TaxTMI 
TaxTMI 
1957 (4) TMI 58
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....Rs. 10,000 in Lala Manmohan Das's case should have been allowed as a deduction to the assessee? (2) (a) Whether in the facts and circumstances of the case, interests paid on bank overdraft amounting to Rs. 46,633 or any portion of the amount should have been allowed as a deduction to the assessee? (2)(b) Whether the claim with regard to the deduction of this amount was argued on behalf of the assessee before the Appellate Tribunal as stated in the affidavit filed today in this Court? (3) Whether in the facts and circumstances of the case the forest income of Kharagpur Circle should have been treated as agricultural income and hence not taxable under the Income-tax Act? (4) Whether in the facts and circumstances of the case, the forest receipts from the Bankura forests should have been held to be capital receipts, or, in any event, as agricultural income and, therefore, not taxable? (5) Whether, in the facts and circumstances of the case, the amount of Rs. 21,274 being the amount paid to the assessee in his character of a shebait of the trust properties should have been held to be exempt from taxation on the ground that it is agricultural income?" 3. The assess....
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....ning the income that could be deductible from the income earned. It further held that there was no evidence showing the real purpose for which the assessee contributed or the purpose of the litigation. The Tribunal found that there was nothing on record to show that this amount was spent for the litigation or to protect the so-called investment. It was, therefore, of opinion that this expense was not laid out even for the purpose of protecting the investment, as alleged by the assessee. 4. At the appellate stage, before the Tribunal, the assessee raised a large number of grounds in the memorandum of appeal. The assessee's counsel, however, expressly stated that he would argue only on some of the grounds and expressly gave up the arguments with respect to the other grounds. At the time of hearing the members of the Tribunal marked the grounds which were argued by the assessee, and decided those points which were argued by the assessee's counsel. In the marking we find that the item whether the interest paid on bank overdrafts amounting to Rs. 46,633 or any part of it should have been allowed as a deduction, was not argued by the assessee's counsel. It might be that th....
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....have already been referred to by us in M.J.C. No. 56 of 1955 and the statement of facts in the said reference would apply in the present statement of case also. 7. On 16th March, 1949, the assessee declared himself to be the sole trustee of a trust in respect of certain properties out of the five circles of his estate. The properties were situated in Rokika, Pandaul Banepuram Dholi and Bahawara Circle and a copy of the trust deed is made a part of the case and is annexure 'A'. T he assessee declared that lie would hold the properties as under trust for religious purposes and for maintaining religious institutions as per schedule "B" in the said trust deed. It was also declared in the trust deed that the as-lessee would be the first and sole trustee and the succession to the trusteeship should be the same as governing the succession to the said impartible estate. It was also declared that the members of the Darbhanga Raj family and none others would have a right to see that the trustee was carrying out the duties under the trust. The family institutions were the beneficiaries in the trust. It was declared that out of the nett income of the trust property, 15 per cent. wou....
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....e assessee? 2. (b) Whether the claim with regard to the deduction of this amount was argued on behalf of the assessee before the Appellate Tribunal as stated in the affidavit filed today in this Court? 3. Whether in the facts and circumstances of the case the forest income of Kharagpur Circle should have been treated as agricultural income and, hence, not taxable under the Income-tax Act? 4. Whether in the facts and circumstances of the case, the forest receipts from the Bankura forests should have been held to be capital receipts, or, in any event, as agricultural income, and therefore not taxable? 5. Whether in the facts and circumstances of the case, the amount of Rs. 21,274 being the amount paid to the assessee in his character of a shebait of the trust properties should have been held to be exempt from taxation on the ground that it is agricultural income?" The assessment year is 1950-51, and the relevant accounting year is 1356 Fasli, which corresponds to the 19th September, 1948, to the 7th September, 1949. The assessee was assessed under section 23(3) of the Act by the Income-tax Officer, Special Circle, on the 26th March, 1951, on a total income of Rs. 15,73....
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.... assessee; and (4) it must be incurred in the accounting year, and not in any prior or subsequent year. Bearing this in mind, I will now proceed to answer the different questions submitted by the Tribunal. Question No. 1: In the assessment year 1950-51 the assessee contributed a sum of Rs. 10,000 towards litigation expenses to one Lala Manmohan Das, and the assessee claimed deduction of this amount as an expenditure under section 12(2) of the Act. The facts which can be gathered from the judgments regarding the nature of this advance are these. Sometime in 1935, the assessee obtained from one P.L. Jetley 21,500 shares of the Lower Ganges and Jamuna Electric Distributing Co. The assessee obtained the above shares in full satisfaction of his loan to Jetley for which he had brought a money suit against Jetley. The amount unrealised from Jetley was allowed as bad debt in the assessment of the assessee. The money-lending investment ended there, and what he received was transferred to his investment department and became an investment in stocks and shares, income whereof was assessable under section 12(1) of the Act. The share scrips so obtained were that of an electric conce....
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....organ (Inspector of Taxes) v. Tote & Lyle Ltd [1954] 26 I.T.R. 195 In my opinion, none of these cases have any application to the present case for the simple reason that here the finding of fact reached by the Tribunal is that the assessee was not a debenture holder, and, that there was nothing on record to show that this amount was spent for litigation to protect the so-called investments. The Tribunal further found that there was no evidence showing the real purpose for which the assessee contributed the expenses, and that the holding of the shares was in the nature of an investment, and the expense for protecting the investment was not expense incurred for earning dividends of the company which ceased to pay dividends since a long time. It will further appear from the judgment of the Appellate Assistant Commissioner that he found that these shares in accordance with the assessee's own claim have been adjudged as investment, pure and simple and were not stock-in-trade. The Tribunal, therefore, held that under section 12(2), only those expenses which were incurred for the purpose of earning the income can be allowed to be deducted, but where, as here, the expense was not la....
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....azumdar, because, as stated earlier, here the definite finding of fact is that this expenditure was incurred not for the purpose of earning any income which only could be allowed to be deducted under section 12(2) of the Act. I would, therefore, answer the first question in the negative in favour of the Department and against the assessee. Question No. 2(a): This question relates to interest paid on bank overdrafts amounting to Rs. 46,633 which the assessee claimed as a deduction under section 12(2). The Tribunal has found that these overdrafts were almost wholly for (1) payment of income-tax (both Central and agricultural), (2) land revenue and cess, (3) call moneys paid for purchase of shares, and (4) personal drawings and interest free advance to Raja Bahadur's estate. Mr. Mazumdar has very frankly and rightly chosen not to press the interest paid on overdrafts on account of personal drawing and interest free advance to Raja Bahadur. He has, however, very strenuously contended that the interest paid on the overdrafts on account of the first three items should have been allowed. In support of his contention, Mr. Mazumdar placed strong reliance on the observation of B....
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....e business." Mr. Mazumdar further relied on a decision of the Madras High Court in Commissioner of Income-tax, Madras v. Raman and Raman Ltd.* in which it was held, on the facts of that case. that the expenditure was in incurred for the purpose of retaining the capital asset of the company, and, there was no improvement of its capital asset by reason of the litigation. Consequently, the expenditure incurred was an allowable deduction under section 10(a)(xv) of the Act. The answer to this question is that section 12(2) is narrower than section 10(2)(xv). Section 10(2)(xv) speaks of an expenditure which is "laid out or expended wholly and exclusively for the purpose of such business, profession or vocation", whereas section 12(2) speaks of an expenditure, which is incurred "solely for the purpose of making or earning such income, profits or gains." On the language of these two sections, it is plain that section 12(2) is narrower than section 10(2)(xv), and, therefore, unless an expenditure is incurred solely for the purpose of making or earning such income, profits or gains which are mentioned in section 12(1) such expenditure cannot be allowed as a deduction under section 12(2) o....
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.... Income-tax Officer has rightly disallowed this deduction. I would, therefore, answer question No. 2(a) also in the negative against the assessee and in favour of the Department. Question No. 2(b):-This question was framed by the High Court on the basis of the affidavit filed by the assessee on the 29th March, 1955. to the effect that the point raised by question No. 2(a) was argued by the assessee's counsel before the Tribunal but it has not been dealt with by it. The Tribunal, however, has definitely stated and has given reasons for coming to the conclusion that the item-whether the interest paid on bank overdrafts amounting to Rs. 46,633 or any part of it should have been allowed as deduction-was not argued by the assessee's counsel. I am not prepared to go behind the finding of the Tribunal, and, therefore, I would answer this question also in the negative against the assessee and in favour of the Department. Questions Nos. 3 and 4:-These two questions are covered by a decision of this Court, to which also the present assessee was a party, in Sir Kameshwar Singh v. Commissioner of Income-tax, Bihar and Orissa*, in which it was held that income from forest is not "....
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.... of a fractional part of the income of the wakf estate, or by a percentage commission. That case may be considered, if. and when, it arises, and their Lordships express no opinion thereon" (underlined by me) Mr. Mazumdar, relying on the above underlined observation, submitted that here the assessee's remuneration was by a percentage commission, and, as such, the receipt of his remuneration by the assessee must be considered to be "agricultural income," because it was 15% of the agricultural income itself. He further relied in support of his argument on another Privy Council decision in Raja Bejoy Singh Dudhuria v. Commissioner of Income-tax, Benga, and also on a decision of the Allahabad High Court in Syed Mohammed Isa v. Commissioner of Income-tax, C.P. & U.P.* In my opinion, it is not necessary to notice these cases in detail, because they have been considered by the Privy Council in a subsequent case in Premier Construction Co. Ltd. v. Commissioner of Income-tax, Bombay City**. Sir John Beaumont, who delivered the opinion of the Board, at page 384. of the Reports, observed: &nb....