TMI Blog1966 (9) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... jewellery pledged with it against receipt from the constituent the amount which was recoverable by the bank. The first element of the transaction would appropriately be deemed expenditure and such expenditure having been laid out for protecting and furthering the business of the bank was properly admissible under section 10(2) (XV) of the Income-tax Act, 1922. Appeal dismissed. - Civil Appeals Nos. 601 & 602 of 1965 - - - Dated:- 15-9-1966 - Judge(s) : V. RAMASWAMY., J. C. SHAH., V. BHARGAVA JUDGMENT The judgment of the court was delivered by SHAH J.---The Nainital Bank Ltd. has its head office at Nainital and a branch at Ramnagar. Currency notes of the value of Rs. 1,06,000 and a large quantity of jewellery pledged with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pretation of section 10(1), section 10(2)(xi) and section 10(2) (XV) of the Indian Income-tax Act, the claims for the losses of Rs. 48,891 and Rs. 1,21,760 were permissible in the assessment years 1953-54 and 1954-55 respectively? " Before the High Court the claim for deduction under section 10(2)(xi) was abandoned by the bank and the High Court negatived the claim of the bank for deduction of the amount under section 10(1). But the High Court held that, having regard to the true nature of the settlements made with the constituents, the amounts credited as the value of jewellery against the claim of the constituents for amounts advanced to them must be regarded as expenditure within the meaning of section 10(2)(xv) and, since such credit wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner submitted that when the bank advanced a loan to its constituent, it incurred expenditure and when the bank failed to recover under an arrangement with the constituent the amount due to it, there was merely an act of forbearance to enforce the demand and such an act of forbearance was not expenditure within the meaning of section 10(2)(XV). Mere forbearance to realize a claim, it may be accepted, is not expenditure within the meaning of the Act; but we are not called upon to consider whether the advances made by the bank to its constituents may in certain circumstances constitute expenditure. Nor can it be said that there was by the settlements mere forbearance to recover the amount. The settlements made by the bank with its cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of the business. The question is not about the strict enforcement of the legal rights and obligations between the bank and its constituents. The sole question is whether the bank in incurring the expenditure acted in the interest of and for the purpose of its business. The bank is carrying on banking business and advances loans on the security of jewellery. The credit of a banking business is very sensitive : it largely thrives upon the confidence which its constituents have in its management. To maintain that confidence the management has often to make concessions and thereby to preserve the goodwill of the business and its relations with the clientele. The bank could have, if so advised, taken its stand strictly on its le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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