R.P.Mookerjee, J. - (1.) This is a reference Under Section. 66 (1), Income Tax Act. On an application, by the Commissioner of Income Tax Calcutta, the following question of law has been formulated by the Tribunal for answer by this Court. "Whether in the circumstances of the case a sum of Rs. 6698/- paid out to Mr. Mitchell-Innes. wholly & exclusively for the purposes of the business was a revenue expenditure so as to-be allowable as an admissible deduction under Section 10 (2) (XII), Income Tax Act (as it stood, before its amendment in 1946)."
(2.) Messrs. Piggot Chapman & Co. is a firm of exchange brokers Mr. Mitchell-Innes & Mr. Danbeny who were working in partnership as exchange brokers, under the name & style of Halford Smith & Co. entered into ah agreement on 22-10-1919 with the partners of the assessee-firm Piggot Chapman & Co. It is not necessary for our present purpose to state in full the terms of this agreement. Broadly speaking Messrs. Mitchell-Innes & Danbeny who were the sole exchange brokers of Messrs. Ralli Brothers were under this agreement to sell their goodwill & the business of exchange brokers with the stipulation that they would not carry on business as exchange brokers or be interested in any such business at Calcutta or at any place within a radius of 100 miles from Calcutta for a period of twenty years unless & until this agreement was rescinded to any of the manners detailed in the agreement. In consideration of the agreement Piggot Chapman & Co. were to make certain payments & continue to pay annuities under certain stipulations.
(3.) As a result of this agreement the assessee Co. continued to act as the sole exchange broker of the firm Ralli Brothers. But before the expiry of the period of twenty years stipulated in the above agreement Messrs. Ralli Brothers took in other brokers as exchange brokers in addition to the assessee firm. Under the terms of the agreement this was an occasion for terminating the agreement.;