J K COTTON MANUFACTURERS LIMITED Vs. COMMR OF INCOME TAX LUCKNOW

JUDGEMENT

(1.) This is an appeal by special leave against the order of the High Court of Allahabad dated September 26. 1969 on a reference made to it by the Income-tax Appellate Tribunal, Allahabad Bench. The facts giving rise to the present appeal may be briefly summarised as follows;

(2.) The dispute in the instant case centres round the question as to whether the compensation of Rs. 2,50,000/-paid to the outgoing Managing Agents was a capital or a revenue expenditure incurred by the appellant. The stand taken by the assessee before the revenue was that as the expenses were incurred wholly and exclusively for the purpose of carrying on the business of the Company it would fall under Section 10 (2) (xv) of the Income-tax Act. 1922. which is the same as Section 37 (1) of the Income-tax Act, 1961, and therefore an allowable deduction under the aforesaid provision. The appellant's case was negatived by the Income-tax Officer, the Appellate Assistant Commissioner and also by the Tribunal. The Tribunal also refused to make a reference to the High Court as in its opinion no point of law arose. The appellant then approached the High Court of Allahabad which directed the Tribunal to make a reference on the following four points and accordingly the Tribunal made a reference to the High Court on those points:

(3.) Mr.Ashoke Sen learned counsel for the appellant has submitted two points before us in support of his case. In the first place it was contended that the High Court having held that the expenditure incurred was wholly and exclusively for the purpose of the business should have held that Section 10(2)(xv) applied in terms and therefore, the expenditure was a revenue expenditure which would be deductible under Section 10 (2) (xv) of the Income- tax Act; and secondly, it was error in not correctly applying the decision of this Court in Godrej and Co. v. Commr. of Income- tax, Bombay City 37 ITR 381 = (AIR 1959 SC 1352 ).