had

accepted the debit note of Sahara India and credited in their account the amount by issuing debit

vouchers. During the course of arguments, no doubt was raised about the genuineness of the said

expenditure. When the expenses were incurred wholly and exclusively for the purpose of the business, the

same were allowable. Thus, unless a case has been made out that the payment was not genuine and what

was borrowed was not true then there is no scope for any interference. Moreover, the AO made the

addition on estimate basis. The first appellate authority as well as Tribunal restricted the same on estimate

basis. Hence, no question of law was emerging from the impugned order. (AYs. 1992-93 & 1994 – 95)

CIT.v. Sahara India Mutual Benefit Co. Ltd. (2013) 40 taxmann.com 69 / (2014)

222Taxman217(Mag.) (All.)(HC)