TMI Blog1987 (2) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... also current liabilities and provision ?" Counsel for the assessee as well as the Revenue conceded that this question is covered against the assessee by two decisions of the Supreme Court: Bombay Steam Navigation Co. (1953) Private Ltd. v. CIT [1965] 56 ITR 52 and Lohia Machines Ltd. v. Union of India [1985] 152 ITR 308. The question accordingly is answered against the assessee and in favour of the Revenue. The questions stated hereunder are referred at the instance of the Revenue: " 1. Whether, on the facts and in the circumstances of the case, should the loans be deducted while computing the capital for the purpose of relief under section 80J of the Income-tax Act, 1961 ? 2. Whether, on the facts and circumstances of the case, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of the deduction under section 80J (see sub-section (3) of section 80J). The said dues are on a par with moneys borrowed and hence the same cannot be said to be capital employed in the industrial undertaking. This view of ours is fortified by the decision of the Supreme Court in Lohia Machines Limited's case [1985] 152 ITR 308. The question, therefore, is answered against the assessee and in favour of the Department. To understand this judgment in regard to question No. 3, it is necessary to state briefly the essential facts pertaining to the said question. The assessee-company had produced before the Income-tax Officer an adjustment account claiming a deduction of Rs. 20,663, representing the freight and customs duty the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 399 and Smith v. Incorporated Council of Law Reporting [1914] 6 Tax Cas 477 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; ........" This observation has been noted with approval by the Supreme Court and, therefore, the said observation is also relevant in the context. The principles deducible from these rulings are: The payment made or expenditure incurred though not of necessity and with a view to a direct and immediate benefit to the trade, but voluntarily and on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the quality of the said goods was unsatisfactory and, therefore, it decided to return the unused catalysts (182 cft) to the U.S. Company. The assessee-company which was then having the transaction aforesaid with Coromandel Fertilisers, came to know of the decision of Coromandel Fertilisers to return the goods. The assessee-company then volunteered to spend for the return of the goods to the American company. The correspondence between the assessee-company and the Coromandel Fertilisers reveals this. The assessee-company accordingly, as is seen from its letters dated August 20, 1970, November 24, 1970, and May 12, 1971, agreed that the value of the unused goods could be adjusted against the amounts due to it from Coromandel Fertiliser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectly to facilitate the carrying on of the business. The facts we have narrated above would show that there was no necessity for the assessee-company to reduce their price as required by Coromandel Fertilisers but such a reduction would facilitate the carrying on of the business. The carrying on of the business necessarily implies looking into the future by the businessman. As a potential and regular customer, the business requirements dictated that the assessee should take over the expenses involved in the shipment of the unused catalysts to America. We are satisfied that there is no extra-commercial consideration involved in this payment. A case was sought to be made out that the assessee's collaborator in U.S. was liable for this payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al expediency and not incurred for fostering business of another or with some improper or oblique purposes, will be treated as money expended wholly and exclusively for the purpose of the trade. It appears to us that the facts found by the Tribunal bring the payment in question within the description mentioned above. We do not find any way to interfere with the conclusions of the Tribunal based on the findings which have become final. For the reasons stated above, the question is answered in the affirmative, in favour of the assessee and against the Revenue. We direct the parties to bear their respective costs in these tax refer red cases. A copy of this judgment under the seal of the High Court and the signature of the Registrar shall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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