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2017 (4) TMI 1558 - HC - Income TaxBusiness expenditure u/s 37 - contribution to PACs development fund and PACs managers salary security fund - HELD THAT:- There is nothing in the statute to suggest, as argued, that the amount standing to its credit cannot be taken into consideration in arriving at the purchase price. For the purposes of sale to a State Board or Government, a different statute lays down how the price is to be fixed, and with it we are not here concerned. We must add that we asked Mr. Sachar to whom, in his submission, the amounts credited to the Contingencies Reverse were diverted. Mr. Sachar replied that they were diverted to and vested in the State Government. This, for the reasons set out above, is quite unacceptable. We hold that the amount credited to the Contingencies Reserve is not diverted by reason of an (3 of 4) [ITA-254/2011] overriding obligation or title and, in determining the business profits of the assessee, it must be taken into account. Mr. Sachar contended that if the amount credited to the Contingencies Reserved was includible in the computation of the business income of the assessee, the amount so appropriated should be allowed as a business deduction, being expenditure necessary to carry on the assessee's business. As the Calcutta High Court has pointed out, there is no expenditure. The amount appropriated to the Contingencies Reserve is set apart to meet possible exigencies. It is not a provision for known, existing liabilities. - Decided against assessee.
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