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Commissioner of Income-tax Vs. Tata Sons Pvt. Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Reference No. 80 of 1965
Judge
Reported in[1978]111ITR290(Bom)
ActsIncome Tax Act, 1922 - Sections 10(2) and 49D
AppellantCommissioner of Income-tax
RespondentTata Sons Pvt. Ltd.
Appellant AdvocateR.J. Joshi, Adv., i/b., ;V.B. Shastri, Attorney
Respondent AdvocateR.J. Kolah and ;Dinesh Vyas, Advs.
Excerpt:
direct taxation - entitlement to deduction - sections 10 (2) and 49d of income tax act, 1922 - whether assessee-company entitled to claim deduction under section 10 (2) on certain sum contributed by it to mills on occasion of its golden jubilee celebrations - expenditure had not brought into existence any asset in favour of assessee-company - expenditure was made for earning more commission - held, assessee entitled to deduction under section 10 (2). - .....and 1958-59 to 1961-62 : '(a) whether, on the facts and in the circumstances of the case, was the assessee-company entitled to unilateral relief under section 49d of the income-tax act, 1922, for the assessment years 1956-57, 1958-59, 1959-60, 1960-61 and 196,1-62 in respect of the dividends received by the assessee on the shares of foreign companies held by it ' for the assessment year 1961-62 ; '(b) whether, on the facts and in the circumstances of the case, was the assessee-company entitled to claim deduction under section 10(2)(xv) on the sum of rs. 1,00,000 contributed by it to the ahmedabad advance mills on the occasion of its golden jubilee celebrations ?' for the assessment year 1956-57 : '(c) whether, on the facts and in the circumstances of the case, the assessee was.....
Judgment:

Desai, J.

1. A number of questions pertaining to several assessment years have been referred to us by the Income-tax Appellate Tribunal, Bombay Bench 'B'. These questions are to be found in para. 15 of the statement of the case, dated 16th October, 1964, and are as follows :

For the assessment years 1956-57 and 1958-59 to 1961-62 :

'(a) Whether, on the facts and in the circumstances of the case, was the assessee-company entitled to unilateral relief under Section 49D of the Income-tax Act, 1922, for the assessment years 1956-57, 1958-59, 1959-60, 1960-61 and 196,1-62 in respect of the dividends received by the assessee on the shares of foreign companies held by it ' For the assessment year 1961-62 ;

'(b) Whether, on the facts and in the circumstances of the case, was the assessee-company entitled to claim deduction under Section 10(2)(xv) on the sum of Rs. 1,00,000 contributed by it to the Ahmedabad Advance Mills on the occasion of its golden jubilee celebrations ?' For the assessment year 1956-57 : '(c) Whether, on the facts and in the circumstances of the case, the assessee was assessable in respect of the distribution received on the liquidation of Air India International Ltd. ?'

2. As far as the first question as to the assessee-company's claim to relief under Section 49D of the Indian Income-tax Act, 1922, for the assessment years mentioned is concerned, counsel on behalf of both the sides stated that, as far as this court was concerned, it was concluded by its decision in Commissioner of Income-tax v. Tata Sons P. Ltd, : [1974]97ITR128(Bom) , and that in accordance with that decision the question was liable to be answered in favour of the assessee and in the affirmative.

3. The third question pertains to the liability of the assessee to be assessed in respect of the distribution received on the liquidation of Air India International. Ltd., in which company it held a large number of shares. Mr. Kolah, on behalf of the assessee, at whose instance the question was referred to us, stated that the points involved in the question do not survive, that the assessee-company had already secured the relief that it wanted and that accordingly the question need not be answered.

4. Accordingly, we are concerned in this reference with the second question, which pertains to the sum of Rs. 1,00,000 contributed by the assessee-company to Ahmedabad Advance Mills on the occasion of its golden jubilee celebrations. In order to appreciate the respective contentions, a few facts as would pertain to this question only may be set out.

5. The assessee-company was acting as the managing agent of Ahmedabad Advance Mills. On the occasion of the golden jubilee celebrations of the managed mills, the assessee-company contributed Rs. 1,00,000 to the management. That amount was given to the mills without being earmarked for any particular business purpose. That amount was utilised by the managed mills for the construction of a canteen for its workers. The assessee-company claimed that deduction as a permissible deduction. The claim was rejected by the Income-tax Officer, who held that it was not an expenditure incurred by the assessee-company as claimed on welfare amenities for the workers and that it was of a capital nature. The Appellate Assistant Commissioner upheld the disallowance on the ground that it was capital expenditure. According to the Tribunal, the contribution made by the assessee-company to the managed mills was made wholly and exclusively keeping in view the business interests of the assessee-company. The amount was also found to be reasonable. In the view of the Tribunal, inasmuch as the assessee-company did not contribute that amount for a specific purpose, it was immaterial in what manner the managed mills had spent the same. Further, the expenditure had not brought into existence any asset in favour of the assessee-company. According to the Tribunal, as far as the assessee was concerned, the expenditure was made for earning more commission. In the light of these facts the Tribunal held that it was an admissible deduction under Section 10(2)(xv) of the Indian Income-tax Act, 1922.

6. In Commissioner of Income-tax v. Chandulal Keshavlal and Co. : [1960]38ITR601(SC) it is observed by the Supreme Court that it is a question of fact in each case whether the amount which is claimed as a deductible allowance under Section 10(2)(xv) of the Income-tax Act was laid out wholly and exclusively for the purpose of such business and if the fact-finding Tribunal comes to the conclusion on evidence which would justify that conclusion, it being for them to find the evidence and to give the finding, then it will become an admissible deduction; it has observed further that the decision of such questions is for the Income-tax Appellate Tribunal and the decision must be sustained if there is evidence upon which the Tribunal could have arrived at such a conclusion. The Supreme Court proceeded to hold that in every case it is a question of fact whether the expenditure was expended wholly and exclusively for the purpose of the trade or business of the assessee. The question posed does not proceed upon the footing that there was no evidence or material before the Tribunal to arrive at several' conclusions that it did, which have been earlier set out. In ray view, applying the decision of the Supreme Court in Chandulal Keshavlal and Co.'s case [I960] 38 ITR 601 above cited, it would, in these circumstances, be a question of fact for the Tribunal to consider and adjudicate upon, and, inasmuch as the basis of its decision has not been questioned, it would not be proper for the High Court to consider and question the correctness of that decision.

7. However, even if we could adjudicate upon the correctness and propriety of the decision of the Income-tax Appellate Tribunal, it would appear to me that the conclusion of the Tribunal is on its findings a correct one and that no exception can be taken to the same. Reference may be made in this connection to a decision of the Bombay High Court in Tata Sons Ltd. v. Commissioner of Income-tax : [1950]18ITR460(Bom) . The assessee in that case was the same as the assessee before us and it had voluntarily paid a certain amount as its share of the bonus which the managed company paid to some of its officers. It was held that looking at the payment from the point of view of commercial principles, what the assessee had done was something which had as its object increasing the profits of the managed company and thereby increasing its own share of the commission. Accordingly, it was held that the sum claimed by the assessee was wholly and exclusively expended for the purpose of its business and was an allowable deduction under Section 10(2)(xv) of the Indian Income-tax Act, 1922.

Vimadalal, J.

8. I agree and have nothing to add.

9. By the court:--We answer the questions as follows:

Question (a).

For the assessment years 1956-57 and 1958-59 to 1961-62, in favourof the assessee and in the affirmative. Question (b).

For the assessment year 1961-62, in favour of the assessee and in the affirmative. Question (c). For the assessment year 1956-57, does not survive and, therefore, need not be answered.

10. The parties will bear their own costs of this reference.


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