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1 - 10 of 16 (0.25 seconds)Section 10 in Income Tax Rules, 1962 [Entire Act]
The Land Acquisition Act, 1894
Badridas Daga vs The Commissioner Of Income-Tax on 25 April, 1958
(21) The contention to be considered, therefore, is whether the amount paid by the assessed by way of interest can be said to be "any expenditure" laid out or expended wholly or exclusively for the purposes of the assessed's business, profession or vocation as envisaged by clause (xv) of section 10(2). This aspect of the matter was considered by their Lordships of the Supreme Court in Badridas Daga Vs Commissioner of Income-tax (34 I.T.R. 10) (7). In that case the assessed carried on business as money lenders, dealers in shares and bullion and commission agents. The assessed's agents at Bombay held a power-of-attorney conferring on him large powers of management including authority to operate on bank accounts. The said agent withdrew from the firm's bank account sums aggregating to Rs. 2,30,636-4-0 and applied them in satisfaction of his personal debts incurred in speculative transactions. The assessed filed a suit for the recovery of the said amount against the agent which was decreed. Only a sum of Rs. 28.000.00 was recovered from the agent which was adjusted towards the decree and the balance of Rs. 2,02,442-13-9 was written off at the end of the accounting year as irrecoverable. The assessed claimed that amount as an admissible deduction under section 10(1) or under the general principle of determining the profit and loss of the assessed or on the ground that the amount was deductible under section 10(2)(xv). The Tribunal held that the amount was not a trading loss and did not allow it. The High Court also negatived the contention of the assessed. In appeal on leave granted to the assessed, under Article 136, their Lordships of the Supreme Court held that the moneys which were withdrawn by the employee out of the business till without authority and in fraud of the employer could in no sense be said to be an "expenditure laid out or expended wholly or exclusively" for the purpose of the business. It was then considered whether the amounts lost through embezzlement by an employee were a trading loss which could be deducted in computing the profits of a business under section 10(1). In this connection their Lordships of the Supreme Court observed as follows at page 15 :- "WHENa claim is made for a deduction for which there is no specific provision in section 10(2), whether it is admissible or not will depend on whether, having regard to accepted commercial practice and trading principles, it can be said to arise out of the carrying on of the business and to be incidental to it. If that is established, then the deduction must be allowed, provided of course there is no prohibition against it, express or implied, in the Act".
Commissioner Of Income-Tax, West ... vs Hindusthan Motors Ltd. on 1 September, 1967
(26) The learned counsel for the assessed relied on Commissioner of Income-tax , West Bengal Vs Hindustan Motors Ltd., (-68 I.T.R. 301)(9). In that case the assessed-company was engaged in the business of manufacturing motor cars. Its factory was situated within the territorial limits of Kotrang Municipality, at a little distance away from the G.T. Road. An approach road connecting the factory with the G.T. Road which belonged to the Government had fallen into disrepair and thus caused difficulty to the assessed in transport of manufactured motor cars from the factory premises to the place of their sale. The Government undertook to repair the approach road on the assessed's contributing in advance a sum of Rs. 39,770.00 to meet the costs of the repair to be carried. The company paid the aforesaid sum to the Government and claimed the amount as expenditure, allowable under section 10(2)(xv) of the Income-tax Act. 1922. The Income-tax officer and the Appellate Assistant Commissioner held that the expenditure was of a capital nature. On appeal the Tribunal allowed the appeal stating that the expenditure was laid out for the purpose of facilitating carrying on of its business and that the enduring benefit went to the owner of the road and not to the assessed. On the asking of the department the question "whether, on the facts and in the circumstances of the case, the sum of Rs. 39.770.00 was an allowable expense within the meaning of section 10(2)(xv) of the Indian Income-tax Act, 1922" was referred to the High Court. While dealing with the question the High Court observed as follows at pages 308 and 309:- "THEmotive behind the payment was to do away with the inconvenience of a disrepair road, which should have been kept in repair by the Government as part of civilised administration. The money was spent not so much to bring about any asset or advantage of enduring benefit to itself but to run the business efficiently and conveniently, that is to say, by not being hampered by slow and possibly dangerous locomation of cars, produced in the factory, while moving on a disrepaired and ill-conditioned road. As a matter of business prudence, there was justification on the part of the assessed to expend this amount so as to induce the Government to repair the road, which it could not itself, repair, not being the owner of the road. The expenditure ought thus to be treated as wholly and exclusively spent for the assessed's business within the meaning of section 10(2)(xv)."
State Of Madras vs C. J. Coelho on 30 April, 1964
(27) Drawing support from the above-cited case the learned cosel contended that interest paid was covered by the term "any expenditure" as the same was paid in the business necessity or expediency of the business of the assessed. The learned counsel also relied upon State of Madras Vs G.J. Coelho (53 I.T.R. 186)(10) in support of his contention that the interest was allowable under section 10(2)(xv). In that case the respondent-assesses purchased an estate consisting of tea, coffee, and rubber plantations for a sum of Rs. 3,10,000.00. The assessed was not possessed of the full price and borrowed Rs. 2,90,000.00 on interest and claimed deduction on the amount of interest paid under section 5 (k) of the Madras Plantations Agricultural Income-tax Act, the provisions of which section are word for word a reproduction of the provisions of section ]0(2)(xv) of the Indian Income-tax Act, 1922. The question for consideration in that case was whether the payment of interest was in the nature of capital expenditure or not. The Court held that in ordinary commercial practice payment of interest would not be termed as capital expenditure as no new asset was acquired with it and neither any enduring benefit was made. I`t was further held that the payment of interest on the amount borrowed for the purchase of plantation when the whole transaction of purchase and the working of plantation was viewed as an integrated whole, was so closely related to the plantation that the expenditure could be said to be laid out or expended wholly or exclusively for the purpose of plantation and from the agricultural receipts must be deducted all expenses which in ordinary commercial accounting must be debited against the receipts.
Messrs. Calcutta Company Ltd vs The Commissioner Of Income-Tax,West ... on 12 May, 1959
(34) Support was also drawn from Calcutta Company Limited Vs Commissioner of Income-tax, West Bengal (37 I.T.R. 1) (13) in which their Lordships of the Supreme Court observed that the words "profits and gains" have to be understood in their commercial sense and there can be no computation of profits and gains until the expenditure which was necessary for the purpose of earning profit was deducted there from-whether the expenditure was actually incurred or the liability in respect thereof had accrued even though it may have to be discharged at some future date.
Article 136 in Constitution of India [Constitution]
Section 34 in The Land Acquisition Act, 1894 [Entire Act]
Bombay Steam Navigation Co. (1953) ... vs Commissioner Of Income-Tax, Bombay on 21 October, 1964
(14) It was accordingly held in the above case that the claim for deduction of the amount of interest under section 10(2) (iii) was not admissible. The Court, however, held that interest paid by the assessed company was a permissible deduction under section 10(2)(xv) and that the question had to be viewed for the larger context of business necessity or expediency. Further that if the out-going or the expenditure was so related to the carrying on or conduct of the business, that it may be regarded as a integral part of the profit earning process, the expenditure may be regarded as revenue expenditure. In the circumstances of the case it was held that the transaction of acquisition of assets was closely related to the commencement and carrying on of the business and the amount of interest paid on the amount remaining due must in the normal course be regarded as expended for the purposes of the business which was laid out or expended wholly or exclusively for the purposes of the business.