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TMI Blog2015 (4) TMI 975X X X X Extracts X X X X X X X X Extracts X X X X ..... at to the business of the company. If the decretal amount is not paid, the decree holder could have executed the decree against the property of the company; could have attached the property of the company and the creditors in the alternative also could have filed for winding up of the company. In those circumstances, to avoid such legal complications, if the decretal amount is paid, it cannot be construed that there was no 'commercial expediency' in payment of such amount. All the appellate authorities on careful consideration of the entire material on record has rightly held that the said expenditure falls within Section 37 of the Act and rightly directed the assessing authority to delete the said amount. - Decided in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls of exchange by Sri Anant Hegde on behalf of the assessee, cannot be found fault with and such a plea is taken only to avoid the liability and therefore, decreed the suit. Thereafter, in terms of the decree, the assessee paid a sum of ₹ 2,70,24,730/- to satisfy the decree and claimed deductions under Section 37 of the Income-tax Act, 1961 (hereinafter referred to as the 'Act'). The said deduction was not allowed by the assessing authority on the ground that the said payment is not in connection with the business activity of the assessee and no business expediency was established, though the company was under the obligation to pay the creditors on account of the High Court Order. Aggrieved by the said order, the assessee pref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee to satisfy the decree passed by the Bombay High Court against it and others in respect of the loan obtained by M/s. Electrix is an allowable expenditure in the hands of the assessee? 8. The facts are not in dispute. The borrower is M/s. Electrix India Ltd., of which Sri Ananth Hegde was the Managing Director. The said loan was secured by execution of bills of exchange of four others including the assessee and the said bills of exchange were accepted on behalf of the assessee by its Managing Director - Sri Anantha Hegde. When default was committed, the creditors initiated proceedings before the Bombay High Court under Order 37 Rule 1 of the Code of Civil Procedure. After service of notice, the assessee entered appearance and sought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is prohibited by law, shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. Barring that exception, all amounts incurred by the company is to be treated as for the purpose of business and the same is allowable as deduction. The amount paid by the company in terms of a decree passed by the High Court cannot be construed as either prohibited by law or is an offence. Even if the assessee was in no way benefited by the said transaction and even if the Managing Director without the authority has bound the assessee and when once a decree is passed by a competent Court, there is a threat to the business of the company. If the decretal amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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