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1 - 10 of 17 (0.66 seconds)The Income Tax Act, 1961
Assam Bengal Cement Co. Ltd vs The Commissioner Of Income-Tax,West ... on 11 November, 1954
(iii) of the Act and thus interest was not expressly
deductible as an allowance. This Court applied the test
formulated by Viscount ,Cave, L. C., in Atherton v. British
Insulated and Helsby Cables Ltd.(1) and approved by the
Court in Assam Bengal Cement Co. Ltd. v. Commissioner of
Income Tax(1), and held that the payment of interest was a
revenue expenditure. It observed that "no new asset is
acquired with it; no enduring benefit is obtained.
Expenditure incurred was part of circulating or floating
capital of the assessee. In ordinary commercial practice
payment of interest would not be termed as capital
expenditure." This Court further held that the expenditure
was for the purpose of business. Mr. Desai tried to
distinguish that case on the ground that what was at issue
was interest on loan and not expenditure incurred for
,obtaining the loan. In our opinion, there is no
justification for drawing this distinction in India.
Vizagapatnam Sugars And Refinery Ltd. vs Commissioner Of Income-Tax, Andhra ... on 30 August, 1961
In Vizagapatnam Sugars and Refinery Ltd. v. Commissioner of
Income Tax(") the Andhra Pradesh High Court relying on Texas
Land and Mortgage Company V. William Holtham(3) and the
decision in Western India Plywood Ltd. v. C.I.T., Madras(4)
held that on the facts and circumstances of that case,
brokerage and commission of four annas on every maund of
sugar paid by
(2) 6 I.T.C. 28. (3) 3 T.C. 255.
Western India Plywood Ltd., Baliapatam vs Commissioner Of Income-Tax, Madras on 1 January, 1960
In Vizagapatnam Sugars and Refinery Ltd. v. Commissioner of
Income Tax(") the Andhra Pradesh High Court relying on Texas
Land and Mortgage Company V. William Holtham(3) and the
decision in Western India Plywood Ltd. v. C.I.T., Madras(4)
held that on the facts and circumstances of that case,
brokerage and commission of four annas on every maund of
sugar paid by
(2) 6 I.T.C. 28. (3) 3 T.C. 255.
Sri Annapurna Cotton Mills Ltd. vs Commissioner Of Income-Tax, West ... on 4 December, 1962
the assessee company was not revenue expenditure but capital
expenditure. In our opinion, the derision, as far as the
brokerage was concerned, was wrong, but we do not say
anything in this case with respect to the decision as far as
the commission on sale of goods was concerned.
The Calcutta High Court examined the question in great
detail in Sri Annapurna Cotton Mills Ltd. v. Commissioner of
Income Tax(1), Bachawat, J., held that the loan of Rs. 10
lakhs obtained by the company was an asset or advantage for
the enduring benefit of the business of the assessee. He
placed reliance on a number of cases,some of which we have
already considered. But we are unable to agree that a loan
obtained can be treated as an asset or advantage for the
enduring benefit of the business of the assessee. A loan is
a liability and has to be repaid and, in our opinion, it is
erroneous to consider a liability as an asset or an
advantage within the test laid down by Viscount Cave and
approved and applied by this Court in many cases. Sinha,
J., after referring to a number of cases, felt that the
raising of capital by issue of debentures was a recognised
mode of raising capital and he felt that the decided cases
had laid down the proposition that borrowing money by the
issue of debentures was an acquisition of capital asset and
that any commission or expenditure incurred in respect
thereof was of a capital nature and not to be considered as
in the nature of revenue. He was impressed by the fact that
not a single case to the contrary was brought to his notice.
But we have to decide the case on principle, and with
respect it seems to us that he erred in treating the loan as
equivalent to capital for the purpose of s. 10(2) (xv) of
the Act.
S.F. Engineer And Ors. (A Firm) vs Commissioner Of Income-Tax, Bombay ... on 11 January, 1965
In S. F. Engineer v. Commissioner of income Tax
(2) the Bombay High Court held that the expenditure incurred
for raising loan for the carrying on of a business cannot in
all cases be regarded as an expenditure of a capital nature.
On the facts of the case they held that as construction and
sale of the building was the sole business of the firm and
the building was its stock-intrade, and the loan was raised
and used wholly for the purpose of acquiring this stock-in-
trade and not for obtaining any fixed assets or raising any
initial capital or for expansion of the assessee's business,
the expenditure incurred for the raising of loan was not an
expenditure of capital nature but revenue expenditure.
Although the conclusion of the High Court was correct, we
are not able to agree with the principle that the nature of
the expenditure incurred in raising a loan would depend upon
the nature and purpose of
(1) 54 I.T.R. 592. (2) 57
I.T.R. 455.
Commissioner Of Income-Tax, Kerala vs Malayalam Plantation Ltd on 10 April, 1964
The last contention of Mr. Desai is that even if it is
revenue expenditure, it was not laid out wholly and
exclusively for the purpose of business. Subba Rao, J.,
reviewed the case law in Commissioner of Income Tax v.
Malayalam Plantation(1) and observed as follows :
Eastern Investments Ltd vs Commissioner Of Income-Tax,West ... on 4 May, 1951
In Eastern
Investments Ltd. v. Commissioner of Income Tax(") this Court
held that the Eastern Investments Ltd., an investment
company, when it borrowed money on debentures, the interest
paid by it was incurred solely for the purpose of making or
earning such income, profits or gains within the purview of
S. 12(2) of the Indian Income Tax Act. It held on a review
of the facts that the transaction was voluntarily entered
into in order indirectly to facilitate the running of the
business of the company and was made on the ground of
commercial expediency. This case, in our opinion, directly
covers the present case, although Mr. Desai suggests that
the case of an investment company stands on a different
footing from the case of a manufacturing company. In some
respects, their position may be different but in determining
the question whether raising money is incidental to a
business or not, we cannot discern any difference between an
investment company and a manufacturing company. We may
mention that in that case this Court was not considering
whether the expenditure was in the nature of a capital
expenditure or not, because it was agreed all through that
the expenditure was not in the nature of capital
expenditure, and the only question which this Court dealt
with was whether the expenditure was incurred solely for the
purpose of making or earning income, profits or gains.
Dharamvir Dhir vs The Commissioner Of Income-Tax,Bihar & ... on 5 January, 1961
The case of Dharamvir Dhir v. Commissioner of Income Tax(1)
also supports the conclusion we have arrived at on this part
of the case. It was held in that case that the payment of
interest and a sum equivalent to 11/16th of the profits of
the business of the assessee in pursuance of an agreement
for obtaining loan from the lender were in a commercial
sense expenditure wholly and exclusively laid out for the
purpose of the assessees business and they were, therefore,
deductible revenue expenditure.