COMMISSIONER OF INCOME TAX Vs. SANDUR MANGANESE AND IRON ORE P LIMITED
LAWS(KAR)-1966-6-1
HIGH COURT OF KARNATAKA
Decided on June 02,1966

COMMISSIONER OF INCOME-TAX, MYSORE Appellant
VERSUS
SANDUR MANGANESE AND IRON ORE (P.) LTD. Respondents




JUDGEMENT

Somnath Iyer, J. - (1.)THIS is a reference under section 66(1) of the Indian Income-tax Act, 1922, sought by the Commissioner of Income-tax, Bangalore. The assessee is a private limited company carrying on business in mining and exportation of manganese ore. In respect of the assessment year 1961-62, a deduction of Rs. 10,500 was claimed by the assessee. THIS sum of money, according to the assessee, had been paid to a consultant known as Ibcon (P.) Ltd. which had been entrusted with the preparation of standard budget forms, establishment of budgetary control and evaluation of standard costs. The Income-tax Officer and the Appellate Assistant Commissioner were of the view that the expenditure was of a capital nature. But the Appellate Tribunal dissenting from that view came to the conclusion that the amount was expended wholly and exclusively for the purpose of the assessee's business and so its deduction was properly claimed under section 10(2)(xv) of the Act.
(2.)THE question referred to us for our decision reads :
"Whether, on the facts and in the circumstances of the case, the sum of Rs. 10,500 was an expenditure deductible in the computation of the income of the assessee for the assessment year 1961-62 under section 10(2)(xv) ?"

We have no doubt in our minds that the question should be answered in favour of the assessee. In Commissioner of Income-tax v. Malayalam Plantations Ltd., the Supreme Court said this when discussing the meaning of the words "for the purpose of such business" occurring in section 10(2)(xv) :

"The expression 'for the purpose of the business' is wider in scope than the expression 'for the purpose of earning profits'. Its range is wide; it may take in not only the day-to-day running of a business but also the rationalisation 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 precondition to commence or for carrying on of a business; it may comprehend many other acts incidental to the carrying on of a business."

It is obvious that when the assessee appointed Ibcon (P.) Ltd. for the preparation of standard budget forms, establishment of budgetary control and the evaluation of standard costs for the various operations of the company, that appointment was made for the improvement and rationalisation of the assessee's administration. The Income-tax Officer himself had no doubt in his mind that the amount paid to Ibcon (P.) Ltd. was an expenditure wholly and exclusively for the purpose of the business. This is what he said :

"There is no doubt that the expense was wholly and exclusively for the purpose of the business."

(3.)WE are not willing to accede to the submission that any capital asset with an enduring benefit was acquired through the advice tendered by Ibcon (P.) Ltd. for the rationalisation of the assessee's administration. In our opinion, the Appellate Tribunal was right in thinking that the expenditure was incurred wholly and exclusively for the purpose of the assessee's business. So, our answer to the question referred to us is that the sum of Rs. 10,500 was an expenditure deductible in the computation of the income of the assessee for the assessment year 1961-62 under section 10(2)(xv) of the Indian Income-tax Act, 1922. No costs.


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