TMI Blog1960 (8) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... ebruary 5, 1951, was compensation for premature termination of office of the managing agents and whether the payment was an expenditure wholly and exclusively laid out for the purpose of the business of the company? (2)Whether the payment of ₹ 3 lakhs was an expenditure wholly and exclusively laid out for the purpose of the business of the company? (3)Whether on the facts and circumstances of the case the legal expenses of ₹ 2,000, ₹ 1,000 and ₹ 1,765 and the travelling expenses of ₹ 1,876 and ₹ 2,013 and costs of ₹ 2,000 were expenditures wholly laid out for purposes of the business? It is common ground that the third question requires no separate consideration, and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners of the firm of the managing agents, such a partner or partners is or are expelled from the firm, or (2)If his or their conviction is set aside on appeal. Controversies arose and they culminated in a petition to the High Court of Madras, O.P. No. 293 of 1954. Thanks to the suggestions from the Bench and the intercession of persons interested in the welfare of the company a settlement was reached by the middle of November, 1954. The deed of settlement is reproduced as annexure K-1 in the paper-book before us. The settlement was reported to the Madras High Court and Mr. Justice Ramaswami Gounder passed the following order in O.P. No. 293 of 1954 on November 18, 1954: This matter was argued more or l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt management of the company and thereby be detrimental to the interests of the company, and in view of the legal advice rendered to the company, the parties consider it desirable and necessary to settle all the disputes as between the managing agents and the company without further protracting the proceedings in court, and also acting on the advice of certain common friends who have mediated in the matter the parties have agreed as follows: (i)That the managing agents, namely, the Malabar Industrial Syndicate hereby resign their office of managing agency of the first respondent company as and from this date and consequently the agency will be terminated and they be relieved of their office from this date, (ii)That the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r premature termination and loss of their office; (vi)In the event of the special resolution mentioned in clause (v) above not being passed or in the event of any claim being established against petitioners Nos. 1, 2, 4 and 6 in respect of the said sum of ₹ 3,00,000 paid to them, respondents Nos. 2 to 13 hereby agree personally to indemnify and keep them indemnified from any such claim or loss or damage in respect thereof. The sum of ₹ 3 lakhs provided in the deed was paid to the managing agents. The controversy before us relates to the liability of that amount to tax in the assessment of the company. According to the Department it is taxable and according to the assessee it should be excluded as an admissible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of the business. We entertain no doubt that the answer should be in the affirmative. In Atherton v. British Insulated and Helsby Cables Ltd. [1925] 10 Tax Cas. 155 Viscount Cave, L.C., said that a sum of money expended, not of necessity and with a view to a direct and immediate benefit to the trade, but voluntarily and on the grounds of commercial expediency, and in order indirectly to facilitate the carrying on of the business, may yet be expended wholly and exclusively for the purposes of the trade . In Noble Ltd. v. Mitchell [1927] 11 Tax Cas. 372 Rowlatt, J., in referring to this passage observed that it was perhaps the clearest as well as the most authoritative statement on the point . The passage was quoted with approva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure would be expended wholly and exclusively for the purposes of business. (p. 467) Counsel for the Department took us through the whole of the deed of settlement and contended that there are indications therein that persons other than the company were also intended to be benefited by the payment of the ₹ 3 lakhs. The indications, according to him, are in the fact that some of the partners of the managing agency firm relinquished their shares in the compensation in favour of the other partners under paragraph 1(iii) of the deed and in the provision in paragraph 6 thereof for the transfer of some of the shares of the company between some of the parties to the agreement. We do not think that any of these circumstances have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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