Shanti Prime Publication Pvt. Ltd.
Section 37 of the Income Tax Act, 1961- Business expenditure- Capital or revenue expenditure - Once the expenditure is incurred in the course of business and for the 'purpose of business', it would naturally be an allowable deduction under section 37(1).
Facts: "Whether Tribunal was justified in holding that amount of Rs. 19,35,950/- being grants disbursed by the assessee-applicant to various State Governments during the financial year 1975-76 relevant to asstt. year 1976-77 was not in the nature of Revenue expenditure, hence not allowable in computing the total income of the assessee for the asstt. year under reference.
Held, that the disbursement of grants has already been held to be the core business of the appellant-Corporation. Once that requirement is satisfied, the expenditure incurred in the course of business and for the 'purpose of business', would naturally be an allowable deduction under section 37(1). The source of funds from which the expenditure is made is not relevant. It is also not really relevant as to whether the expenditure is incurred out of the corpus funds or from the interest income earned by the appellant-Corporation. There was no force in the submission of the Revenue Department that the direct nexus of monies given as outright grants from the taxable interest income cannot be distinctly identified. This is a question of fact. The plea of the respondents is based on a pure conjecture. It is the case of the appellant-Corporation throughout that it can easily demonstrate the direct and proximate nexus of interest earned through grants made, as its accounts were duly audited. In fact, CIT(A) allowed the business expenditure only to a certain amount on the basis of the facts and figures as emerged from the balance sheet. This is a burden which was to be discharged by the appellant-Corporation and the CIT(A) had been satisfied with the nexus of interest income with the disbursement of grants made, as having been established. - NATIONAL CO-OPERATIVE DEVELOPMENT CORPORATION V/s CIT -  29 ITCD Online 005 (SC)