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TMI Blog1962 (4) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... im by the bank if he completed the term of seven years of service or if he became totally incapacitated for further service at any time during that period, or in the event of the bank terminating his services. If, on the other hand, this Arumugham Subbiah should die or should voluntarily cease from service, a certain sum dependent upon the length of his service was payable by him to the bank. An agreement was entered into between the bank and Arumugham Subbiah embodying these terms. Clause 3 of this agreement set out the amount which would be so payable by Arumugham Subbiah if his services should be denied to the bank at any time during this period of seven years. This clause further provided that the sum of ₹ 1,00,000 would bear interest at 3? per cent. per annum and from that amount, the sum stipulated as being payable by Arumugam Subbiah was to be deducted. Clause 4 laid down the conditions under which the entire sum of ₹ 1,00,000 would become the absolute property of Arumugham Subbiah, conditions to which reference has been made earlier. This agreement was come to in 1945 and apparently a sum of ₹ 1,00,000 was so placed to the credit of this Arumugham Subbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assessee for that year; this is the amount given up by the assessee from out of advance and earned by Subbiah simultaneously. This contention of the assessee has, therefore, to be accepted for all the assessment years presently under appeal. It is in these circumstances that the first question was referred on the application of the Commissioner for the determination of this court: Whether the sums of ₹ 15,200, ₹ 16,050, ₹ 16,650, ₹ 17,250 and ₹ 17,850 were allowable deductions against the income of the assessee for the respective assessment years 1948-49 to 1952-53? The second question arises on the following facts. The assessee claimed to be entitled to deduct profit taxes paid in Ceylon under the Ceylon Profits Tax Act amounting to ₹ 11,909 for the assessment year 1951-52 and ₹ 53,348 for the assessment year 1952-53. The Appellate Assistant Commissioner rejected this claim observing: The records do not show that business profits tax claim was made in the course of assessment proceedings. However, business profits tax is not expenditure of the business deductible under section 10 of the Indian Income-tax Act. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on from the bank in writing voluntarily, then and in such events only a sum calculated as under shall become payable by the said Arumugham Subbiah or from his estate................ The further parts of this clause set out the sum payable at any particular time when the contingencies contemplated above happened. Clause 3(b) provided: Interest will accrue at the rate of 3? per cent. per annum on the principal sum outstanding as calculated above from the date of appointment to the date of death or the date of voluntary resignation of Arumugham Subbiah. Clause 4 stated that Arumugham Subbiah would be entitled to the said sum of ₹ 1,00,000 free from any claim of the bank on the completion of seven years of service under the agreement or in the event of the bank terminating his service. It seems to us that the intention of the parties was that the sum of ₹ 1,00,000 was to be paid to Subbiah immediately on taking up service. That sum was to bear interest to the advantage of Subbiah and was to become his absolute property under clause 4. If it should happen that Subbiah should die without completing the contemplated seven years period of service or if he sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then, there was nothing to be written off and no question of allowance can arise. The question has therefore to be answered in favour of the department. On the second question, the assessee has not been able to place before us any authority in support of his contention that taxes paid outside the taxable territories have to be allowed for in the income-tax assessment under the Indian Income-tax Act. Section 10(4) of the Act prohibits the allowance of any sum paid on account of any cess, rate or tax levied on the profits or gains of any business, profession or vocation . Obviously, the only provisions relevant to any allowance or the deduction claimed would be under section 10(2)(ix) or section 10(2)(xv). Clearly section 10(2)(ix) has no application. Section 10(2)(xv) relates to any expenditure laid out or expended wholly and exclusively for the purpose of such business, profession or vocation. Section 10(4) makes specific reference to these clauses and lays down that neither of these two clauses shall be deemed to authorise the allowance of any sum paid on account of any tax paid on the profits. The Tribunal's view that on some analogy, which we are unable to follow, the C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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