Case: M/s. Sandur Manganese &amp; Iron Ores Ltd Vs. Commissioner of Income Tax

These civil appeals filed by the assessee pertain to Assessment Years 1985-1986, 1986-1987, 1989-1990, 1990-1991 and 1992-1993The assessee is a limited Company engaged in the business of extraction of manganese and iron ore. The assessee is also a mine owner. For Assessment Year 1985-1986, the assessee filed its Return of Income on 30th October, 1985 declaring a loss of Rs.8,65,97,200/-Subsequently, the Company filed its revised Return of Income declaring a loss of Rs.12,83,16,800/-One of the claims made for deduction by the assessee was under Section 37(1) of the Income Tax Act, 1961 [`Act, for short]. The assessee claimed that it had spent a sum of Rs.11,40,641/- as welfare expenses towards providing education to its employees children. During the course of discussion with the Assessing Officer, the Company stated that it had made payments to other educational institutions where the children of its employees were studying. At this stage, it is important to note that assessee has established Sandur Residential School and Sandur Education Society for imparting education to students in that area.

Court's reasoning:
In the present case, we do not know how the ITAT and the High Court have come to the conclusion that these payments made by the assessee constituted reimbursement. As stated above, for the Assessment Year 1985-1986, the Assessing Officer records that an amount of Rs.11,40,641/- has been incurred by payments to other educational institutions and not by way of payments made to school or the society promoted by the assessee. For each assessment year, therefore, the ITAT will have to record a separate finding as to whether the claim for deduction is being made for payments to the school promoted by the assessee or to some other educational institutions/schools and thereafter apply Section 40A(9) of the Act which has not been done in the present case.