COMMISSIONER OF INCOME-TAX, KERALA versus MALAYALAM PLANTATION LTD.

Citation: [1964] 7 S.C.R. 693 · Decided: 10-04-1964 · Supreme Court of India · Bench: K. SUBBA RAO · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · cites 3 · see the full citation network in Lexace

Judgment (excerpt)

78.C.R. 
SUPREME COURT REPORTS 
693 
COMMISSIONER OF INCOME-TAX, KERALA 
v. 
MALAYALAM PLANTATION LTD. 
JK. SUBBA RAo, J. c. SHAH AND s. M. Snrn, JJ.] 
Income Tax-Assessee treated as agent-Estate duty of 
non-resident paid bu assessee-If an allowable deduction-Ex-
pression "for the purpose of the bushess"-Meaning of-
Indian Income-tax Act, 1922 (11 of 1922), s. 10(2)(xv}-Estate 
Duty Act, 1953 (34 of 1953),, s. 34. · 
For the two accounting periods the assessee, a residenf 
company, incorporated outside India paid estate duty payable 
on the death of its certain share holders not domiciled in 
India and debited the said amounts to r€irenue in its accounts 
in ascertaining the profits and gains of its business for the 
said years. The Income-tax Officer included the said amounts 
so paid towards estate d'uty in the profits and gains of the 
company for the said two accounting periods and assessed the 
company to income-tax for 1955-56 and 1956-57 on that basis. 
The appeals by the assessee to the Appellate Assistant Com-
missioner were dismissed but on further appeal, the Appel-
late Tribunal set aside the said orders and held that the asses-
see was entitled to deduct the said amount in computing its 
profits. On an application by the Commissioner of Income-tax, 
the Tribunal stated a case under s. 66(1) of the Act to the 
High Court and referred the following question of law for 
its opinion: ''Whether on the facts and in the circumstances 
of the case, the estate duty paid by the company under s. 84 
of the Estate Duty Act, 1953, is a revenue expenditure de-
ductible in computing the assessee's business income for the 
assessment years in question." The High Court agreed with the 
view of the Tribunal and answered the question in the affirma-
tive. On appeal by special leave it was urged on behalf of the 
appellants, (i) that the sum paid by the assessee under s. 84 of 
the Estate Duty Act wete not expenditure of the assessee com-
pany and therefore, they could not be deducted from its pro-
fits in computing its assessable income under s. 10(2)(xv) of 
the Act; and (2) that even ii it was revenue expenditure, It 
was not laid out or expended wholly or exclusiwly for the 
purpose of the assessee's business within the meaning of the 
said sub-clause. 
Held: (i) There was nothing on the record to show whe-
ther in England, where the concerned share holders died th<! 
resident company could recover the amount representing the 
estate duty paid by it in India from the legal representative 
of the deceased share holders. Therefore, the assessee who, 
as a statutory agent paid to the State the estate duty, could 
not recover the same from the legal representative of the de-
ceased non-resident share holders. In that situation the com-
pany ·would be out of pocket to the extent it paid the estate 
duty of tire said persons. Therefore, it cannot be held that the 
amounts paid by the assessee towards estate duty were wot' 
expenditur_e incurred by it, but only amounts paid by it on 
account with a right to recover the same from the persons on 
whose behalf it paid. 
(ii) The expression "for the purpose of the business" in 
s. 10(2)(xv) of the Act is wider in scope than the expression 
"for the purpose of earning profits". Its range is wide: it may 
191J4 
.April ID 
1961 
Oommiuiomr of 
lftCOmt'-lax, Kuala 
v. 
Maiaydam 
Planlalion J,i,J,. 
Bubba Bao, J. 
694 
SUPREME COURT REPORTS· 
[1964} 
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 and taxes 
imposed as a pre-condition to commence or for carrying on 
of a business; it may comprehend many other acts incidental 
to the carrying on of a business. However wide the meaning 
of the expression may be, its limits are implicit in it. The pur-
pose shall be for the purpose of the business, that is to say, 
the expenditure incurred shall be for carrying on the busi-
ness and the assessee shall incur it in his capacity as a per-
son carrying on the bu9iness. It cannot include sums spent by 
the assessee as agent of a third party, whether the origin of 
the agency is voluntary or statutory; in that event, he pays 
the amount on behalf of another and for a purpo

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