Business Expenditure

Authorities were aggrieved of order passed by Income Tax Appellate Tribunal directing for allowance for corporate assets tax as expenses allowable under S.23 of Income Tax Ordinance, 1979

Validity

Any expenditure incurred for the purposes of business which was neither capital nor personal was an allowable expenditure under S. 23(1)(xviii) of Income Tax Ordinance, 1979

Only bar which could be imposed was whether such expenditure was incurred in ordinary course of business or not and on the ground of commercial expediency and had a direct nexus and relation with the business or not

While making assessment of a company corporate assets tax had to be given the same treatment as that of wealth tax since it was a direct levy on the assets held by a company

Such was an allowable expenditure and the same was rightly allowed by appellate authority as well as Income Tax Appellate Tribunal

Provisions of S. 24(a) of Income Tax Ordinance, 1979, were not applicable as corporate assets tax was not a tax on the profits and the gains of a company rather it was a direct charge or levy upon the assets held by a company as specified in S. 12 of Finance Act, 1991

High Court answered the question in affirmative against the authorities and in favour of assessee

Reference was dismissed in circumstances.

[CIT v. Britannia Industries Co. Ltd. (1982) 135 ITR 35 (Cal.) and Geoffrey Manners & Co. Ltd. v. CIT. (1996) 221 ITR 695 (Bom.) overruled].

Indian Income Tax Act, 1961, Ss. 37 & 256.

Indian Income Tax Act, 1961, S. 40(c).

Indian Income Tax Act, 1961, S.37.

Indian Income Tax Act, 1961, S.40(c).

Indian Income Tax Act, 1961, S.37.

Indian Income Tax Act, 1961, Ss.40A & 58.

Indian Income Tax Rules, 1962, R.6D.

Indian Income Tax Act, 1961, S.37.

Amount exempt under S.10(6)(viia) is not to be taken into account for fixing coiling under S.40(c) read with S.40A(5)(b)

Indian Income Tax Act, 1961, Ss .10(6)(viia), 40(c) 8c 40A(5)(b),

Indian Income Tax Act, 1961, S.40A.

Indian Income Tax Act, 1961, S.37.

CBDT Circular No.599, dated 24-4-1991.

Indian Income Tax Act, 1961, Ss.36(l)(va), Expln. & 43B.

Indian Income Tax Act, 1961, S.37.

Indian Income Tax Act, 1961, S.37.

Indian Income Tax Rules, 1962, R.6DD,

Indian Income Tax Act, 1961, S.37.

Indian Income-tax Act, 1961, S.37(3-A).

Indian Income Tax Act, 1961, S.37.

Whether laid out wholly and exclusively for business purposes Whether capital expenditure-Whether allowable-Indian Income-tax Act, 1961, S. 37.

Business expenditure Manufacture and sale of blankets and other woollen cloth-General Manager-.Commission ,a profits-Disallowance of part-Whether permissible-Indian Income-tax Act, 1922, S. 10(2)(xv)-[J. K. Wooden Manufacturers (Pvt.) Ltd. v. Commissioner of Income-tax (1963) 48 I T R 346 reversed].

Income-tax-Business expenditure - Expenditure on getting technicians trained in U. S. A. for running existing business more efficiently and with Improved technique-Whether capital expenditure or business expenditure-Income-tax Act, 1922, S. 10(2)(xv)Indian Income-tax Act, 1961, S. 37(1).Held, that, as the outlay in question was not made for the initiation of the business or for expansion of the business or for a substantial replacement of the equipment of the business, nor was it an expenditure for acquiring or bringing into existence an asset or an advantage of enduring nature to the business but it was made for running the business with a view to produce more profits and with a view to run the business more efficiently so as to produce higher profits, the Tribunal was right in taking the view that it did regarding these items of expenditure. The two sums of Rs. 71,625 and Rs. 50,000 were, therefore, correctly allowed by the Tribunal as items of revenue expenditure.

Business expenditure - Managing agency company-Expenses incurred by director on foreign tours to explore possibilities of expansion of business of managed companies-Whether allowable as business expenditure of managing agency company-Income-tax Act, 1922, S, 10(2) (xv).

-Business expenditure-Waiver of remuneration by managing agents in view of losses of managed company-Managed company subsequently making profits-Additional remuneration paid to managing agents-Whether allowable-Indian Income-tax Act, 1922, S. 10(1), (2)(xv).

Business expenditure-Firm-Expenses of partner to earn his share of profits of firm-Whether deductible from partner's share of profits-Indian Income-tax Act, 1922, S. 10(2)(xv).

Income-tax-Business expenditure-Remuneration of directors Test of reasonableness - Factum of payment not disputed -Whether entire payment allowable - Indian Income-tax Act, 1922, Ss. 10(2)(xv) & (4-A).

Income-tax-Business expenditure-Fees paid to lawyer for appearing in proceedings to obtain new permits-Whether allowable-Expenses for registering trade mark distinguished-Indian Income-tax Act, 1922, S. 10(2)(xv).

Income-tax-Business expenditure-Whether reasonableness of expenditure can be gone into-Business of distribution and exhibition of films - Film exhibited for twenty-five weeks-Celebrations connected therewith-Expenditure incurred for presentations whether laid out for business and allowable-Indian Income-tax Act, 1922, S. 10(2)(xv).

Business expenditure-Interest pail by assessee on loan borrowed by him for a firm of which he is a partner Whether allowable-Indian Income-tax Act, 1922, Ss. 10(1) & 16(3).

Income-tax-Business expenditure - Purchase of allied concerns-Agreement by purchaser to pay the vendor a percentage of profit annually in addition to cash consideration-Share of profits paid to vendor-Whether allowable as business expenditure Indian Income-tax Act, 1922, S. 10(2)(xv).

Income-tax-Business expenditure-Salary paid to manager or employee - Reasonableness - When assessing authorities may disallow whole or part - Guiding principles - Indian Income-tax Act, 1922, S. 10(2)(xv).

Business expenditure-Expenditure resulting in indirect benefit to business-Remuneration paid by managing agency company to its managing director for services rendered to managed company-Whether allowable -Indian Income-tax Act, 1922, S. 10(2)(xv).

Hotel business - Initial issue of linen, blankets and uniforms-Expenses whether allowable Licence fees from stall-holders-Resolution after end of accounting year that licence fees likely to be reduced-Provision made in accounts as likely bad debt-Whole licence fees whether accrue during year-Indian Income-tax Act, 1922, S. 10(2)(xv).

Business expenditure - Contribution to ruling political party-Whether allowable-Wealth tax for assessment year-Legal charges for obtaining loan-Whether allowable deductions - Development rebate - Sanitary and drainage fittings Whether "plant"-Insufficiency of material-Indian Income-tax Act, 1922, Ss. 10(1), 10(2)(vib) & 10(2) (xv).

Business expenditure - Sole selling agency Agreement to pay commission on all sales-No sales effected by agent-Payment of commission to agent-Whether allowable Indian Income-tax Act, 1922, S. 10(2)(xv).

Income-tax-Business expenditure-House property given as security to bank for overdraft to third party - Guarantee commission assessed as income-Whether municipal taxes paid allowable as expenditure solely incurred for earning profits

Heads of Income, whether distinct-Reference-Power of High Court to consider question referred from a new aspect-Indian Income-tax Act, 1922, Ss. 9, 12(2) & 66(1).

Whether allowable-Indian Income-tax Act, 1922, S. 12(2).

Business expenditure-Penalty paid for infraction of law-Default in paying cess levied under U. P. Sugarcane Cess Act, 1956-Whether allowable as business expenditure-Indian Income-tax Act, 1922, S. 10(2)(xv).

S. 10 (2) (xvi) Business expenditure Remuneration of Managing Director Expenditure whether "wholly and exclusively" for purpose of business of company Important factor for determining question Whether expenditure incurred bona fide on ground of commercial expediency and not whether it is reasonable Such expenditure cannot be disallowed by applying some subjective standard of reasonableness.

Gratuity paid to employee's on retirement-When allowable-General principles-Burden of proof Income-tax Act, 1922, S. 10(2)(xv).

Fees paid to income-tax advisers for conducting assessment proceedings-Law before, and after, 1939-Test of allowability-Commercial expediency-Income-tux Act, 1922, S.10(2) (xv) as amended in 1939.

S. 10(2)(xvi) - Business expenditure-Claim for allowance of legal expenses incurred on criminal prosecution of assessee's employees-Prosecution must be shown to have arisen out of acts performed in ordinary course of business of assessee-Deductability of such expenses not dependent upon success or otherwise of defence-Primary test : whether expenses incurred wholly and exclusively for purpose of business.

Salaries of officers -In crease-Whether should be reflected in profits-No increase of salary of staff generally-Relationship to director-Effect-Indian Income-tax Act, 1922, S. 10 (2) (xv).

Capital expenditure Agreement with ruler of Native State for monopoly rights, tax concessions and immunity from labour and industrial laws for a term of years Percentage of annual profits paid to ruler under agreement Capital expenditure-Non resident Income Receipt by cheque Remand by appellate Tribunal to provide opportunity to let in evidence regarding mode of sending cheques and request of assessee

Whether proper Income tax Act, 1922, Ss. 4(1) (a), 10 (xv),& 33.

Business Expenditure Monthly allowance paid to directors for financing the company-Whether business expenditure-Indian Income-tax Act, 1921, S. 10(2)(xv), (4-A).

Interest on money borrow-ed for purchase of shares for retaining managing agency-Whether allowable as business expenditure or as interest on borrowed capital-Indian Income-tax Act, 1922, Ss. 10(2)(xv) & 10(2)(iii)-Power to go into genuineness of transactions.

Commission paid to employee Power of Income tax authorities to disallow wholly or in part Applicability and scope of S. 10(2)(x), (xv) Tests for determining whether expenditure is allowable under S. 10(2)(.xv) Income tax Act, 1922, S. 10(2)(x), (xv) Law before and after 1953.

Business Expenditure Business expenditure-Bad debt-Company-Amount advanced for purchase of shares in new company with object of obtaining selling agency-Failure of issue of shares in new company-Part of amount alone repaid-Balance of advance whether business expenditure-Whether bad debt.