9911796707
TMI Blog1966 (1) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed by the Appellate Assistant Commissioner and by the Appellate Tribunal. On the following question referred by the Wealth-tax Appellate Tribunal, " Whether on the facts and circumstances of the case, the assessee-company is entitled to a deduction of Rs. 12,873 being the wealth-tax paid during the account year ended February 29, 1960, against the profits and gains of its business for the assessment year 1960-61 under section 10(2)(xv) of the Indian Income-tax Act ? ", the High Court of Kerala recorded an answer in the negative. The company has appealed to this court with special leave. The company claims that wealth-tax paid by it represented expenditure laid out wholly and exclusively for the purpose of its business, and on that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and without taking into account the losses brought forward from the earlier years, and which has not declared any dividend on its equity capital in respect of that year. It is also provided by rule 5 of the Schedule that where the profits of a company in respect of any year, before deducting any of the allowances referred to in the second paragraph of Part II, are less than the amount of wealth-tax payable by it in respect of the relevant assessment year, the wealth-tax payable by the company for such assessment year shall be limited to the amount of such profits provided that the company has not declared any dividend on its equity capital in respect of that year. But by relating the quantum of liability of a company to wealth-tax in thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the meaning of the expression "for the purpose of such business". On behalf of the company it is urged that for the purpose of its business, it holds assets and by the use of those assets profits are earned and, therefore, tax paid in respect of those assets is expenditure laid out for the purpose of the business. Whether an item of expenditure falls within that description has of necessity to be determined having regard to the nature of the business, the nature of the expenditure and the relation between the business and the expenditure. In adjudicating upon the claim that an outgoing is a permissible deduction under section 10(2)(xv) of the Income-tax Act, the primary question is whether in the light of accepted commercial practice, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bruce and Harrods (Buenos Aires) Ltd. v. Taylor-Gooby. In the Lion Brewery Co.'s case a brewery company, who were owners or lessees of licensed premises acquired as part of their business as brewers and as a necessary incident to profitable exploitation, were held entitled to the allowance in the computation of their income under Schedule D of compensation fund charges imposed under the Licensing Act upon their tenants and which the tenants after paying recouped themselves by deduction from the rents payable to the company. In Usher's Wiltshire Brewery Ltd.'s case the claim of a brewery company as owners or lessees of licensed premises acquired in the course of and for the purpose of their business as brewers and as a necessary incident to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en sleeping in the inn, injured by a falling chimney, the fall of the chimney being due to the negligence of the company's servants. The company was held disentitled to deduct the expenditure in computing its profits for income-tax purposes. Lord L.C. observed in disallowing the claim as a permissible expenditure under the head expenditure laid out wholly and exclusively for the purpose of the business : " A deduction cannot be allowed on account of loss not connected with or arising out of such trade. That is one indication. And no sum can be deducted unless it be money wholly and exclusively laid out or expended for the purposes of such trade. That is another indication. .... It does not follow that if a loss is in any sense connected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not domiciled in India were sought to be deducted under section 10(2)(xv) as expenditure laid out or expended wholly and exclusively for the purposes of the business. Subba Rao J., speaking for the court, observed at page 150: "The expression 'for the purpose of the business' is wider in scope than the expression 'for the purpose of earning profits'. Its range is wide : it may take in not only the day to day running of a business but also the rationalization of its administration and modernization of its machinery; it may include measures for the preservation of the business and for the protection of its assets and property from expropriation, coercive process or assertion of hostile title; it may also comprehend payment of statutory dues ..... X X X X Extracts X X X X X X X X Extracts X X X X
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