Kerala H.C : Whether, on the facts and in the circumstances of the case, and on a proper construction of the trust deed relating to the Vijayalakshmi Cashew Company Employees’ Welfare Trust, it could be held that the contribution of Rs. 1 lakh for the asst. yr. 1976-77 and Rs. 2,85,101 for the asst. yr. 1977-78 are not allowable expenditure ?

Counsel Appeared

B.S. Krishnan & V. Ramachandran, for the Petitioner : P.K. Ravindranatha Menon & N.R.K. Nair, for the Respondent

K.S. PARIPOORNAN, J.:

The petitioner is the same person in both the O.Ps. He is an assessee to income-tax. The respondent in both these O.Ps. is the CIT. The petitioner prays that the following two questions of law may be directed to be referred by the Tribunal for the decision of this Court. The questions of law formulated by the petitioner- assessee in both the O.Ps. are as follows :

“(i) Whether, on the facts and in the circumstances of the case, and on a proper construction of the trust deed relating to the Vijayalakshmi Cashew Company Employees’ Welfare Trust, it could be held that the contribution of Rs. 1 lakh for the asst. yr. 1976-77 and Rs. 2,85,101 for the asst. yr. 1977-78 are not allowable expenditure ?

(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that only 50per cent of the proportionate expenditure considered is eligible could be treated as relating to exports and deductible under s. 35B of the IT Act instead of the full proportion of 85.15per cent for the asst. yr. 1976-77 and 75.91per cent for the asst. yr. 1977-78 ? “

It is conceded that on the day when the funds were transferred to the trustees, no trust had, in fact, been created. This finding has been arrived at by the Tribunal. It is not questioned. If that be so, the contribution of Rs.1 lakh or transfer of Rs.1 lakh to the trustees even before the trust has been created cannot be said to be a proper or allowable expenditure. On this short ground, the common question No. (i) in both the O.Ps. does not arise for consideration. The Tribunal has opined that the contribution is not business expenditure in the light of the construction of the trust deed and concluded that no trust had been created, even though the money has been transferred to the trustees. The finding is largely one of fact, and the question of law, formulated as question No. (i), can be hardly said to arise on the facts of the case. It could be stated that the petitioner has not questioned the finding of fact, to the effect, namely, that no trust had, in fact, been created on the day when the money was transferred. In so far as the said finding stands, any expenditure or contribution cannot be said to be an allowable expenditure.

It is agreed that question No. (ii), regarding deductibility of amount under s. 35B of the IT Act, is covered by the decision of this Court in I.T.Rs. Nos. 7 and 8 of 1982 CIT vs. Tharian and Sons (1987) 63 CTR (Ker) 146 : (1987) 166 ITR 607 (Ker)] and I.T.Rs. Nos. 133 and 134 of 1983 [CIT vs. K. Ravindranathan Nair (1988) 170 ITR 411 (Ker)]. We are of the view that in the light of the two Division Bench decisions of this Court as aforesaid no referable question of law, formulated question No. (ii), arises for consideration in these cases.

In the result, we reject the plea of the petitioner to direct the Tribunal to refer the two questions of law formulated in the two O.Ps.

The O.Ps. are without merit. They are dismissed. No costs.

[Citation : 170 ITR 409]