| Case ID |
2fa951c3-2fc8-4cfe-a49b-97e6f0f9cb85 |
| Body |
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| Case Number |
IT REFERENCE NO. 251 OF 1983 |
| Decision Date |
Sep 18, 2003 |
| Hearing Date |
|
| Decision |
The court held that the payment of overriding charges to Mrs. Jagjit Kaur was an integral part of the sale deed and thus deductible from the income of the assessee. The obligation to pay these charges was attached to the source of income, which was the going concern transferred to the assessee. The court also stated that the payment should be allowed as revenue expenditure, dismissing the Tribunal's claim that it was excessive. The court emphasized that the amount paid to the wife of the vendor was not merely an application of income but rather a diversion due to the specific terms laid out in the sale deed. |
| Summary |
In the case of Jit & Pal X-Rays (P.) Ltd. v. Commissioner of Income Tax, the Allahabad High Court addressed the issue of whether certain payments made to Mrs. Jagjit Kaur, the wife of the previous owner, were deductible business expenditures. The case revolved around the interpretation of Section 37(1) of the Income-tax Act, 1961, which governs the allowance of business expenditures. The court found that the payment of overriding charges was an integral part of the sale deed, which stipulated that the company must pay a percentage of its net profits to Mrs. Jagjit Kaur as a condition of the sale. The court concluded that since the payment was tied to the very source of income, it constituted a diversion of income rather than an application of income. This ruling clarified the legal distinction between obligations arising from a sale agreement and mere applications of income, emphasizing the significance of contractual obligations in tax matters. Additionally, the court affirmed that the company qualified as an industrial entity under the Finance Act, 1979, due to its processing activities. This case is important for understanding the deductibility of expenses tied to contractual obligations in corporate acquisitions. |
| Court |
Allahabad High Court
|
| Entities Involved |
Jit & Pal X-Rays (P.) Ltd.,
Mrs. Jagjit Kaur,
Dr. Harnam Singh
|
| Judges |
M. Katju,
Umeshwar Pandey
|
| Lawyers |
Not available
|
| Petitioners |
Jit & Pal X-Rays (P.) Ltd.
|
| Respondents |
Commissioner of Income Tax
|
| Citations |
2004 SLD 2273,
(2004) 267 ITR 370
|
| Other Citations |
Raja Bejoy Singh Dudhuria v. CIT [1933] 1 ITR 135 (PC),
CIT v. Travancore Sugars & Chemicals Ltd. [1973] 88 ITR 1 (SC),
CIT v. Nariman B. Bharucha & Sons [1981] 130 ITR 863 (Bom.),
Addl. CIT v. Rani Pritam Kunwar [1980] 125 ITR 102 (All.),
P.C. Mullick v. CIT [1938] 6 ITR 206 (PC),
CIT v. State Bank of India [1987] 32 Taxman 619 (Bom.),
CIT v. A. Tosh & Sons (P.) Ltd. [1987] 30 Taxman 516 (Cal.),
Provat Kumar Mitter v. CIT [1961] 41 ITR 624 (SC),
Motilal Chhadami Lal Jain v. CIT [1991] 190 ITR 1 (SC),
M.K. Bros. (P.) Ltd. v. CIT [1967] 63 ITR 28 (All.),
M.K. Bros. (P.) Ltd. v. CIT [1972] 86 ITR 38 (SC),
Abbas Wazir (P.) Ltd. v. CIT [IT Reference No. 290 of 1983],
CIT v. Dr. V.K. Ramachandran [1981] 128 ITR 727 (Mad.),
Addl. CIT v. A. Mukherjee & Co. (P.) Ltd. [1978] 113 ITR 718 (Cal.),
CIT v. Datacons (P.) Ltd. [1985] 155 ITR 66 (Kar.)
|
| Laws Involved |
Income-tax Act, 1961
|
| Sections |
37(1)
|