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TMI Blog1981 (2) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1961, the assessee claimed the benefit of deduction of deficiency for Rs. 19,934 in accordance with the provisions of s. 44A of the I.T. Act, 1961. Along with the said letter, a computation showing the said deficiency of Rs. 19,934 was filed and this included a sum of Rs. 14,846 representing in respect of furniture, air-conditioner, etc., which was debited in the accounts. The assessee is registered under the Indian Trade Unions Act, 1926. The ITO disallowed this amount of deficiency for the computation of deficiency as, in his opinion, being a non-trading association, was not entitled to claim depreciation. In support, it was observed that such a depreciation could not be claimed since the assets were not used in the business. He, therefore, restricted the deficiency to Rs. 5,088, being the difference between Rs. 19,934 and Rs. 14,846. The assessee, being aggrieved by the aforesaid order of the ITO, went up in appeal before the AAC. The AAC upheld the order of the ITO observing that the depreciation was not an expenditure to be taken into account for computing the deficiency under s. 44A of the Act. Being dissatisfied with the order of the AAC, the assessee went up in further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the amount received during a previous year by any trade, professional or similar association [other than an association or institution referred to in clause (23A) of section 101 from its members, whether by way of subscription or otherwise (not being remuneration received for rendering any specific services to such members) falls short of the expenditure incurred by such association during that previous year (not being expenditure deductible in computing the income under any other provision of this Act and not being in the nature of capital expenditure) solely for the purposes of protection or advancement of the common interests of its members, the amount so fallen short (hereinafter referred to as deficiency) shall, subject to the provisions of this section, be allowed as a deduction in computing the income of the association assessable for the relevant assessment year under the head. ' Profits and gains of business or profession' and if there is no income assessable under that head or the deficiency allowable exceeds such income, the whole or the balance of the deficiency, as the case may be, shall be allowed as a deduction in computing the income of the association assessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iability actually existing at the time, but the putting aside of money, which might become expenditure on the happening of an event was not expenditure. The Supreme Court was giving this meaning in considering the question whether there was a distinction between the actual liability in present and liability in future. Reliance was placed in this connection on the observations of the court at p. 78 of the, report, where the Supreme Court observed as follows : " But there is no case directly on what is ' expenditure' and if the authorities under the English statute were to be of real assistance, the whole of the matter should have been before us. The question, however, limits the approach to whether the payments made towards the policy were 'expenditure' within clause (xv). 'Expenditure' is equal to ' expense' and 'expense' is money laid out by calculation and intention though in many uses of the word this element may not be present, as when you speak of a joke at another's expense. But the idea of 'spending' in the sense of 'paying out or away' money is the primary meaning and it is with that meaning that we are concerned. 'Expenditure' is thus what is 'paid out or away' and is som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the claim for deduction of this amount. The AAC, however, held that only Rs. 12,500, which related to the year in question, was allowable. Before the Tribunal, the assessee claimed that the entire Rs. 3 lakhs ought to have been allowed and the AAC having directed the allowance of only Rs. 12,500, the balance of Rs. 5,87,000 of the discount ought to have been allowed. The Tribunal upheld the claim of the assessee holding that instead of receiving Rs. 100 per bond and returning Rs. 2, the issue price was stated to be Rs. 98, so that a subscriber was required to pay only Rs. 98 per bond at Rs. 100. In that context, the Division Bench of the Madras High Court, after referring to the aforesaid decisions of the Supreme Court, observed as follows at p. 468 of the report: " ' But there is no case directly on what is " expenditure " and if the authorities under the English statute were to be of real assistance, the whole of the matter should have been before us. The question, however, limits the approach as to whether the payments made towards the policy were " expenditure " within clause (xv). " Expenditure " is equal to "expense " and " expense " is money laid out by calculation and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure does not necessarily involve actual delivery of or parting with money or property. If there are cross-claims one by the assessee against a stranger and the other by the stranger against the assessee and as a result of accounting the balance due only is paid, the amount which is debited against the assessee in the settlement of accounts may appropriately be termed expenditure within the meaning of section 10(2)(xv) (of the 1922 Act). We are not satisfied that this passage is in any manner inconsistent with or runs counter to the earlier decision in the case of Indian Molasses Co. (P.) Ltd. v. CIT [1959] 37 ITR 66 (SC). The earlier decision was not noticed in the later case, but the later decision is also a case where the money had gone out to the hands of the depositors. There was an adjustment of the accounts. Excepting in cases where the assessee maintained accounts on cash basis, in other cases of mercantile accounts, the expenditure which involved payment out, could be incurred by appropriate book entry being made and not necessary by cash. " The expression " expenditure " is not defined in the Act, as such. In the context of different statutes, the expression " ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the depreciation adjustment. The required entry is debit Trading and Profit & Loss account and credit the asset, in respect of which depreciation is being recorded. This entry conforms with the principles already enunciated in that the debit to Trading and Profit & Loss account is necessary because the amount written off represents an expense and the credit to the asset is required as the asset has, pro tanto, been reduced in value." Therefore, really from that point of view it is the money expended which is spread out over the effective life of an asset. The Legislature, it seems, has also used the expression " allowances and depreciation " in several sections in the scheme in Chap. IV within which s. 44A appears. Reference in this connection may be made to s. 37 of the Act which enjoins that any expenditure not being the expenditure of the nature described in ss. 30 to 36 laid out or expended wholly and exclusively for the purpose of the business or profession should be allowed in computing the income chargeable under the head " Profits and gains of business or profession ". In ss. 30 to 36 the expressions " expenses incurred " as well as "allowances and depreciation " had been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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