TMI Blog1965 (7) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the company naturally resisted this petition. The litigation went on for a number of years and ultimately the matter came before this court. The parties, however, came to an agreement and the forfeited shares were reallotted to the shareholders. The company paid ₹ 10,500 to Shri Rajpaul Chadha for his efforts in bringing about a compromise with Messrs. Shivraj Bhalla and other shareholders, who had filed the above-mentioned petition for the winding up of the company. A sum of ₹ 1,000 was also incurred by the company for the journeys in connection with the trips of its employees to Patiala with regard to this winding up petition. Both these items were claimed by the company as a deduction under section 10(2)(xv) of the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this court under section 66(2) of the Income-tax Act : Whether on the facts and in the circumstances of the case, the legal and traveling expenses amounting to Rs, 9,000 and ₹ 1,000, respectively, could be legally allowed as a deduction under section 10(2)(xv) of the Income-tax Act, 1922? That is how this reference has come before us. The relevant portion of section 10 for the determination of this question reads as under- 10. Business.-(1) The tax shall be payable by an assessee under the head 'Profits and gains of business, profession or vocation' in respect of the profits or gains of any business, profession or vocation carried on by him. (2) Such profits or gains shall be computed after making the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cope than the expression 'for the purpose of earning profits'. Its range is wide : it may take in not only the day to day running of a business but also the rationalisation of its administration and modernization of its machinery ; it may include measures for the preservation of the business and for the protection of its assets and property from expropriation, coercive process or assertion of hostile title ; it may also comprehend payment of statutory dues and taxes imposed as a pre-condition to commence or for carrying on of a business ; it may comprehend many other acts incidental to the carrying on of a business. However wide the meaning of the expression may be, its limits are implicit in it. The purpose shall be for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction from its profits for income-tax purposes ':- Held, that the object of the expenditure being to preserve the assets of the company from seizure and so to enable it to carry on and earn profits there was no reason in law to prevent the Commissioners from so finding. On the evidence it was not to be assumed that the trade of the company would have continued, in an income tax sense, in other hands, after nationalisation and accordingly that the expenditure was incurred for the puprose of preventing a change of ownership. This amount was thus incurred for carrying on the business of the company and for no other purpose. It was, therefore, expended wholly and exclusively for the purpose of the business of the assessee-company and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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