Jagdish Sahai, J.
1. The question requiring our answer in both these cases is the same. We are, therefore, dealing with those cases in a common judgment.
2. In reference No. 198 of 1965, the assessee is the Dehra Dun Tea Company Ltd., Dehra Dun, and in reference No. 199 of 1965, the assessee is the East Hope Town Estate Co. Ltd., Dehra Dun. The Dehra Dun Tea Company Ltd. was assessed to U.P. large land holdings tax on the land holding held by it for the years 1959-60, 1960-61 and 1961-62. The tax assessed in respect of the first year is Rs. 72,167, in respect of the second year Rs. 74,248, and in respect of the third year Rs. 73,356.
3. The East Hope Town Estate Co. Ltd. was taxed to Rs. 19,346 for the year 1959-60, Rs. 19,498 for the year 1960-61 and Rs. 20,080 for the year 1961-62.
4. Their assessments were not disturbed up to the stage of appeal before the Income-tax Appellate Tribunal (hereinafter referred to as 'the Tribunal', which while dismissing the second appeal filed by the assessee aforesaid affirmed the appellate orders of the Appellate Assistant Commissioner and thus of the Income-tax Officer.
5. The assessee-companies mentioned above claimed as deductible expenditure under Section 10(2)(xv) of the Indian Income-tax Act, 1922 (hereinafter referred to as ' the Act '), the sums that they had paid as large land holdings tax to the State of Uttar Pradesh, referred to above. Neither the Income-tax Officer nor the Appellate Assistant Commissioner nor the Tribunal accepted this plea of the two assessees mentioned above.
6. After the dismissal of the appeal by the Tribunal the two income-tax references mentioned above were made by the Tribunal at the instance of the assessee-companies.
7. The questions referred by the Tribunal are as follows :
Income-tax Reference No. 198 of 1965.
' Whether, in the facts and circumstances of the case, the sums of Rs. 72,167, Rs. 74,248 and Rs. 73,356 being large land holdings tax are admissible deductions while computing the business income of the assessee-company '
Income-tax Reference No. 199 of 1965.
'Whether in the facts and in the circumstances of the case the tax of Rs. 19,346, Rs. 19,498 and Rs. 20,080 paid by the assessee in the assessment years 1959-60, 1960-61 and 19j61-62, in respect of the tax due from the assessee under the U.P. Large Land Holdings Tax Act, 1957, is allowable under Section 10(2)(xv) of the Indian Income-tax Act, 1922 '
8. Mr. Pachauri, who has appeared on behalf of the aforesaid asscssees, has contended that the sums paid by the two companies mentioned above by way of U.P. Large Land Holdings Tax Act were paid to the Government because the two companies aforesaid were using the land for which they are assessed for carrying on the business of tea plantation. Learned counsel submitted in this case that there is a direct relationship between the land holding and the business of manufacturing tea.
9. The correct position with regard to the U.P. large land holdings tax is that it is a tax on holdings and not one on the annual value or capitalised value of the land, nor is it a tax on the person who holds the land : see Oudh Sugar Mills Ltd. v. State of U.P., A.I.R. 1960 All. 136 (F.B). It is admitted that the liability to pay the U.P. large land holdings tax exists on a person whether he cultivates his holding or not and whether he plants trees and shrubs on it or not. It is well settled that the tax being on the holding, it is a liability that has to be met whether or not the holding is put under cultivation.
10. That being the position we are unable to agree with the contention of learned counsel that there is a nexus between the large land holdings tax charged and the business of manufacturing tea by the two assessees mentioned above. There is good authority for the proposition that before an expenditure can be declared to be a deductible expenditure, the same must have been incurred by the assessee in its character of a trader (see Strong & Co. of Romsey Ltd v. Woodifield,  5 T.C 215).
11. In the present cases it were not the asscssees aforesaid who were taxed. It were the holdings held by them which were taxed. Even though the assessees had to pay the tax, they were only the medium through which the tax was paid. Inasmuch as the assessees were not taxed, there can be no question of the tax being imposed on them in their character of traders. We see no relationship between the tax imposed and the business of manufacturing tea carried on by the assessees aforesaid.
12. Mr. Shanti Bhushan, who has appeared for the income-tax department, has placed reliance on Travancore Titanium Products Ltd. v. Commissioner of Income-tax,  60 I.T.R. 277, 282 (S.C.); A.I.R. 1966 S.C. 1250. In this Supreme Court case a claim for an allowance under Clause (xv) of Section 10(2) was made by the assessee on the ground that the wealth-tax that it had paid was in the nature of business expenditure incurred by it because its wealth constituted the capital invested in its business.
13. The Supreme Court repelled the submission made on behalf of the Travancore Titanium Product Ltd. on the ground that ' every item of expenditure merely because it is connected with the trade may not necessarily be treated as a permissible deduction '. Their Lordships observed that a fairly reliable approach for determining what may be regarded normally as the expenditure laid out or expended wholly and exclusively for the purpose of the business was suggested in Strong and Co. of Romsey Ltd. v. Woodifield. That was a case of a brewery company owning a licensed house in which it carried on the business of innkeepers. The company had to pay damages to a customer who was, when sleeping in the inn, injured by a falling chimney, the fall of the chimney being due to the negligence of the company's servants. The company was held disentitled to deduct the expenditure in computing its profits for income-tax purposes. In that case Lord Loreburne L.C. observed :
' A deduction cannot be allowed on account of loss not connected with or arising out of such trade. That is one indication. And no sum can be deducted unless it be money wholly and exclusively laid out or expended for the purposes of such trade. That is another indication. '
14. In Titanium Products Ltd. v. Commissioner of Income-tax the Supreme Court observed :
' In Badridas Daga v. Commissioner of Income-tax,  34 I.T.R. 10; A.I..R. 1958 S.C. 783 Venkatarama Aiyar J. observed that whether the expenditure is admissible or not will depend upon whether it can be said to arise out of the carrying on of the business and be incidental to it, and this was reaffirmed by this court in a later judgment in Commissioner oj Income-tax v. Abdullabhai Abdulkadar,  41 I.T.R. 545 (S.C). . . . .
The position may therefore be summarised thus : the nature of the expenditure or outgoing must be adjudged in the light of accepted commercial practice and trading principles. The expenditure must be incidental to the business and must be necessitated or justified by commercial expediency. It must be directly and intimately connected with the business and be laid out by the taxpayer in his character as a trader. To be a permissible deduction, there must be a direct and intimate connection between the expenditure and the business, i.e., between the expenditure and the character of the assessne as a trader, and not as owner of assets, even if they are assets of the business. '
15. It is true that the aforesaid case is not one under the U.P. Large Land Holdings Tax Act, but is one under the Indian Wealth-tax Act, but what their Lordships have said in that case applies to the case before us also.
16. We have already pointed out earlier that there is no direct and intimate connection between the large land holdings tax paid and the business carried on by the two assessees mentioned above, nor was the tax imposed on the assessees in their capacity as traders. Clearly the tax was assessed on the holdings and the assessees were the medium of payment because they were the owners of the holdings.
17. For the reasons mentioned above, our answer to the question referred to us in I.T.R. No. 198 of 1965 as also in answer to the question referred to us in I.T.R. No. 199 of 1965 is in the negative, against the assessees and in favour of the department. The assessees shall pay to the department a sum of Rs. 100 as costs in each of the two cases mentioned above.