| Case ID |
39728328-8898-4bee-952a-ec615b6e3b10 |
| Body |
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| Case Number |
IT REFERENCE No. 189 OF 1962 |
| Decision Date |
Sep 16, 1966 |
| Hearing Date |
|
| Decision |
The Tribunal did not err in concluding that the payment of Rs. 2,50,000 made by the assessee to the U.P. Government was not an allowable deduction under section 10(2)(xv) of the Income-tax Act. The payment, described as 'composition money', was intended to avoid potential prosecution related to alleged infractions of control orders, which fell outside the scope of business expenses. The court emphasized that deductions must be wholly and exclusively for business purposes, and in this case, the payment was not directly connected to the normal operations of the company. The ruling reaffirms the principle that expenses must be demonstrably linked to the business to qualify for deductions under tax law. |
| Summary |
This case revolves around the issue of whether the payment made by J.K. Cotton Spinning & Weaving Mills Co. Ltd. to the U.P. Government could be claimed as a business expense under the Income-tax Act, 1961. The company paid Rs. 2,50,000 following a police raid that resulted in the seizure of documents related to their business. The payment was described as 'composition money' intended to prevent further legal action. However, the court determined that this expenditure was not directly related to the business operations and thus could not be deducted. The case underscores the stringent requirements for tax deductions, particularly the necessity for expenses to be wholly and exclusively for business purposes. The decision is significant for companies facing legal challenges and emphasizes the need for clear links between expenditures and business activities. Key terms include business expenditure, allowable deductions, and income-tax implications. |
| Court |
Allahabad High Court
|
| Entities Involved |
U.P. Government,
Anti-corruption police
|
| Judges |
S.C. Manchanda,
M.H. Beg
|
| Lawyers |
C.S.P. Singh,
J. Sarup,
R.L. Gulati
|
| Petitioners |
J.K. Cotton Spinning & Weaving Mills Co. Ltd
|
| Respondents |
Commissioner of INCOME TAX
|
| Citations |
1967 SLD 340 = (1967) 64 ITR 444
|
| Other Citations |
J.K. Cotton Spg. & Wvg. Mills Co. Ltd. v. CIT (No. 2) [1966] 62 ITR 836,
Wali Mohammad v. Mohammad Baksh AIR 1930 P.C. 91,
Atherton v. British Insulated and Helsby Cables Ltd. [1925] 10 Tax Cas. 155,
CIT v. Calcutta Agency Ltd. [1951] 19 ITR. 191 (SC),
CIT v. H. Hirjee [1953] 23 ITR. 427 (SC),
Eastern Investments Ltd. v. CIT [1951] 20 ITR. 1 (SC),
Golder v. Great Boulder Proprietary Gold Mines Ltd. [1952] 33 Tax Cas. 75,
Haji Aziz and Abdul Shakoor Bros. v. CIT [1961] 41 ITR. 350 (SC),
J.K. Cotton Spg and Wvg Co. v. CIT [1955] 28 ITR. 78 (All),
J. N. Singh & Co. v. CIT [1966] 60 ITR. 732 (Punj. & Har.),
Morgan v. Tate and Lyle Ltd. [1954] 26 ITR. 195 (HL.),
Smith v. Incorporated Council of Law Reporting for England and Wales (1914) 6 Tax Cas 477,
Smith's Potato Estates Ltd. v. Bolland (1948) 30 Tax Cas. 267,
Strong & Co. of Romsey Ltd. v. Woodifield [1906] 5 Tax Cas. 215,
Union Cold Storage Co. Ltd. v. Jones [1924] 8 Tax Cas. 725,
Usher's Wiltshire Brewery v. Bruce [1914] 9 Tax Cas. 399
|
| Laws Involved |
Income-tax Act, 1961
|
| Sections |
37(1)
|