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TMI Blog1971 (3) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is a limited company engaged in the business of generation and supply of electricity. It had some surplus funds. Out of the surplus funds, a sum of Rs. 45,000 was invested in fixed deposit with a non-scheduled banking concern of the name and style of M/s. Mansa Ram & Sons. Besides, it had another account with that bank called as "war costs surcharge account", in which there was a credit balance of Rs. 897. The company came to know that the bank was not doing well and insolvency petition had been filed against it by some of its creditors. The assessee grew apprehensive and filed a civil suit for the recovery of its dues. The company, however, failed to realise anything even though a decree was passed in its favour in the sum of Rs. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofits or gains of any business, profession or vocation carried on by him. (2) Such profits or gains shall be computed after making the following allowances, namely : (xv) any expenditure (not being an allowance of the nature described in any of the clauses (i) to (xiv) inclusive, and not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of such business, profession or vocation." The Tribunal has not disputed that any expenditure incurred for safeguarding or protecting an asset of a business is an allowable expenditure and indeed such a proposition cannot be disputed. It is now settled beyond doubt that any expenditure incurred by a businessman for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im out of the business assets and put in an investment of different kind, but the case of a company stands on a different footing. In a company, which is formed for business, all its assets represent business assets. It is rather difficult to visualize that a limited company could segregate any of its assets and treat it as private property. Nothing has been placed on the record to show that the company took any step to take this amount of Rs. 45,000 out of its assets and to treat it as a non-business asset. It is possible to argue that the fixed deposit represented a capital asset and the loss of such capital asset is, ordinarily, not an admissible expenditure under section 10(2)(xv). But, so far as the expenditure incurred for the protec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act, 1922, a claim for bad debt falls for consideration under section 10(2)(xi) while expenditure incurred for purposes of business falls under section 10(2)(xv). In the case of Curtis v. J. & G. Oldfield, a company claimed as trading loss a certain sum of money, which had been misappropriated by its managing director and had been written off as a bad debt. The claim was disallowed on the ground that the loss suffered by the company as a result of misappropriation by its managing director could not be said to have arisen in carrying on the business. The second case of Badridas Daga v. Commissioner of Income-tax is also a case where a sum of money had been embezzled by the employee of a company, which it wrote off and the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There is no finding that was the intention with which the criminal proceedings were had lanched against Sri Mander Dag nor indeed is there any finding that as a result of criminal action the company was able to recoup its loss. In fact, the finding is that Sri Mander Dag was convicted and fined. In any event, even if one of the reasons for launching a criminal proceeding was to put pressure upon Sri Mander Das, the expenditure could not be said to have been incurred wholly and exclusively for the purposes of the business. We, accordingly, answer the question by saying that out of the sum of Rs. 6,200 that much amount would be admissible under section 10(2)(xv) as represented the expenses incurred oni civil litigation and the remaining exp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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