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Interpretation of Section 10(2)(xv) of the Income-tax Act regarding deduction eligibility for a sum paid under a business agreement. Analysis: The judgment by the Calcutta High Court under Section 66(1) of the Indian Income-tax Act delves into the question of whether a sum of &8377; 2,100 paid by an assessee private limited company can be allowed as a deduction under Section 10(2)(xv) of the Income-tax Act. The company, engaged in the business of dealing in petroleum and mobil oil, entered into an agreement with a joint family for the transfer of agency for kerosene oil. The agreement included clauses restricting the joint family from engaging in similar businesses without the consent of the company and requiring the company to pay &8377; 2,100 annually to the joint family as compensation for trading limitations. The assessment year in question was 1946-47, and the sum of &8377; 2,100 was paid in accordance with the agreement. The court analyzed the provisions of Section 10(2)(xv) which allow for the deduction of any expenditure laid out or expended wholly and exclusively for the purposes of the business, provided it is not capital expenditure or personal expenses of the assessee. The court highlighted the conditions that must concur for an expenditure to be deductible under this clause, emphasizing that it must be incurred in the accounting year, in relation to a business carried on by the assessee, not be personal expenses, not be capital expenditure, and be laid out exclusively for the business purpose. In the present case, the court found that the sum of &8377; 2,100 was not paid for acquiring any assets of the business but rather to prevent competition in the area where the company operated. The court concluded that this payment was not a capital expenditure but an amount paid for the business's benefit, aligning with the provisions of Section 10(2)(xv). Therefore, the court upheld the Tribunal's decision to allow the sum of &8377; 2,100 as a deduction under the Income-tax Act. The judgment affirmed that the assessee was entitled to the costs of the reference, and the Chief Justice concurred with the decision. In conclusion, the Calcutta High Court's judgment clarified the application of Section 10(2)(xv) of the Income-tax Act in allowing the deduction of a sum paid under a business agreement, emphasizing the necessity for the expenditure to be exclusively for business purposes and not classified as capital expenditure or personal expenses. The court's decision in this case supported the assessee's claim for deduction based on the nature and purpose of the payment made under the agreement, ultimately providing a comprehensive interpretation of the relevant legal provisions.
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