TMI Blog1962 (4) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is: Whether on the facts of the case the payment of compensation amounting to ₹ 35,000 has been rightly disallowed as capital expenditure within the meaning of section 10(2)(xv) of the Income-tax Act, 1922? The facts giving rise to the reference are: The assessee is a public limited company carrying on the business of manufacturing and selling cloth and other textile goods. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . A.N. Sanyal Sons demanded a sum of ₹ 20,000 for cancellation of the contracts. The assessee paid both these sums of monies and claimed the total amount of ₹ 35,000 as an admissible deduction under section 10(2)(xv). The claim was disallowed by the income-tax authorities and the disallowance was confirmed by the Income-tax Appellate Tribunal. The Tribunal, in disposing of the claim, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Steamship Co. Ltd. v. Ogg [1924] 8 Tax Cas. 652. In this case the assessee company owned one ship and it contracted for the construction and purchase of another ship for the sum of 226,000 payable as to 30,000 on the signing of the contract and as to the balance by instalments as the building of the ship progressed. Before any substantial progress was made a heavy slump in trade occurred, and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by reference to another English case, Short Bros. Ltd. v. Commissioners of Inland Revenue [1927] 12 Tax Cas 953. In this case the assessee whose business it was to build steamers contracted to build two steamers. Subsequently it agreed to the cancellation of the contract in consideration of the payment of a sum of 100,000. The company contended that the sum was a capital receipt and not a revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or revenue; whereas if it is related not to the actual carrying on of the business but to the means of carrying on a business it may partake of the nature of capital. Accordingly the view taken by the Tribunal was correct and the question referred to this court should be answered in the affirmative. The reference should be returned to the Income-tax Appellate Tribunal, Allahabad, with this ans ..... X X X X Extracts X X X X X X X X Extracts X X X X
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