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TMI Blog1966 (10) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... limited company carrying on the business of manufacture and export of carpets having their head office at Bhadohi which was formerly in the State of Banaras. The respondent used to obtain yarn from a firm known as Allahabad Woollen Mills at Allahabad for the purpose of its business, viz., the manufacture and export of carpets. The Allahabad Woollen Mills supplied yarn to the respondent for three years ending March 31, 1947, March 31, 1948, and March 31, 1949. While making the assessment of the Allahabad Woollen Mills for the assessment years 1947-48, 1948-49 and 1949-50, the Income-tax Officer held that the goods were supplied by the Allahabad Woollen Mills to the respondent at a lower rate and profit, to that extent, had been diverted. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he previous year relevant to the assessment year 1950-51. The Tribunal, however, added : "We do not express any opinion whether the claim is maintainable in the subsequent years." The respondent thereafter amended its profit and loss account for the accounting years 1952-53 and 1953-54 corresponding to the assessment years 1954-55 and 1955-56 and claimed the sum of Rs. 46,582, as a deduction in the assessment year 1954-55. The claim was disallowed by the Income-tax Officer by his order dated December 30, 1957, and it was held that the alleged payment was an ex gratia payment and could not be considered to be a payment arising out of the business transaction with the Allahabad Woollen Mills. The Income-tax Officer, therefore, disallowed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact that the two companies had business dealings with each other for a long time and were closely connected. In our opinion the debit notes were accepted for reasons of commercial expediency. The claim should be allowed." Thereafter, the Commissioner of Income-tax applied to the Tribunal under section 66(1) of the Act for a reference to the High Court. The application was dismissed by the Tribunal and in the course of its order the Tribunal stated as follows: " The question before the Tribunal was whether the sum of Rs. 46,582 was a permissible deduction under section 10(2)(xv). The department held that this was a sort of ex gratia payment and that the payment was not out of bona fide business consideration. The Tribunal, after cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the final conclusion on the question is always one of law. To put it differently, the question whether the expenditure was laid out or expended wholly and exclusively for the purpose of the business is a question which involves, in the first place, the ascertainment of facts by the Appellate Tribunal, and, in the second place, the application of the correct principle of law to the facts so found. The question, therefore, is a mixed question of fact and law. It is a question of law because the Tribunal has to determine what is the meaning to be given to the statutory phrase " expenditure laid out or expended wholly and exclusively for the purpose of such business ". The proper construction of statutory language is always a matter of law an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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