TMI Blog1971 (1) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... y special leave from a judgment of the Calcutta High Court answering the following question referred to it under section 66(1) of the Indian Income-tax Act, 1922, hereinafter called " the Act " , in the negative and against the assessee : " Whether, on the facts and in the circumstances of the case, the sum of Rs. 1,24,199 was deductible from the business income of the assessee either under section 10(1) or 10(2)(xi) or 10(2)(xv) of the Income-tax Act ? " The assessee is a public limited company having its registered office at Calcutta. Its principal business consists of manufacturing aluminium ingots, sheets and such other products from aluminium. There is another company known by the name of Aluminium Laboratories Ltd., Montreal, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim. The department preferred an appeal to the Tribunal which held that the amount in question was neither expenditure incidental to the business, nor was it wholly and exclusively laid out for that purpose nor was it claimable as a bad debt in view of the fact that it had not been incurred as a trade debt in the course of the business. The departmental appeal was, therefore, allowed and the order of the Income-tax Officer was restored. The High Court was of the view that there was a nexus between payment and the business of the assessee inasmuch as it had an indirect bearing upon the technical aid which the assessee had obtained from the Montreal company but was of the opinion that, even if the payment had some connection with the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the rate applicable to a company or in accordance with the provisions of sub-clause (b) of sub-section (1) of section 17, as the case may be : Provided that where the person not resident is not a company, the proviso to sub-section (2B) shall apply to the deduction of income-tax and super-tax under this sub-section as it applies to the deduction of income-tax and super-tax under sub-section (2B) : Provided further that nothing in this section shall apply to any payment made in the course of transactions in respect of which a person responsible for the payment is deemed under the first proviso to section 43 not to be an agent of the payee. Section 18(7) : " If any such person does not deduct or after deducting fails to pay t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assistance based on the researches carried on by us in our plant and laboratories, state demanding income-tax and super-tax on our charges, no such State could ever receive any technical assistance at all and we ourselves could hardly afford to render such technical assistance and the expensive taxes involved. We have given this matter our serious consideration and cannot bring ourselves on any score, equitable, legal, contractual or moral to reimburse to you any monies you may have to pay to the Indian taxing authorities." The claim of the assessee principally is two-fold. It is maintained, firstly, that after the refusal of the Montreal company in the matter of reimbursement, the amount of Rs. 1,24,199 was written off as a bad and irr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to avail of its continued technical assistance and advice. Indeed, the argument on behalf of the appellant has rested a great deal on this aspect of the matter and it has been urged strenuously that the assessee could not afford to displease the Montreal company as it stood greatly in need of the latter's technical assistance. Secondly, the question is whether the assessee could claim deduction under section 10(2)(xv) of the Act. For that purpose the assessee had to establish that the amount in question had been wholly and exclusively laid out for the purpose of its business. Our attention has been invited to a decision of the Bombay High Court in Commissioner of Income-tax v. Pannalal Narottamdas Co., in which it was held that the am ..... X X X X Extracts X X X X X X X X Extracts X X X X
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