TMI Blog1965 (4) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... illage cultivators who utilised them for the manufacture of gur. The business was seasonal and the kohlus were utilised by the villagers for a period of about six months. For the assessment year 1951-52 and 1952-53, the Income-tax Officer declined to allow depreciation for the whole year. He has disallowed certain taxes which had been imposed by the U.P. District Board. The Appellate Assistant Commissioner allowed depreciation for the whole year subject to certain minor modifications and he also held that the taxes were allowable under section 10(2). The Tribunal upheld the order of the Appellate Assistant Commissioner. Thereupon, the Commissioner of Income-tax sought reference of the following questions of law which was allowed: (1) W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of business, profession or vocation must be deducted while computing the profits or gains therefrom. Section 10(4), however, provides that the allowance of any sum paid on account of any cess, rate or tax levied on the profits or gains of any business, profession or vocation or assessed at a proportion of or otherwise on the basis of any such profits or gains cannot be deducted. Now, the tax amounting to ₹ 2,000 for which deduction was claimed by the assessee had been imposed under section 114 of the U.P. District Boards Act. That section is in the following terms: 114. Imposition of tax on circumstances and property.--The power of a board to impose a tax on circumstances and property shall be subject to the following conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Act could only proceed on a rough guess which was in no way comparable with the ascertainment of profits and gains under the Income-tax Act and the inclusion of this element of business income as part of the circumstances of the assessee with a view to the imposition of the union rate did not fall within section 10(4) of the Income-tax Act. Their Lordships proceeded to say that where the union rate was not wholly referable to premises occupied for the purpose of a business, the assessee, on establishing the portion of the rate which was so referable, would be entitled to deduct such portion under section 10(2)(ix) (new section 10(2)(xv)). Mr. Hardy has not been able to show how the principles laid down by the Privy Council in this case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore and it is too late in the day for Mr. Hardy to agitate this matter. On the other hand, as in the Allahabad case(1), the argument has throughout proceeded on the assumption that the assessee was carrying on business in the area falling within the jurisdiction of the District Board and in order to carry on this business it became necessary for the assessee-firm to submit to the tax liabilities imposed by the District Board. The amount, therefore, which was expended by payment of the tax in question, was for the purpose of enabling the assessee to carry on its business within the jurisdiction of the District Board and such an expenditure must necessarily be held to be of the nature covered by section 10(2)(xv). For the reasons given abo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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