TMI Blog1966 (10) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... which could not be interfered with is to be accepted. The judgment of the High Court dated April 4, 1962, should be set aside. The High Court is directed to ask the Income-tax Appellate Tribunal to state a case on the following question of law and refer it under section 66(2) of the Act : " Whether, on the facts and circumstances of the case, the sum of ₹ 46,582 was a permissible deduction under section 10(2)(xv) of the Income-tax Act in the assessment year 1954-55 ?" After receipt of the reference the High Court should deal with it in accordance with law. Appeal allowed. - - - - - Dated:- 4-10-1966 - Judge(s) : V. RAMASWAMY., J. C. SHAH., V. BHARGAVA JUDGMENT The judgment of the court was delivered by RAMASWAMI J.-- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the shareholders of the respondent-company were partners in the Allahabad Woollen Mills which functioned as a firm till March 31, 1948, and thereafter converted itself into a limited company of the same name in which also the said partners were the main shareholders. The respondent was then a non-resident company as it was carrying on business at Bhadohi in the State of Banaras. The Allahabad Woollen Mills Ltd. thereafter sent to the respondent-company a debit note for a sum of Rs. 46,582, on August 22, 1953, and another debit note for a sum of Rs. 32,213, on March 23, 1954. These amounts were claimed by the Allahabad Woollen Mills as extra price of mill yarn supplied by them to the respondent for the accounting period from April 1, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed the appeal and held that the debit note was accepted for reasons of commercial expediency. In the course of its order the Tribunal stated as follows: " The claim was disallowed by the Income-tax Officer as an ex gratia payment made by the appellant to the Allahabad Woollen Mills Ltd., and the Appellate Assistant Commissioner was of the opinion that passing of the debit note was not a bona fide business transaction prompted by commercial expediency. We are unable to concur. We see nothing to warrant the conclusion that the acceptance of the debit note issued by the Allahabad Woollen Mills Ltd. was not prompted by considerations of commercial expediency. It may be true that the Allahabad Woollen Mills Ltd. had supplied woollen yarns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereafter made an application under section 66(2) of the Act to the Allahabad High Court which dismissed the application by its judgment dated April 4, 1962. On behalf of the appellant Mr. Sen put forward the argument that the question whether, on the facts and circumstances of this case, the amount of Rs. 46,582 was a permissible deduction under section 10(2)(xv) of the Act was a mixed question of fact and law and the High Court was in error in not directing the Tribunal to state a case under section 66(2) of the Act. It was submitted by learned counsel that the High Court was not right in holding that no question of law arose out of the order of the Tribunal and that the finding of the Tribunal that the payment was made for commercial c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the question whether an expenditure was incurred solely for the purpose of carrying on the business of the assessee and was made on the ground of commercial expediency was not a pure question of fact but was a mixed question of fact and law which was subject to review and the decision of the High Court was reversed and the claim of the assessee was allowed by this court on the ground that section 12(2) of the Act applied to the case. Similarly, in a later case, Commissioner of Income-tax v. Royal Calcutta Turf Club this court reiterated the principle that though the question whether an item of expenditure was wholly and exclusively laid out for the purpose of the assesee's business must be decided on the facts of each case, the final conc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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