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TMI Blog1960 (11) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... ian boys as jockeys, did not constitute expenses of the business of the assessee allowable under section 10(2)(xv) ? " which was answered in favour of the respondent. The Commissioner is the appellant before us and the assessee is the respondent. The respondent is an association of persons whose business is to hold race meetings in Calcutta on a commercial basis. It holds two series of race meetings during the two seasons of the year. The respondent does not own any horses and, therefore, does not employ jockeys but they are employed by owners and trainers of horses which are run in the races. It is a matter of some importance to the respondent that there should be jockeys available to the owners with sufficient skill and experience bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act. The Tribunal found that it was not the business of the respondent to provide jockeys to owners and trainers, that the jockeys trained in the respondent's school were not bound to ride only in the races run by the respondent and that the benefit, if any, which accrued was of an enduring nature. It also found that the respondent had been conducting race meetings since long, that it was not the case of the assessee that if it did not train jockeys they would become unavailable and that the mere policy of producing efficient Indian jockeys was not a sufficient consideration for treating the expenditure as one incurred for the business of the respondent. For these reasons the expenditure was disallowed. Before the Appellate Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said : "Another test is whether the transaction is properly entered into as a part of the assessee's legitimate commercial undertaking in order to facilitate the carrying on of its business ; and it is immaterial that a third party also benefits thereby (Eastern Investments Ltd. v. Commissioner of Income-tax). But in every case it is a question of fact whether the expenditure was expended wholly and exclusively for the purpose of trade or business of the assessee. In the present case the finding is that it was laid out for the purpose of the assessee's business and there is evidence to support this finding." But those observations must be read in the context. In that case the assessee firm was the managing agent of a company and at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s business profitable it was necessary that there were jockeys of requisite skill and experience in sufficient numbers who would be available to the owners and trainers because without such efficient jockeys the running of race meeting would not be commercially profitable. It was for this purpose that the respondent started the school for training Indian jockeys. If there were not sufficient number of efficient Indian jockeys to ride horses its interest would have suffered, and it might have had to abandon its business if it did not take steps to make jockeys of the necessary calibre available. Therefore, any expenditure which was incurred for preventing the extinction of the respondent's business would, in our opinion, be expenditure wholl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture being to preserve the assets of the company from seizure and so to enable it to carry on its business and earn profits, the expense was an admissible deduction being wholly and exclusively laid out for the purpose of the company's trade. Lord Morton of Henryton said : " Looking simply at the words of the rule I would ask : 'If money so spent is not spent for the purposes of the company's trade, for what purpose is it spent ? ' If the assets are seized, the company can no longer carry on the trade which has been carried on by the use of these assets. Thus the money is spent to preserve the very existence of the company's trade. " See also Strong & Co. v. Woodifield. the observations of Lord Davey ; and Smith v. Incorporated Council ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion is that the amount in dispute was laid out wholly and exclusively for the purpose of the respondent's business because if the supply of jockeys of efficiency and skill failed the business of the respondent would no longer be possible. Thus the money was spent for the preservation of the respondent's business. As to the third point there is no substance in the submission that the expenditure was in the nature of a capital expense because no asset of enduring nature was being created by this expense. In our opinion, the High Court has rightly held that the expenditure claimed was one which was wholly and exclusively laid out for the purpose of the respondent's business. It was to prevent the threatened extinction of the busines ..... X X X X Extracts X X X X X X X X Extracts X X X X
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