TMI Blog1968 (10) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment under the Wealth-tax Act, 1957, is allowable against profits and gains of the company's business under section 10(1) or section 10(2)(xv) of the Indian Income-tax Act, 1922 ? (ii) Whether, on the facts and circumstances of the case, the sum of Rs. 1,00,000 being contribution to the Congress party is an allowable deduction under section 10(1) or section 10(2)(xv) of the Income-tax Act, 1922 ? (iii) Whether the levy of excess dividend tax by withdrawal of corporation tax rebate can be made and collected under the Income-tax Act, 1922 ? (iv) Whether, on the facts and circumstances of the case, the legal charges of Rs. 1,10,138 incurred for obtaining loan from the Industrial Finance Corporation are allowable in the computation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Tribunal the assessee claimed, on the basis of its letter dated June 1, 1961, that the amount was paid for furtherance of the business. In the said letter it is, inter alia, stated : " Due to commercial expediency, the company has spent the same with a view to ensure smooth and efficient running of the factory. The factory is situated at a place far away from Calcutta and other places. Supply of coal, packing bags, supply of cement, etc., envisage problems which are effectively solved by the Government, ruled by the Congress party. This contribution is, therefore, an expenditure, wholly and exclusively for the purposes of the business. " The assessee contended before the Tribunal that the Government had given to the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d expenditure in carrying out a " campaign " against the nationalization of the sugar refining industry. The Commissioner recorded a finding that " the sum in question was money wholly and exclusively laid out or expended for the purpose of the company's trade and was an admissible deduction from its profits for income-tax purposes. " The House of Lords, by a majority, decided that the money was spent for the purposes of the company's trade and to preserve the very existence thereof and the finding of the Commissioner was, therefore, correct. That case is of no assistance to the assessee as the expense incurred to prevent seizure of the company's assets could not but be accurately described as money expended for the purposes of enabling the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e established. I would, in the circumstances, rest my decision in this case on the failure of the assessee to show that necessary conditions for allowance of the amount as a deduction were satisfied. This question, therefore, must be answered in the negative and against the assessee. That takes me to the third question. Mr. K. K. Jain, the learned counsel for the assessee, conceded that under clause (ii) of the proviso to Paragraph D of Part II read with the further proviso to the said Paragraph D of the Finance Act, 1957, the amount could be levied and collected. He, however, said that the assessee had challenged the vires of the said provision of the Finance Act, 1957, by a separate writ petition which is pending and it was not open to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oan is negotiated to be taken into consideration or the purpose for which it is actually used? Further, suppose that in the accounting year the purpose is to borrow and buy raw material but in the assessment year the company finds it unnecessary to buy raw material and spends it on capital assets. Will the Income-tax Officer decide the case with reference to what happened in the accounting year or what happened in the assessment year ? In our opinion, it was rightly held by the Nagpur Judicial Commissioner in Nagpur Electric Light and Power Co. Ltd. v. Commissioner of Income-tax that the purpose for which the new loan was required was irrelevant to the consideration of the question whether the expenditure for obtaining the loan was revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and he directed the Income-tax Officer to look into the matter. On further appeal by the assessee to the Tribunal, the Tribunal came to the conclusion that the items of drainage and sanitary fittings constituted part of plant and machinery and not of building as held by the Appellate Assistant Commissioner and the assessee was, therefore, entitled to development rebate thereon. It may be pointed out that under section 10(2)(vib) development rebate is allowed only in respect of machinery or plant and not on building as in the case of depreciation. " Plant " has been defined under sub-section (5) of section 10 of the Indian Income-Act, 1922, as including vehicles, books, scientific apparatus and surgical equipment purchased for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X
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