LexCOMMISSIONER OF INCOME-TAX, WEST BENGAL versus INDIAN MOLASSES (P) LTD.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
B
c
0
E
F
G
It
773
COMMISSIONE,R OF INCOME.TAX, WEST BENGAL
v.
JNDIAN MOLASSES (P) LTD.
August 12, 19]0
••!
[J.C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.J
Income-tax Act (II of 1922), '"· 10(2)(.iv), 10(4A). 66(1)
111111
06(5)-lntredients of ·'· Hl(2) (xv )-Amounts paid to 'tru"t"" for 11.rr 011
tht happrning of a /uturt event-Wiren deemetl lo he expemliture 11nder
s.10(2)(xv).
'Question of law wising out of it.• order' in s.66(! ), scope of-A.•pect
1101 •xprossly raisedj be/or• tbe Tribunal-When coultl be 11rR•d llf/Ore
High Court on reftrence.
Ht1h Court wrung/111/y refu.ring pltt1 to he 11rgetl--Prot·td11rt to he
follow1d by Supflme Court .
. The respondent-company appointed a manaaina dire,tor who was 10
retire at the aae of 55.
The company arranged to provide a pension tC\
him on retirement, or a pension to his widow if he died hefore attaining
the aae of 55. 1t executed a trust deed c.n September 16. 1948, and paid
to the trustees certain amoup.ts to enable the trustees to take out an an11uit\
policy to cover the pension. On Octohcr 29. 1954, the company arrangetl
to 1ivc enhanced pension to the director or his wife and set <ipart an
additional sum on the ~ame terms.
The director died in
195~ before attaining the age of 55. and the
company claimed. in the return of its taxable income for the assessn1cnt
year 1956-57, the total amount paid by it to the trustees as a pcrmissihlc
expenditure in the ·CQmputation of the company's husin>!ss profits in th~
·pre\iotL1 year.
•,, ·
The Appellate Trihunal, held; (i) that the s•:ttin~ apart of the funds
amounted to expenditure within the meaning of s.10(2)(xv). and (ii)
that it amountc<I to revenue expenditure ~nd not carital expendi:ure. The
Tribunal did not however consider wilether the outgoing represented expen-
diture laid out or expended whollv and exc1usivelv for the purpose of the
busint91S and whether it was auth0rioed under s.10( 4A).
The Trihunal
referred to the High Court two questions. namely: · (1) whether the
amounts constitute<l cxocnditure during the relevant accounting year 1955
within the meaning of the section: and (2) .whether it resorescnted
a
revenue expenditure. 'The High Court held 1n favour of the company.
When the Department sought to urge the plea that hcfore the se·:tion could
he called in aid, it had also to he established that. the expenditure was
wholly and exclusivelv fo• the ,nurnose of .the hnsine.s. and that 1t was
authorised hv s.10(4A). the HIJh Court did not permit the plea to ht
raised as it was not expr .. slv raised before the Trihunal.
Jn appeal to this Court.
HELD: (1 \ The amounts set •!>•rt became subject "? the o~liQatiM
to pav the pensio" arrani!ed to be give". O"IY when the director died. and
since he died in Mav 1955. they m•~•t he deemed to have hccn (Xn<nde~
only then, that is durin~ the aecountm~ year 1955. {776 H: 777 .~·Rl
774
SUPREME COURT REPORTS
{1971) l S.C.R.
Indian Molasses Co. (P). Ltd. v.' Com1n;s.<>ioner· Of iff.co1ne~tax, West
Bengal, 37 I.T.R. 66, referred to.
(2) An amount proved to be expended by a tax-payer carrying on
husincss is a permissible allowal)ce under -s.10(2) (iv) in the computation
of the taxable income of the business if it is established; (i) that the
&.Jlowance claimed is expenCiiture which is not of the nature described
in els. (i) to (xiv) of s. 10(2); (ii) that it is not of the nature of capital
expenditure or personal expenses of the assessee; (iii) that the expendi-
ture was laid out or expended wholly and exclusively for the purposes of
such business; and (iv) that it was authorised under s. 10 ( 4A). [778 C-.F]
· · (3) The expression 'question of law arising out of such order'.' in
q:66(1), is not restricted to take in only those questions which have been
expressly argued before and decfded bv the Tribunal. If a question of Jaw
is raised before the Tribunal, even if ari aspect of the question was not
raised, that aspect may be urged before the High Court.
In the present
case, the second question as framed and referred. does not exclude· an
enquirv whether the expenditure was whollv and exclusively laid out or
expended for the purpose of the business of the company .. Tt cannot be
held that. because before the Tribunal. stress was not pointedly laid 11pon
the ingredients which enable an expenditure to be claimed and allowed,
the question did not arise out of the order of the Tribunal. Therefore, the
fExcerpt shown. Read the full judgment & AI analysis in Lexace.