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TMI Blog1960 (11) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... ) : J. L. KAPUR., M. HIDAYATULLAH., J. C. SHAH JUDGMENT The judgment of the court was delivered by KAPUR, J.---This is an appeal by special leave against the judgment and order of the High Court of Judicature at Calcutta in a reference made by the Income-tax Appellate Tribunal under section 66(1) of the Income-tax Act. The following question was referred : " Whether, in the facts and circumstances of this case, the Appellate Tribunal was right in holding that Rs. 61,818, spent by the assessee to train Indian boys as jockeys, did not constitute expenses of the business of the assessee allowable under section 10(2)(xv) ? " which was answered in favour of the respondent. The Commissioner is the appellant before us and the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the chargeable accounting period ending March 31, 1949. This claim was disallowed by the Income-tax Officer and on appeal by the Appellate Assistant Commissioner and also by the Income-tax Appellate Tribunal. At the instance of the respondent the question already quoted was referred to the High Court and was answered in favour of the respondent. This appeal is brought by special leave against that judgment. The decision under the Business Profits Tax Act will be consequential upon the decision of the deduction under the Income-tax Act. The Tribunal found that it was not the business of the respondent to provide jockeys to owners and trainers, that the jockeys trained in the respondent's school were not bound to ride only in the races r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit-earning of the assessee should be direct and substantial and not remote ; and (3) to be admissible as revenue expenditure it should not be in the nature of a capital expense, i.e., it should not bring into existence an asset of an enduring nature. As to the first question this court has held in Eastern Investments Ltd. v. Commissioner of Income-tax that " though the question must be decided on the facts of each case, the final conclusion is one of law." In Commissioner of Income-tax v. Chandulal Keshavlal Co. this court said : "Another test is whether the transaction is properly entered into as a part of the assessee's legitimate commercial undertaking in order to facilitate the carrying on of its business ; and it is immaterial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ope and meaning of these words. In our opinion, in the circumstances of this case, it cannot be said that the finding of the Tribunal was one of fact. The question as to whether the expenses of running the school for jockeys is deductible has to be decided taking into consideration the circumstances of this case. The business of the respondent was to run race meetings on a commercial scale for which it is necessary to have races of as high an order as possible. For the popularity of the races run by the respondent and to make its business profitable it was necessary that there were jockeys of requisite skill and experience in sufficient numbers who would be available to the owners and trainers because without such efficient jockeys the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diate benefit to the trade, but voluntarily and on the ground of commercial expediency and in order indirectly to facilitate the carrying on of the business may yet be expended wholly and exclusively for the purpose of the trade. In a case more recently decided, Morgan v. Tate Lyle Ltd ., the assessee company was engaged in sugar refining business and it incurred expenses in a propaganda campaign to oppose the threatened nationalisation of the industry. It was held by the House of Lords by a majority that the object of the expenditure being to preserve the assets of the company from seizure and so to enable it to carry on its business and earn profits, the expense was an admissible deduction being wholly and exclusively laid out for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question whether the money was wholly and exclusively laid out or expended for the purpose of trade within the meaning of rules applicable to the question was one of law, but on a consideration of the question it was held that the expenditure was not solely incurred with that object. It is not necessary to discuss that case at any length because what was held in that case was that the pamphlet was not wholly and exclusively for the purpose of the company's trade. Applying the law, as laid down in those cases, to the present case the conclusion is that the amount in dispute was laid out wholly and exclusively for the purpose of the respondent's business because if the supply of jockeys of efficiency and skill failed the business of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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