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1971 (2) TMI 25 - HC - Income TaxBusiness of clearing and forwarding agents selling agents and commission agents - from the various amounts received by the company from a number of constituents a total sum of Rs. 29, 643 was lying in the books of the company to the credit of those constituents - those amounts were not claimed by the respective constituents held that such amounts can be treated as assessee s income
Issues:
1. Treatment of a sum of Rs. 29,643 as income for the assessment year 1962-63. 2. Disallowance of a claim of Rs. 8,679 as business expenditure for the same assessment year. Analysis: Issue 1: Treatment of Rs. 29,643 as Income The case involved the Pioneer Consolidated Company of India, Ltd., where a sum of Rs. 29,643 was transferred to the profit and loss account during the accounting year 1961-62. The Income-tax Officer treated this amount as income for the assessment year 1962-63. The company contended that the sum could not be considered as income. The court analyzed the nature of the receipts, noting that they were received in connection with the company's business activities and were transferred to the profit and loss account during the relevant accounting year. The court held that the sum of Rs. 29,643 represented income of the assessee for the assessment year 1962-63. Issue 2: Disallowance of Rs. 8,679 as Business Expenditure The second issue pertained to the disallowance of a claim of Rs. 8,679 as business expenditure by the Income-tax Officer, which was upheld by the Appellate Assistant Commissioner and the Appellate Tribunal. The company had paid this amount in connection with its role as a selling agent for a specific company. The court examined the reasons for disallowance, including the failure to take legal action against debtors and the cessation of the principal-agent relationship after 1955-56. The court emphasized that the nature of the expenditure, not the company's diligence, was the relevant factor. It was concluded that the payment of Rs. 8,679 was a legitimate business expenditure, and the Tribunal was incorrect in disallowing it. In conclusion, the court answered the questions raised in the case. Question 1, regarding the treatment of Rs. 29,643 as income, was answered in the affirmative, against the assessee. Question 2, concerning the disallowance of Rs. 8,679 as business expenditure, was answered in the negative, in favor of the assessee. The parties were directed to bear their own costs in the reference.
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