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of <h1>Court allows deductions for business expenses under Agricultural Income-tax Act, 1950</h1> <h3>Harisons Malayalam Limited Versus Commissioner Of Agricultural Income-Tax</h3> Harisons Malayalam Limited Versus Commissioner Of Agricultural Income-Tax - [1998] 233 ITR 273, 151 CTR 529 Issues:Interpretation of clauses in a scheme of arrangement and amalgamation under the Agricultural Income-tax Act, 1950 for deduction of expenses related to bonus, sales tax arrears, and estate valuation fee.Analysis:The judgment pertains to an assessment under the Agricultural Income-tax Act, 1950, involving an amalgamation of a foreign company into a domestic company. The Commissioner of Agricultural Income-tax revised the assessment, disallowing deductions for bonus, sales tax arrears, and estate valuation fee, considering them as capital expenditure incurred for bringing the assets into existence. The assessee challenged this decision, arguing that the expenses were allowable deductions under the approved scheme of amalgamation. The court analyzed clauses (7) and (8) of the scheme, emphasizing the continuity of service for employees and the transfer of profits and losses to the Indian company from the transferor company. The court found that the expenses were incurred in the normal course of business and not specifically for acquiring assets, thus allowing the deductions.The court highlighted that the bonus payment to employees and other expenses were part of the normal business operations post-amalgamation, as per the approved scheme. The judgment emphasized that the profits and losses of the transferor company, including such expenses, were to be considered for the benefit of the Indian company. The court noted that the expenses were not incurred solely for acquiring assets but were part of regular business activities. Citing a decision of the Calcutta High Court, the court ruled in favor of the assessee, stating that the expenses were allowable deductions under the scheme of amalgamation.In conclusion, the court answered questions related to the deduction of bonus, sales tax arrears, and estate valuation fee in favor of the assessee and against the Revenue. The court held that the expenses were not capital expenditure but allowable deductions as they were incurred in the normal course of business post-amalgamation. The judgment directed the Commissioner of Agricultural Income-tax to adhere to this decision and forwarded a copy of the judgment for compliance.
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