TaxTMI 
TaxTMI 
1960 (1) TMI 34
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....d lawyer's fees, totalling ₹ 12,923-14-0 or roughly ₹ 12,924 were incurred. In the revised statement of the case which is furnished to us, by the Appellate Tribunal, it is stated, that "on the basis of the entries in the cash book and on consideration of the cash balances at various dates" the loan raised "can be stated in a rough and ready way to be identified with payments" towards the purchase of timber and casein for over ₹ 1,76,000, cash purchases on December 18, 1950, for over ₹ 24,000 and discharge of loans on suspense account between October 28, and November 23, 1950, amounting to over ₹ 82,900, and with a deposit of ₹ 51,800 under a separate account, for the payment of dividends for the year ended March 31, 1950, as declared at the annual general meeting held on November 15, 1950. The assessee did not claim a deduction of the aforesaid expenditure of ₹ 12,924 in the return of income filed for the year ended March 31, 1950, for the assessment year 1951-52, but made the claim before the Appellate Assistant Commissioner, which was admitted and allowed. On appeal by the Department of Income-tax, the Tribunal dis....
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....d or borrowed, and as for the latter, the Act itself makes allowance for interest payable in respect of it. A borrowing of capital has to be distinguished from securing mere temporary or day to day accommodation, or from banking or overdraft facilities, and may be either by way of addition to the capital, or for improving the capital position. The above distinction was pointed out by Finlay, J., in European Investment Trust Company Limited v. Jackson [1932] 18 Tax Cas. 1 and was affirmed by Lawrence, J., in Ascot Gas Water Heaters Ltd. v. Duff [1942] 24 Tax Cas. 171 who considered a temporary accommodation to be an ordinary incident in carrying on the business. In a commercial sense, no one would speak of his banking facilities as part of his capital assets. In Ward v. Anglo-Amercian Oil Co. Ltd. [1934] 19 Tax Cas. 94, Singleton, J., quoted as follows, from the judgment of the Court of Sessions in Scottish North American Trust v. Farmer [1911] 5 Tax Cas. 693, 398: "It may well be said that if money is borrowed on a permanent footing, as from year to year, the capital of the concern is in a commercial sense enlarged thereby, and the business extended,...." The category ....
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....n earning them have of course to be deducted, but such ascertainment has or ought to have nothing to do with how the capital is found; for, as Mathew, J., observed in Texas land and Mortgage Company v. Holtham [1894] 3 Tax Cas. 255, "there cannot be one law for q company having sufficient money to carry on all its operations and another which is content to pay for the accommodation." A borrowing for capital is thus distinguishable from obtaining temporary accommodation, or banking or trading facilities for the purpose of carrying on business, though the distinction is a matter of degree. We are not, therefore, impressed by the argument, that the borrowing in the present case though subject to repayment in three years in terms of the resolution, was a temporary accommodation or a trading facility as distinguished from the acquisition of capital. The resolution of the board of directors of the assessee itself reveals, that it had no doubt in its mind as to the nature of the borrowing, which was to furnish the "working capital" of the company; the expenses for raising the loan were not, therefore, claimed as an allowance under the Act before the Income-tax Officer....
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....92] 3 Tax Cas. 185, an investment or a banking company may have to borrow for making investments, as in Farmer v. Scottish North American Trust Ltd. [1911] 5 Tax Cas. 693, or for lending; the price paid for the annuity in one case, and the amount borrowed in the other, are not capital assets in the real sense, and may be deemed to be trading assets or circulating capital. But the assessee here is doing no such thing, but purchases the raw materials for manufacture, converts them into finished goods and sells them; we were told, that the need was felt by the assessee to obtained more raw materials, of course, on payment. This, as we understand, was only by way of enlarging or extending its business, if it was paying its way, or was by way of establishing its business, if it was not; both mean the same thing. At one stage of the argument, counsel seemed to assume that the enlargement or extension of business can only be in additional building, plant or machinery; we do not see sufficient warrant for this assumption, though cases of additional business are conceivable without a corresponding addition to capital. It is clear law, that outlay for the extension of business is in the natu....
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....n the expression "laid out or expended wholly and exclusively", but the argument is useful for one purpose, as indicating the limit to which it can be extended. We have so far examined the question in the light of the general principles, deductible also from decided cases. We also find, that authorities are not wanting, which have taken a similar view. The learned counsel for the assessee cautioned us, against accepting too readily the decisions of the English courts, as they are based on different statutory provisions. We agree that the provisions of the concerned statutes in England and in this country, are not all in pari materia; but in the study and elucidation of fundamental concepts and general principles, like capital receipts and disbursements, revenue receipts and disbursements, as pointed out by the Supreme Court itself in Commissioner of Income-tax v. Vazir Sultan & Sons [1959] 36 I.T.R. 175, English decisions afford considerable help and guidance. Before adverting to them, it has to be borne in mind, that under the English statutes too, from 5 and 6 Vict. c. 35, down to 15 and 16 Geo. 6 and 1 Eliz. 2 c. 10 (being the Income Tax Act, 1952), questions do arise....