TMI Blog1962 (4) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... inally came up before a Bench consisting of R.N. Gurtu and B. Upadhya JJ., who called for supplementary statement of the case, which having been received the reference has been put up before us for hearing. The facts as emanating from the statement of the case and relevant for our purpose are as follows: The assessee and his brother, Gauri Shanker Kapoor, constitute a registered partnership firm styled as Messrs. Hari Chand Kapoor and sons. This firms carried on canteen and contract business in the India Army. A partition took place between the brothers and out of seventeen contracts that they had, each got eight. With regard to the remaining one, which was a canteen shop run under the style of Irwin Stadium, New Delhi, the military authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment was made top Gauri Shanker Kapoor in satisfaction of his forgoing the claim to profits of the firm. The question therefore, is whether the amount of ₹ 45,000 was expended wholly and exclusively for the purpose of this business. In this connection is relevant to reproduce the provisions of section 10(2)(xv) of the Act. 10. (2) Such profits or gains shall be computed after making the following allowances, namely:........ (xv) any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) laid not or expended wholly and exclusively for the purpose of such business, profession or vocation. We have perused the Institute Rules, India (Army and Royal Air Force Head quarters, India 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances, we do not see how it can be said that the sum of ₹ 45,000 was paid buy over the good will of Gauri Shanker Kapoor. Ordinarily, capital means an assure which has an element of permanency about it and which is capable of being a source of income. Capital expenditure must, therefore, normally mean an acquisition of an asset of lasting value; while income or revenue expenses are generally running expenses incurred in earning profits or expenses incurred with the primary objects of an immediately return or acquisition of assets which are not of lasting value and are likely to get exhausted or consumed in the process of the return or a very limited number of return (see Jagat Bus Service v. Commissioner of Income-tax [1950] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m's trading result and the partner No. 1 would be the sole in-charge of the firms profits and losses. It was held in that case that the payments were made in order to acquire the right to conduct the business and not for the purpose of producing profits in the conduct of the business and as such were in the nature of capital expenditure and could not be treated to be revenue expenditure. That case is closely parallel to ours. In Guruswamy Naidu v. Commissioner of Income-tax [1952] 21 I.T.R. 188 the remuneration of managing agents consisted of a monthly payment of ₹ 1,000 and a percentage of commission on various items. During the relevant accounting year the assessee who was one of the partners in the firm-a limited company--ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, and you do find money to pay the expenses year by year, and you get the receipts year by year, and the difference between the expenses necessary to earn the receipts of the year, and the receipts of the year are the profits of the business for the purpose of the income-tax. Here is a clear statement that the difference between money expended in the year in order to earn income which was to be received in the year, and the income so received, was ? 128,000. That is the net profit within the year, that is the sum upon which income-tax is to be paid; and it is as plain as plain can be that you cannot deduct from those net profits so arrived at any part of the capital which you so invested, whether you paid it or not for the purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X
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