Deductibility of fund payments under income tax law upheld only to the limited extent linked to profit and loss account charges.

Deductibility of fund payments under section 10(2)(xv) of the 1922 Act and the corresponding section 37 of the 1961 Act depended on whether the claimed sums were properly attributable to the assessee's profit and loss account for the relevant assessment years. The High Court held that the amounts claimed for 1959-60 and 1960-61 were not allowable, and for later years only the excess amounts specifically referable to the fund payments and charged to the profit and loss account could be deducted. The Supreme Court found no infirmity in that approach and declined to interfere, leaving the deduction claim rejected except to the limited extent allowed by the High Court.

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Issues: Whether the assessee was entitled to deductions of the sums claimed for the relevant assessment years under section 10(2)(xv) of the Indian Income-tax Act, 1922 or the corresponding section 37 of the Income-tax Act, 1961.

Analysis: The question turned on the allowability of the claimed amounts as deductions in relation to the assessee's fund payments for the assessment years 1959-60 to 1964-65. The High Court held that the sums for 1959-60 and 1960-61 were not allowable, and for the later years only the excess amounts specifically referable to the fund payments and charged to the profit and loss account could be deducted. The Supreme Court found no infirmity in that answer and saw no ground to interfere.

Conclusion: The deduction claim was rejected except to the limited extent allowed by the High Court, and the appeals were dismissed.

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