INDIAN COPPER CORPORATION LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this case the assessee is a public limited company carrying on business in the raining of copper ore and manufacture of copper and brass in Ghatshila in the State of Bihar. For the assessment year 1953-54 the assessee claimed that a sum of 20,000 pounds equivalent to Rs. 2, 66, 677/-should be deducted as business expenses under the provisions of Section 10 (2) (XV) of the INdian INcome-tax Act. The sum of 20,000/ pounds was paid by the assessee to the London Directors as compensation for loss of office. The 'Company was registered in the United Kingdom and its affairs were looked after by a Board of Directors in that Company. IN course of time about 85 p.c. of the total shares passed to the hands of INdian nationals, and in accordance with the views of the majority of the shareholders the seat of management and control of the Company was transferred from the United Kingdom to INdia on 6-4-1952. This decision was taken by a special resolution at an Extraordinary General Meeting of the Company held on 26-3-1952. There was also an ordinary resolution passed at the same meeting of the Company to the effect that the present Directors should be paid as compensation for the loss of office the following amounts noted against their respective names: <FRM>JUDGEMENT_544_ITR38_1960Html1.htm</FRM>

(2.) UNDER Section 66(1) of the Indian Income-tax Act the Income-tax Appellate Tribunal has submitted the following question' of law for the opinion of the High Court:

(3.) ON behalf of the Income-tax Department reliance was placed upon two decisions, Overy v. Ashford Dunn and Co. Ltd., 1933 17 Tax Cas 497" and James Snook and Co., Ltd. v. Blasdale, 1952 83 Tax Cas 244. These cases are, however, distinguishable and the principle laid down in these cases does not govern the present case. In (1933) 17 Tax Cas 497 the respondent Company, whose three Directors were also sole shareholders, was engaged in a trade in which the control of the raw materials and of markets had passed into the hands of another Company. By an agreement dated 19-12-1929, the latter Company agreed to purchase from the shareholder of the respondent Company all their shares and, in accordance with 'the provisions in the Articles of Association of the respondent Company the vendors, on completion of the sale, vacated their officer as Directors.