Tax reimbursement from sister concern not taxable as business income where no deduction existed and no business benefit arose.

Reimbursement of an assessee's tax liability by a sister concern was not taxable as business income because section 41(1) did not apply where no allowance or deduction had been claimed in the earlier assessment year, and section 28(iv) did not apply because the receipt was not a business benefit. The Bombay High Court also held that the Tribunal was justified in declining the proposed reference question. On that basis, the reimbursement was not liable to be taxed in the assessee's hands.

---

---

Issues: Whether reimbursement of an assessee's tax liability by a sister concern was chargeable to tax as business income, and whether the Tribunal was justified in refusing to refer the proposed question.

Analysis: The reimbursement did not attract section 41(1) because no allowance or deduction had been made in the assessee's assessment in the relevant earlier year. It also did not fall within section 28(iv) because the amount received was not a benefit arising from the assessee's business.

Conclusion: The proposed reference question was rightly declined, and the reimbursement was not liable to be taxed in the assessee's hands.

---