Satyanarayana Rao, J.
1. Under Section 66 (1) of the Indian Income-tax Act, the Income-tax Appellate Tribunal referred the following question for decision of this Court:
'Whether on the facts and circumstances of the case, the applicant in computing the profits of his business is entitled to deduct the sum of Rs. 13,588 paid to the India Canning Industrials, Ltd., either under Section 10 (2) (i) or 10 (2) (xv) of the Income-tax Act.'
In the accounting year ending 30th June 1943, the assesses paid this sum to the India Canning Industrials and he claimed that it was either rent, for the machinery and the building of the company or an expenditure incurred for the purpose of the business. The assessec carried on the business of manufacturing fruit jam, jelly, etc. He was also one of the directors of the India Canning Industrials and by a resolution of the company dated 7th June 1941, he was granted a lease of the concern subject to two conditions, namely, that he should pay at the rate of Rs. 4,000 to the company per annum and that the company should bear the depreciation of the assets leased out to him, and secondly, that of the net profits remaining and to be wholly enjoyed by him, he should pay 33 1/3 per cent, of them to the company besides Rs. 4,000 mentioned above. In the year of account ending with June 1943 he paid a sum of Rs. 4,000 & also a sum of Rs. 13,588 representing 33 1/3 per cent, of the net profits as per the terms of the resolution. He claimed that the amount of Rs. 13,588 should be allowed as deduction either as rent or as expenditure. This claim was rejected by the revenue authorities and at his instance this reference has been made.
2. The clause under which his liability to pay 33 1/3 per cent, of the profits arises leaves no room for doubt that it is out of the entire profits that this amount is to be paid to the company. The net profits of his business are treated as profits belonging to him and to be wholly enjoyed by him. It is from that amount that this 33 1/3 per cent, should be paid. If once profits are received by the assessee as his profits their destination is irrelevant. It is not a case where the net profits should, be arrived at after deducting the 33 1/3 per cent which has to be paid to the company. We do not suggest thereby that if it was so done, it would have been an expenditure within Section 10 (2) (xv) of the Act, and it is unnecessary for us to decide that question. It is rather difficult, therefore. In view of the clear language of the resolution to accept the contention urged by Mr. Srini-vasan, the learned advocate for the assessee, that it should be treated as a permissible deduction. The view taken by the revenue authorities is, in our opinion, correct and they were right in not permitting this deduction. The answer, therefore, to the question referred to us must be in the negative and against the assessee. As the assessee has failed, he must pay costs of Rs. 150 to the Income-tax Commissioner.