Question

arret Company maactured chemicals thar were toxia. Over the coorse of se veral yearo, the toxic waste contaminated the air and water around the companys plant. Sveral employeas su terod toxia poisoning and the Environmen ka Agenoy cited The comeany por vnola hens. ion In court, the judge Pound Barre quilty and imposed ines of #45 milion. The compony volentanly betle a chan table urpose o she environ ment and funded Tt with 25 milli The company incuired legal expenses in solhna Up the Pounda hon and doanding itself in cour The court reduced the fine from 45 milhon to 20 million. are Coneany dedve led the 42smillen paid lo expenses incurred vchons on t ha goonds e Foundation and the TRS dsallowed bolh dedschen on tha reunds lae the payment was, in e and in violahon of pobli contacted arrell has the 120 million fine ordv you garding the deduchbihy the 25 m lhon paymen ohe oendahum and the la What ve your advce you gare Hhs Gare or thea aLi reason al ave her

Answer 1

In the given question we can understand the situation in the both cases

Case 1 :-

Whether the court reduced the fine of $25 millions for starting of foundation or any other reason

Case 2:-

whether the court deducted the $25 millions from fine for the reason of starting a foundation

In case 1 the 25 millions are treated as benefits given to the company

But, in the case 2 25 millions are treated as deduction in the fine amount

If court gave benefit to the company , then the company can deduct that 25 millions from the income and pay income tax for rest of income

If the court treats that 25 millions as deduction of fine then it will be a part of income and tax should be paid on collective income including this 25 millions

So, now we want to prove that the court has given the benefit to company because the company voluntarily started foundation for the employees

So, voluntary starting of foundation will leads to benefits to employees and that benefits is from company in nature of charity and welfare of the employees.

So the company can eliminate the 25 millions from income and pay income tax on rest of this 25 millions.

As per above explanation the company intention for starting foundation is safety and welfare of employees in charity nature so the total expenses incurred to the foundation can be get deduction and pay tax on rest of 25 millions.

I hope, all the given information is useful to you.

Thank you.