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TMI Blog2001 (2) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... n allowable expenditure under the Income-tax Act, 1961?" The brief facts of the case are that the assessee-company succeeded to the business of an association of persons, viz., Hyderabad Race Club, Hyderabad, which was conducting the races. In the process of taking over the business, it took over all the assets and liabilities of its predecessor. At the time when the assets and liabilities were taken over by the assessee company, there was no demand of income-tax. However, subsequently there was a demand for a sum of Rs. 28,413 which was due by the assessee's predecessor and the said amount was paid by the assessee-company. In the assessment proceedings, the assessee-company claimed deduction. A perusal of the orders of assessment and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue deduction. Even assuming that the same would be treated as the assessee's liability, as it is an income-tax liability, it would be treated as a personal liability and, therefore, it is not allowable as deduction. Even otherwise also, if it is a liability of its predecessor, it should go into the cost of acquisition of the assets and in that case it would be a capital expenditure and, therefore, it could not be allowed as a revenue deduction. Learned counsel also relied upon the following decisions in support of his contention: Puspa Perfumery Products Pvt. Ltd v. CIT (1992] 194 ITR 248 (Cal) and Dashmesh Transport Co. (P.) Ltd. v. CIT [1980] 125 ITR 681 (P H). Learned counsel for the respondent-assessee, on the other hand, supporte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in subsequent proceedings. In the light of the said observations of the very same High Court and also taking a different view under almost identical circumstances in the very same assessee's case, it shows that the view taken by the Tribunal is not just and proper. Apart from that in the subsequent decision, it was held that if it is a liability of the predecessor, the said expenditure would become the capital expenditure of the assessee and hence is not allowable as a revenue deduction. A similar issue was also considered by the Calcutta High Court in the case of Puspa Perfumery Products Pvt. Ltd v. CIT [1992] 194 ITR 248, where it was held that the income-tax liability of the predecessor would form part of the purchase consideration and, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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