9911796707
TMI Blog1972 (8) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the agreement dated July 31, 1956, between the British India Corporation and the appellant company, the letters of Sri Kailash Nath Agarwal, the letters of managing directors, the sum of Rs. 43,333 retained by the British India Corporation and adjusted by it to the credit of Sharma & Co. was the assessable income of the appellant company? (2) Whether, on the facts and circumstances of the case, the sum of Rs. 43,333 represented an expenditure under section 10?" The matter relates to the assessment year 1956-57. The appellant is a private limited company and Kailash Nath Agarwal is one of its directors. As per agreement dated July 31, 1956, the appellant was appointed with effect from April 1, 1955, the sole selling agent of the Kan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 23, 1955, Kailash Nath Agarwal addressed a letter to the managing director of BIC informing him of the agreement with Sharma & Co. and requesting for the grant of sole selling agency to the appellant. The letter concluded as follows: "I hereby authorise you in case you are pleased to grant your sole selling agency to my said firm to retain one-seventh of our commission for adjustment in the account of M/s. Sharma & Co. with minimum of Rs. 50,000 per annum till your dues against them are cleared with interest." The managing director of BIC later on that day, ie., March 23, 1955, addressed a letter to Sharma & Co., accepting its resignation from the sole selling agency of the Kanpur Cotton Mills and about the appointment of Kailash Nath ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iability, the sole selling agents agree that the corporation may continue to retain an amount equal to one-seventh of the trade discount of 1 3/4% or Rs. 50,000 whichever is greater and adjust it towards such dues of M/s. Sharma & Co. as way then be outstanding. Clause 13. That the authority given above to the corporation to retain and adjust a part of the trade discount towards the outstanding against M/s. Sharma & Co. will not be revocable and will be binding on the sole selling agents, their successors, or assigns only so long as they act as the corporation's sole selling agents and will be deemed to be a condition on which the sole selling agency has been granted to the agents. The agents will have no claim whatsoever to any such amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court should be upheld. It would appear from the resume of facts given above that in March, 1955, an amount of Rs. 8,39,350-15-6 was due to BIC from the firm, Sharma & Co., who was the previous sole selling agent of the Kanpur Cotton Mills. As a result of agreement between the appellant, BIC and Sharma & Co., the appellant undertook to discharge the liability of Sharma & Co., in lieu of being appointed the sole selling agent of the Kanpur Cotton Mills in place of Sharma & Co. It can, therefore, be said that the appellant got the sole selling agency of the Kanpur Cotton Mills in consideration of its agreeing to pay Rs. 8,39,350-15-6 which was the amount due from Sharma & Co. to BIC. It is not disputed by Mr. Maheshwari that if the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income-tax, if the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business it is properly attributable to capital and is of the nature of capital expenditure. If on the other hand it is made not for the purpose of bringing into existence any such asset or advantage but for running the business or working it with a view to produce the profits it is a revenue expenditure. If any such asset or advantage for the enduring benefit of the business is thus acquired or brought into existence it would be immaterial whether the source of the payment was the capital or the income of the concern or whether the payment was made once and for all or was made periodically. The ai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 43,333 which had been retained by BIC. This fact, in our opinion, would make no material difference so far as the true nature of that amount was concerned. The amount was deducted by BIC in pursuance of the agreement entered into by the appellant with BIC and Sharma & Co., according to which the appellant had to pay that amount in the form of deduction out of its commission in consideration of being appointed the sole selling agent of the Kanpur Cotton Mills. The present is a case relating to the application of income to discharge a liability incurred not in the course of running the business but a liability undertaken for the purpose of acquiring the sole selling agency right which was indisputably an asset of capital nature. The appea ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
