9911796707
TMI Blog1953 (5) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... made at the instance of the Commissioner of Income-tax, West Bengal. Appearing for him Mr. Meyer made it clear at the very outset that he was not concerned at all with the amount of deduction which had been allowed by the Tribunal but his sole concern was to have certain erroneous principles upon which the Tribunal had proceeded corrected in order that the decision in the present case might not be utilised as a precedent in other similar cases. Likewise, the learned Advocate for the assessee said that to him also the amount of ₹ 6,000 was of no concern and that he wanted rather to defend the principles upon which the Tribunal had allowed the deduction. We may therefore leave the amount of ₹ 6,000 to itself and see whether the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s but the Income-tax Officer did not allow any deduction at all. The Appellate Assistant Commissioner on appeal upheld the Income-tax Officer's disallowance and did so on the ground that the assessee company was still at the development stage and therefore the expenses claimed could not be allowed. When the matter went up to the Tribunal on further appeal, the Tribunal applied the principles which it had applied to the previous year's assessment to which it expressly referred. In accordance with those principles, the Tribunal estimated the allowable expenditure at ₹ 500 per month and granted a total deduction of ₹ 6,000. It is that amount of ₹ 6,000 which finds place in the question referred. As the reasons upon w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The point taken by Mr. Meyer was that although the Tribunal might, if it liked, estimate the amount of the expenditure incurred in collecting the interest income at ₹ 6,000 or even a higher figure, it could not base the allowance upon the principles which it had purported to follow. The learned Advocate for the assessee, on the other hand Stated that the observations of the Tribunal indicated that they were proceeding on two lines, one of which had reference to the business activities of the company and the other of which only had some reference to the interest income. If I understood the learned Advocate aright, what he intended to say was that the Tribunal had allowed the deduction on the basis that the assessee was entiled to som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some interest income might be earned. It seems to have made a somewhat bad bargain because although there is no finding as to what the actual expenses were of collecting the interest, there is some suggestion that the expenses of collecting the interest from the managing agents themselves were considerable. Be that as it may, it is impossible to see how before the company had even commenced its business and when it was carrying on no business at all and when it had no business income which was being brought under assessment under Section 10, there could be any item of expenditure allowable as office and establishment expenses of a business. Nor is it easy to see how the company could claim any deduction on the ground that some expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to have been at the development stage and a large claim on account of office and establishment expenses was made. The learned Chief Justice pointed out that all that the assessee company was entitled to by way of deduction was the amount of actual expenditure incurred in earning the income and proved to the satisfaction of the Income-tax Officer "There must have been", observed the learned Chief Justice, "some expenditure to gain that profit and if the assessee company is able to show the Income-tax Officer what that expenditure actually was -it must be expenditure solely for the purpose-the assessee company Will be entitled to a deduction in respect of that". Similarly in the present case, whatever could be proved to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness, are wholly extraneous and cannot be utilised for enlarging the amount of the deduction nor can any allowance which is claimable only under Section 10 be allowed or claimed before a business income assessable under the Act has emerged. The principles upon which the Tribunal purported to act are therefore entirely erroneous. But the Tribunal also referred to the expenditure which must have been incurred in earning and collecting the interest income. What it exactly meant by saying that it did not consider it necessary to go into the question as to how much of the expenditure could be attributed to the earning and collection of the interest receipts, it is not easy to understand. Probably, it thought that having regard to its view that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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