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TMI Blog1961 (12) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... s. But this has not been shown and therefore the amount claimed is not a deductible item under section 10(2)(xv). Appeal dismissed. - - - - - Dated:- 20-12-1961 - Judge(s) : J. L. KAPUR., M. HIDAYATULLAH., J. C. SHAH., J. R. MUDHOLKAR., B. P. SINHA JUDGMENT The judgment of the court was delivered by KAPUR J.---This appeal by special leave is directed against the judgment and order of the High Court, of judicature at Madras. The appellant is the assessee and the respondent, is the Commissioner of Income-tax and the question raised is as to the applicability of section 10(2)(xv) of the Indian Income-tax Act to a gratuity paid by the appellant to one of its officers on his retirement from service. The appeal relates to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter making the following allowances, namely : --- . . . (xv) any expenditure (not being an allowance of the nature described in any of the clauses (i) to (xiv) inclusive, and not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of such business, profession or vocation. " The amount was disallowed by the Income-tax Officer as well as by the Appellate Assistant Commissioner on the ground that the appellant company had no pension scheme ; the payment was voluntary and that the entry in the assessee's books clearly indicated it to be a capital payment. Against this order the appellant company took an appeal to the Income-tax Appellate Tribunal whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sum of Rs. 40,000 paid to Mr. J. H. Philips on his retirement from the service of the company was not an admissible deduction under section 10(2)(xv) of the Income-tax Act, 1922 ? " The High Court answered the question against the appellant company. It held that in order that section 10(2)(xv) be applicable it had to be proved that the amount was laid out or expended wholly and exclusively for purposes of the company's business. In this case the amount was paid on retirement and for valuable services rendered by Mr. J. H. Philips ; there was no evidence that he expected to receive this amount or the company contemplated its payment at any time before ; the payment was voluntary and there was no evidence to show that it was in the futur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then the payment was a matter of commercial prudence. It was also submitted that the company had acted not with any oblique motive and its good faith was not in doubt, and in support of the contention several cases were relied upon. In our opinion on the findings as given the payment in dispute does not fall within the provisions of section 10(2)(xv). The amount was paid not in pursuance of any scheme of payment of gratuities nor was it an amount which the recipient expected to be paid for long and faithful service but it was a voluntary payment not with the object of facilitating the carrying on of the business of the appellant company or as a matter of commercial expediency but in recognition of long and faithful. service of Mr. J. H. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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