9911796707
TMI Blog1971 (8) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... te limited company. It derives its income from exhibition of motion pictures. Two cinema houses, one at Gurgaon and the other at Hissar, are owned by it. During the previous years to the assessment years 1961-62 and 1962-63, the assessee paid property tax on the cinema houses. Rs. 3,065 was paid in the year 1961-62 and Rs. 2,563 in the year 1962-63. The assessee debited these amounts in the profits and loss account and claimed deduction in computing its total income. The Income-tax Officer disallowed this deduction by his order dated 12th February, 1964. An appeal by the assessee to the Appellate Assistant Commissioner also failed. The Appellate Assistant Commissioner held that the property tax was not admissible deduction under section 10( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of these amounts was unjustified and the amount should be allowed as a deduction in both these years." On the application of the department under section 256(1) of the Income-tax Act, 1961, the question already set out in the opening part of this order has been referred for our opinion. Before we proceed to answer the question, it will be appropriate to refer to the provisions of the Punjab Urban Immovable Property Tax Act, 1940. Section 2(c) defines an owner and is in the following terms : "'Owner' includes a tenant in perpetuity, a mortgagee with possession, and a trustee having possession of trust property." Section 3 is the charging section and the relevant part with which we are concerned is sub-section (4) and is in the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it may be connected with something else quite as much as or even more than with the trade. I think only such losses can be deducted as are connected with it in the sense that they are really incidental to the trade itself. They cannot be deducted if they are mainly incidental to some other vocation, or fall on the trader in some character other than that of trader. " This test was accepted by the Supreme Court in Travancore Titanim Products Ltd. v. Commissioner of Income-tax. While dealing with the question whether estate duty can be claimed as a permissible deduction under section 10(2)(xv) their Lordships, while dealing with the said provision, summed up the position thus : " The nature of the expenditure or outgoing must be adjudged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this tax only, if it can show, as is alleged by it, that this tax was an expenditure laid out or expended wholly and exclusively for the purpose of its business. In other words, can it be said that this was an expenditure which had been incurred by the assessee exclusively for the purpose of it business ? It is quite different to say that the assessee was taxed, because it carried on its business. Only that expenditure will be covered by this clause which the assessee has spent or laid out exclusively for the running or betterment of its business. If a tax has been imposed simply because a person was carrying on a particular business, that, in my view, will not be covered by this clause, because the tax is the result of that person's do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness but also the rationalisation of its administration and modernization of its machinery ; it may include measures for the preservation of the business and for the protection of its assets and property from expropriation, coercive process or assertion of hostile title ; it may also comprehend payment of statutory dues and taxes imposed as a pre-condition to commence or for carrying on of a business ; it may comprehend many other acts incidental to the carrying on of a business. However wide the meaning of the expression may be, its limits are implicit in it. The purpose shall be for the purpose of the business, that is to say, the expenditure incurred shall be for the carrying on of the business and the assessee shall incur it in his capa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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