TaxTMI 
TaxTMI 
2016 (8) TMI 558
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....siness of the assessee in deviation from the law and the statute. (iii) For that on the facts and circumstances of the case the learned Tribunal was not justified in law further allowing the deductions in respect of the club subscription charges for its executives in respect of clubs situate at far away places from the garden in deviation from ear lier practice when all along club expenses for clubs situate near the garden were allowed." 3. The appeal was, however, admitted solely on the following question of law : "Whether on the facts and circumstances of the case where club subscription were paid by the assessee for its executives in terms of contracts for employment are allowable deductions ?" 4. At the hearing of the appeal, Mrs. Gutgutia, learned advocate appearing on behalf of the Revenue submitted that the ground as regards the allowance of deduction of a sum of Rs. 1.35 crores quoted above involves a substantial question of law and this court should, therefore, also consider the appeal on the basis of the aforesaid ground. 5. Mr. J. P. Khaitan, learned senior advocate appearing on behalf of the assessee submitted that at the time of admission of the appeal, the Div....
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....of DAIL was transferred in favour of NTC, against the security of stocks, stores and tobacco owned by NTC. Whereas on or about September 15, 1987 the bank filed a suit against NTC. and two directors of NTC being suit No.1035 of 1987 before the hon'ble Calcutta High Court for recovery of a sum of Rs. 2,69,54,228 being the amount outstanding from NTC to the bank in respect of the aforesaid credit facility. Whereas pursuant to orders passed by the hon'ble High Court at Calcutta in applications filed in the suit, the hypothecated tobacco stock were sold by the joint receivers appointed by the court for a sum of Rs. 1.35 crores and the amount is lying in a deposit account in the name of the joint receivers with the bank. Whereas Andhra Cements Limited, a company incorporated under the Companies Act, 1956, having its registered office at Sri Durgapuram- 522 414, Guntur District (A.P.) being an undertaking taken over by DAIL from the Board for Industrial and Financial Reconstruction in the year 1994 is enjoying credit facilities from the bank and that additional facilities as may be required by the said Andhra Cements Limited cannot be considered by the bank unless and until....
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....ations. The settlement with the bank was therefore in the commercial interest of the appellant. (d) We find that in the assessment year 1992-93 the appellant's claim in respect of Rs. 6.67 crores paid to Deutsche Bank came up for consideration before this Tribunal. In its appellate order the Account ant Member extensively dealt with the assessee's contentions and allowed the assessee's claim. However, since the accountant member's view was not in line with the views of the Judicial Member, the matter was referred to the Third Member. The hon'ble President of this Tribunal in his order dated July 17, 2004 however agreed with the view taken by the learned Accountant Member. In his order dated July 17, 2004 the learned Third Member made the following observations in paras. 18 and 19, which are relevant for the present appeal and accordingly these are reproduced. '18. The learned accountant member thereafter noted contention of the learned counsel for the assessee-made before him. It was argued that commitment was required to be honoured as a matter of commercial necessity and secondly to maintain prestige and reputation of the assessee-company. The amount w....
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....e facts, that the managing agency agreement with the managed company was a profitable source of income. The assessee incurred the expenditure in question to avoid any adverse effect on its reputation, to protect the managing agency, which was an income earning apparatus, and for retaining it with the reconstituted firm in which the interest of the assessee was the same as before. Therefore, the expenditure was laid out on purely business considerations and wholly for the purpose of the assessee's business. (ii) That the fact that the firm had not claimed the expenditure in its return did not affect the right of the assessee to claim deduction in respect of the amount paid by it. The true test of an expenditure laid out wholly and exclusively for the purposes of trade or business is that it is incurred by the assessee as incidental to his trade for the purpose of keeping the trade going and of making it pay and not in any other capacity than that of a trader. The expenditure incurred on the preservation of a profit-earning asset of a business is always a deductible expenditure." 12. The judgment cited by Mr. Khaitan does not appear to us to have any applicability to the f....
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....diture made by it during the course of business for the purpose of removal of any restriction or obstruction or disability would be on revenue account, provided the expenditure does not acquire any capital asset. Payments made for removal of restriction, obstruction or disability may result in acquiring benefits to the business but that by itself would not acquire any capital asset." 16. We do not think that the judgment in the case of Bikaner Gypsums Ltd. has any application to the facts of this case either. What had happened in that case was that the assessee was a lessee in respect of a mine. The area leased out to the lessee contained a railway station and track, which were causing disruption in the business of the assessee. In order to shift the railway station and the track payment of a sum of Rs. 3 lakhs was made. The question was whether the payment was an expenditure of a capital nature or of a revenue nature. It is in that context their Lordships held that "the restriction operated as an obstacle to the assessee's right to carry on business in a profitable manner". It is in those facts that the payment was allowed as a revenue expenditure. 17. The third and the last....
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....that a holding company has a deep interest in its subsidiary, and hence if the holding company advances borrowed money to a subsidiary and the same is used by the subsidiary for some business purposes the assessee would, in our opinion, ordinarily be entitled to deduction of interest on its borrowed loans." 18. The aforesaid judgment does not help him either. According to us, in paragraph 36, the apex court has clarified that in every case interest on borrowed loan cannot be allowed where the money borrowed had been advanced interest-free to a sister concern. Therefore, the judgment is to be understood in the facts of its own case. What had happened was that the money had been borrowed by the assessee and advanced to the sister concern. The assessee obviously was interested in the working of the sister concern. The assessee naturally had business relation and the assessee was also interested in the profits to be earned by the sister concern. 19. It is in that view of the matter that the concept of business expediency or commercial expediency was taken into account. The facts of the case before us are altogether different. It would appear from the terms of settlement entered into ....
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.... entitled to be reimbursed by the other. Illustration B holds land in Bengal, on a lease granted by A, the zamindar. The revenue payable by A to the Government being in arrear, his land is advertised for sale by the Government. Under the revenue law, the consequence of such sale will be the annulment of B's lease. B, to pre vent the sale and the consequent annulment of his own lease, pays to the Government the sum due from A. A is bound to make good to B the amount so paid. 70. Obligation of person enjoying benefit of non-gratuitous act.- Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered." 20. The learned Tribunal was also wrong in proceeding on the basis that the Reserve Bank of India had issued a caution notice. We asked Mr. Khaitan to produce the caution notice before us for consideration. Pursuant to our request, Mr. Khaitan has produced before us a news item published in the business page of The Telegraph dated March 31, 1995 from....