2015 (4) TMI 975

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.... amount paid by the assessee in terms of the decree passed by the Bombay High Court falls within the words 'commercial expediency' and therefore entitled to deduction. 3. The assessee is a limited company engaged in manufacture and sale of electric power tools. M/s. Electrix again a private limited company took a loan from several sources for which the assessee acted as a drawer of bills of exchange on its behalf and had co-accepted the bills of exchange on behalf of the assessee. The creditors moved the High Court of Bombay for repayment of loans against the Electrix and thus co-acceptors of the bills of exchange. In the said suit, it was contended that Sri Anant Hedge - the Managing Director, who accepted the bills of exchange ....

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...., the commercial expediency is for the assessee to make payments which is rightly affirmed by the Appellate Commissioner and therefore, the appeal came to be dismissed. Aggrieved by the said order, the revenue is in appeal before this Court. 6. The appeal was admitted on 15.2.2010 to consider the following substantial question of law: "Whether the Appellate Authorities were correct in holding that a sum of Rs. 2,70,24,730/- paid by the assessee a company to satisfy a decree obtained against its Director Sri Anantha Hegde who was Managing Director and standing as guarantee to M/s Electrex India Ltd., towards loan obtained by M/s. Electrex is an allowance expenditure in the hands of the assessee?" 7. After hearing, we noticed that th....

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....the material placed on record shows that it was validly accepted by the Managing Director, it binds the company and therefore, it proceeded to decree the suit of the plaintiff against the assessee and three others. Therefore, in order to avoid execution of the said decree against the assessee by way of attachment, arrest and to protect the name of the assessee, the said amount is paid by the assessee. 9. Section 37 of the Act provides: "Any expenditure not being expenditure of the nature described in Sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee, laid doubt or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the inco....