COMMISSIONER OF INCOME TAX Vs. GOBALD MOTOR SERVICE P LIMITED

JUDGEMENT

(1.) THE assessee is a private limited company operating a fleet of buses and lorries under permits granted by the road transport authorities of the Government of Tamil Nadu. In the year ending March 31, 1962, the company had subscribed to certain Government bonds at the instance of the road transport authorities. Within a short time of its purchase, these bonds were sold and there was a loss of Rs. 13,820. For the previous year ending March 31, 1962, the company returned an income of Rs. 12,16,625 and in arriving at this income it claimed the above sum of Rs. 13,820 as loss incidental to its business. It was contended before the Inspecting Assistant Commissioner, who did the assessment in this case, that the assessee was forced to purchase these bonds by the Regional Transport Authorities, that the assessee had borrowed large sums of money for the purpose of its business at very high rates of interest and that in order to make the money available for its business the assessee had to sell the bonds very soon after its purchase at a loss. THE Inspecting Assistant Commissioner rejected this claim on the ground that no evidence had been produced to show that the assessee had been forced to purchase the bonds by the road transport authorities and that there was no evidence that if the assessee had not purchased the bonds its business would suffer.

(2.) THE Commissioner of Income-tax also dismissed the appeal in the view that the loss was occasioned on account of purchase and sale of bonds which was not the business of the assessee, and, consequently, the amount cannot be treated to be a revenue loss. THE assessee preferred a further appeal to the Tribunal. In the course of the hearing the assessee produced several letters and notices issued by the road transport authorities calling upon them to subscribe to the Government bonds. It was argued that the assessee had to purchase the bonds as its business depended on the goodwill of the road transport authorities, and that it had to sell the bonds so soon after purchase even at a loss as the assessee was in need of funds for its own business and its borrowings were heavy and on payment of high interest. THE Tribunal was of the view that the letters and notices, coming as they are, from the road transport authorities could not have been easily ignored by the assessee when its entire business depended upon the goodwill of the officers. Though there was no compulsion or threat specifically held out in these letters and notices, they could have left no doubt in the mind of the assessee that it could ignore the request only at its peril. THE assessee also did not have any surplus funds and, on the other hand, had borrowed considerable amounts for its business at much higher rate of interest than that which the assessee would get under the bonds. It was also necessary for the assessee to mobilise all its available resources in order to carry on its business and, therefore, it had to sell the bonds at a short time after the purchase. THEse facts, according to the Tribunal, proved that, though the purchase and sale of bonds was not part of the business of the assessee, the expenditure was incurred by the assessee only for the purpose of its business. In this view, the Tribunal held that the assessee was entitled to claim this loss in computing its assessable income and there was no justification for disallowing the same. Accordingly, it directed the deletion.

(3.) THE Supreme Court in Indian Molasses Co. (P.) Ltd. v. Commissioner of Income'tax considered the meaning of the word "expenditure" in Section 10(2)(xv) of the Indian Income-tax Act, 1922. It was held therein that in the context in which that word was used in the clause, it means money laid out by calculation and intention. It is what is paid out or away and something which is gone irretrievably. It is in this sense we are also concerned in the present case.