Puja expense for smooth running of business is tax-deductible, rules Tribunal

Shishir Sinha New Delhi | Updated on July 06, 2020

Upholds trucking company’s claim that puja for drivers’ safety is ‘business expense’

Think of it as an answered prayer. The Income Tax Appellate Tribunal (ITAT) has ruled that puja expenses incurred for the smooth functioning of a business can be treated as ‘business expenses’, which qualify for income tax deduction.

The ruling came in a case in which Capital Tours (India) Private Limited, a transport business company plying trucks in Assam, Meghalaya and Mizoram, approached the Tribunal after a ₹1.65 lakh deduction was disallowed during assessment. The Assessing Officer (AO) claimed there was no voucher to substantiate the claim.

The expenditure, in cash, had been incurred on puja, a propitiatory ritual carried out by driver/cleaners before taking their trucks out to various destination.

The company approached the first appellate authority, the Commissioner of Income Tax-Appeal (CIT-A), who upheld the AO’s action. According to the CIT-A, the two ledgers produced showed monthly expenses on puja, but since it was not clear whether there was a temple inside the business premises, on which the expenses had been incurred, it could not be held that the expenses were only for the purpose of the business. The company then moved to Kolkata bench of the ITAT.

During those hearings, the company’s lawyer argued that puja expenses are inextricably connected with the business. According to him, drivers and cleaners performed puja every day, before they start their journey, as they believe that if a puja is performed, the vehicle will not meet with any accident. The expenditure incurred went towards buying garlands, lighting lamps/candles for the puja.

The lawyer quoted a Kolkata High Court August 18, 2014 ruling in a case involving Bata India, wherein it had observed that puja expenses are required for smooth running of the business. Citing this, he pleaded that the tribunal should allow the tax deduction on the puja expense. On the other hand, the tax department argued that at least 50 per cent of the claim should be disallowed.

The tribunal noted that the company is into the business of plying trucks in the North-Eastern States, and that it is common knowledge that drivers and cleaners conduct a puja before they start their journey and that they incur expenses to buy garlands and bhog to pray for their safety while travelling to remote areas of Assam, Meghalaya and Mizoram to deliver/collect goods.

“Since it has been found that the expenses incurred are for the smooth functioning of the business of plying trucks, the expenses need to be allowed,” the bench said. However, it also ruled, taking into consideration the peculiar facts and circumstances of the case, that 10 per cent of the expenses may be disallowed — in order to plug the revenue loss, if any.

Published on July 06, 2020

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