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TMI Blog1994 (3) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Rs. 3 lakhs was a permissible deduction for the assessment year 1974-75 ?" As far as the first question is concerned, which is at the instance of the Department, in view of the decision of this court in CIT v. Rajaram Bandekar [1993] 202 ITR 514, the question will have to be answered in the negative and in favour of the Revenue. The first question is answered accordingly. The second question is referred to us at the instance of the assessee. In this connection, the relevant facts are as follows : (a) The assessee is a partnership firm which came into existence under a deed of partnership dated July 1, 1963. The partnership was formed with the sole object of working the mines at Sirigao. The mining concession being Mining Conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreed to abide by and fulfil the commitment of supplying 7,50,000 DM tonnes of iron ore to Vinayak during the period of six years from October 1, 1970, to September 30, 1976, at a price specified in the said settlement, a draft of which was shown to the assessee-firm. The assessee-firm also agreed to make itself liable for all obligations, liabilities, responsibilities, etc., that may arise for non-fulfilment, breach or violation or short-delivery of iron ore under the said settlement. Two days thereafter, on July 17, 1970, a settlement was accordingly signed by Rajaram and Vinayak in which specific details of the supply of iron ore to Vinayak and the prices at which the same were to be supplied are set out. It seems that thereafter disput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of both the assessment years 1974-75 and 1975-76. The Tribunal has disallowed the deduction in both the assessment years. The assessee-firm has, therefore, come by way of reference for the assessment year 1974-75. The Supreme Court in the case of CIT v. Delhi Safe Deposit Co. Ltd. [1982] 133 ITR 756 has considered when expenditure can be considered as laid out on purely business considerations and wholly for the purpose of the assessee's business. The Supreme Court has observed that the true test of an expenditure laid out wholly and exclusively for the purposes of trade or business is that it is incurred by the assessee as incidental to his trade for the purpose of keeping the trade going and of making it pay and not in any ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee-firm had agreed to the said settlement and had agreed to supply iron ore to Vinayak by its agreement dated July 15, 1970, with Rajaram. Similarly, the assessee-firm paid Rs. 3,00,000 to Vinayak to terminate its obligation to supply iron ore to Vinayak at specified prices under the settlement dated July 17, 1970, read with the agreement of the assessee-firm with Rajaram dated July 15, 1970. The Tribunal, therefore, was not right when it held that the arrangement of payment of Rs. 3,00,000 was only between Rajaram and Vinayak and that the assessee-firm had no connection with it. The assessee-firm's business was directly affected by the arrangement and, in fact, the letter of Dr. Hede which is addressed to the assessee-firm m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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