LexTHE COMMISSIONER OF INCOME TAX, BOMBAY versus BOMBAY DYEING AND MANUFACTURING CO. LTD.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
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THE COMMISSIONER OF INCOME TAX, BOMBAY
A
v.
BOMBAY DYEING AND MANUFACTURING CO. LTD.
FEBRUARY 29, 1996
[B.P. JEEVAN REDDY AND M.K. MUKHERJEE, JJ.]
B
Income Tax Act, 1922: Section 10(2)(.XV).
Income Tax-Business expenditur~Deduction in computation of in-
come-Capital or revenue expenditur~Professional charges paid by assessee C
to solicitors for effecting amalgamation of Companies-Claim for deduction
as revenue expenditur~Tribunal holding that amalgamation of Companies
was necessary for smooth functioning of business-Being expenditure incurred
laid out wholly and exclusively for business of assessee it was deductible as
revenue expenditurir-field Tribunal was right in its conclusion.
Bombay Steam Navigation Company Pvt. Ltd. v. Commissioner of
Income Tax, Bombay, 56 I.T.R. 52, relied on.
State of Madras v. G.J. Coelho, 53 I.T.R. 186, referred to.
D
Assessee-Contribution made to Housing Bo,ard towards construction E
of tenements for the Company's worke,-Assessee ,n9t under obligation to
provide tenements-Claim for deduction by assessl!e as Revenue expendi-
ture-Claim allowed by Tribunaf-Tribunal holding that expenditure in ques-
tion brought into existence no capital assets to the assessee Company-Held
conclusion of Tribunal was right.
F
L.H. Sugar Factory and Oil Mills (P) Ltd. v. Commissioner of Income-
Ta.x, U.P.125 I.T.R. 293 and Commissioner of Income Tax, Madras v. T.V.
Sundram Iyengar and Sons Private Ltd., 186 I.T.R. 276, relied on.
Travancore-Chochin Chemicals Ltd. v. Commissioner of Income-Tax, G
Kera/a 106, I.T.R. 900, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 593-94
of 1978.
From the Judgment and Order dated 12.8.77 of the Bombay High H
65
66
SUPREMECOURTREPORTS
[1996] 3 S.C.R.
A Court in LT.A. No. 206 of 1977.
B
Dr. V. Gaurishankar and S.N. Terdol for the Appellants.
Gourab Banerjee, Ms. Anjali Verma and Ms. Ruby Ahuja for the
Respondents.
The following Order of the Court was delivered :
These appeals are preferred against the judgment of the Bombay
High Court rejecting an application under Section 256{2) of the Income
Tax Act. The revenue had applied for referring the following two questions
C for the opinion of the High Court :
D
E
"(i) Whether on the facts ad in the circumstances of the case, the
Tribunal was right in law in holding that the professional charges
paid by the assessee company to its Solicitors for effecting the
amalgamation of nawrosjee Wadia ginning & pressing company
with it, was of revenue nature and should be allowed as a deduction
in the computation of its total income?
(ii) Whether, on the facts and in the circumstances of the case, the
Tribunal was justified in law in holding that the 'assessee-company'
was entitled to a deduction for a sum of Rs. 2,25,000 in respect of
the contribution made by it to the Maharashtra Housing Board
towards the construction of tenements for its workers."
The facts concerning the first question are the following : a company
named Nawrosjee Wadia Ginning & Pressing Company was amalgamated
F
with the assessee-company. In that connection an expenditure of Rs. 10,350
was incurred by the assessee company towards the professional charges
paid to the firm of Solicitors. In the assessment proceedings the said
amount was claimed as a revenue expenditure. The assessee's case was that
Newrosjee Wadia Ginning & Pressing Company was engaged in the same
business as the assessee. In other words, the business of both the companies
G were "complimentary". The directors of both the companies thought that it
would be advantageous if both the companies are amalgamated. Accord-
ingly, a scheme of amalgamation was evolved. It was submitted that the
legal expenses incurred in connection with the said amalgamation are in
the nature of revenue expenditure. The Income Tax Officer did not agree
H nor did the Appellate Assistant Commissioner. On further appeal, the
C.l.T. v. BOMBAY DYNG. AND MFG. CO.LTD.
67
Tribunal upheld the assessee's contention. It disagreed with the Revenue's A
contention that inasmuch as the said amalgamation resulted in acquisition
of the other company by the assessee, which acquisition was in the nature
of acquisition of a capital asset, the legal expenses incurred in that behalf
partake the nature of capital expenditure. The Tribunal was of the opinion
that "as both the companies were carrying on complimentary business and B
their amalgamation was necesExcerpt shown. Read the full judgment & AI analysis in Lexace.