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1 - 5 of 5 (0.20 seconds)Section 10 in Income Tax Rules, 1962 [Entire Act]
The Commissioner Of Income-Tax, ... vs Sir S.M. Chitnavis on 26 April, 1932
(xiv), which ;is not in the nature of capital expenditure or
personal expenses of the assessee, to be deducted, if laid
out or expended wholly and exclusively for the purpose of
such business, etc. The clauses expressly provide what can
be deducted; but the general scheme of the section is that
profits or gains must be calculated after deducting
outgoings reasonably attributable as business expenditure
but so as not to deduct any portion of an expenditure of a
capital nature. If an expenditure comes within any of the
enumerated classes of allowances, the case can be considered
under the appropriate class; but there may be an expenditure
which, though not exactly covered by any of the enumerated
classes, may have to be considered in finding out the true
assessable profits or gains. This was laid down by the
Privy Council in Commissioner of Income-tax v. Chitnavis (1)
and has been accepted by this Court. In other words, s. 10
(2) does not deal exhaustively with the deductions, which
must be made to arrive at the true profits and gains.
To find out whether an expenditure is on the capital account
or on revenue, one must consider the expenditure in relation
to the business. Since all payments reduce capital in the
ultimate analysis, one is apt I to consider a loss as
amounting to a loss of capital. But this is not true of all
losses, because losses in the running of the business cannot
be said to be of capital. The Questions to consider in this
connection are: for that was the money laid out? Was it to
acquire an asset of an enduring nature for the benefit of
the business, or was it an outgoing in the doing of the
business? If money be lost in the first circumstance, it is
a loss of capital, but if lost in the second circumstance,
it is a revenue loss. In the first, it bears the
(1) (1932) L.R. 59 I.A. 290.
London Investment And Mortgage Co. Ltd. vs Inland Revenue Commissioners. London ... on 6 December, 1956
The second case, Charles Marsdon & Sons. Ltd v. The
Commissioners of Inland Revenue (1), is under the Excess
Profits Duty in England, and the question arose in the
following circumstances: an English Company carried on the
business of paper-making. To arrange for supplies of wood
pulp, it entered into an agreement with a Canadian Company
for supply of 3000 tons per year between 1917-1927. The
English Company made an advance of E. 30,000 against future
deliveries to be recouped at the rate of E. I per ton
delivered. The Canadian Company was to pay interest in the
meantime. Later, the importation of wood pulp was stopped,
and the Canadian Company (appropriately called the Ha Ha
Company) neither delivered the pulp nor returned the money.
Bowlatt, J. held this to be a capital expenditure not admi-
ssible as a deduction. He-was of opinion that the payment
was not an advance payment for goods, observing that no one
pays for goods ten years in advance, and that it was a
venture to establish a source and money was adventured as
capital.
Income Tax Rules, 1962
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