TMI Blog1972 (8) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to it under section 66(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as "the Act"), against the appellant and in favour of the revenue: " (1) Whether, on the facts and on a true and proper interpretation of the agreement dated July 31, 1956, between the British India Corporation and the appellant company, the letters of Sri Kailash Nath Agarwal, the letters of managing directors, the sum of Rs. 43,333 retained by the British India Corporation and adjusted by it to the credit of Sharma Co. was the assessable income of the appellant company? (2) Whether, on the facts and circumstances of the case, the sum of Rs. 43,333 represented an expenditure under section 10?" The matter relates to the assessment year 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are fully liquidated. We do hereby authorise you to retain this amount thus becoming due to us out of the commission payable to the agency and adjust the same to our firm's account with the Corporation." On the same day, i.e., March 23, 1955, Kailash Nath Agarwal addressed a letter to the managing director of BIC informing him of the agreement with Sharma Co. and requesting for the grant of sole selling agency to the appellant. The letter concluded as follows: "I hereby authorise you in case you are pleased to grant your sole selling agency to my said firm to retain one-seventh of our commission for adjustment in the account of M/s. Sharma Co. with minimum of Rs. 50,000 per annum till your dues against them are cleared with intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid amount retained by the corporation as payable to M/s. Sharma Co" Clauses 12 and 13 of the indenture were as under: Clause 12. That in the event of the dissolution of M/s Sharma Co., before the complete repayment of their liability, the sole selling agents agree that the corporation may continue to retain an amount equal to one-seventh of the trade discount of 1 3/4% or Rs. 50,000 whichever is greater and adjust it towards such dues of M/s. Sharma Co. as way then be outstanding. Clause 13. That the authority given above to the corporation to retain and adjust a part of the trade discount towards the outstanding against M/s. Sharma Co. will not be revocable and will be binding on the sole selling agents, their succ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble deduction and the High Court was in error in deciding this matter against the appellant. There is, in our opinion, no force in this contention and we agree with Mr. Ramachandran, learned counsel for the respondent, that the judgment of the High Court should be upheld. It would appear from the resume of facts given above that in March, 1955, an amount of Rs. 8,39,350-15-6 was due to BIC from the firm, Sharma Co., who was the previous sole selling agent of the Kanpur Cotton Mills. As a result of agreement between the appellant, BIC and Sharma Co., the appellant undertook to discharge the liability of Sharma Co., in lieu of being appointed the sole selling agent of the Kanpur Cotton Mills in place of Sharma Co. It can, therefore, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of carrying on business or trading activity would be revenue expenditure even though the payment is of a large amount and has not to be made periodically. As observed by this court in the case of Assam Bengal Cement Co. Ltd. v. Commissioner of Income-tax, if the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business it is properly attributable to capital and is of the nature of capital expenditure. If on the other hand it is made not for the purpose of bringing into existence any such asset or advantage but for running the business or working it with a view to produce the profits it is a revenue expenditure. If any such asset or advantage for the enduring bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of periodic receipts, they have a direct bearing even on cases relating to periodic payments. Mr. Maheshwari has referred to clause 13 of the indenture reproduced above and has contended that the appellant could make no claim to the amount of Rs. 43,333 which had been retained by BIC. This fact, in our opinion, would make no material difference so far as the true nature of that amount was concerned. The amount was deducted by BIC in pursuance of the agreement entered into by the appellant with BIC and Sharma Co., according to which the appellant had to pay that amount in the form of deduction out of its commission in consideration of being appointed the sole selling agent of the Kanpur Cotton Mills. The present is a case relating to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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