TaxTMI 
TaxTMI 
2000 (2) TMI 5
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....(Raj)]. The assessee is the appellant. By the order under challenge the High Court answered the following question, referred to it under s. 256(1) of the IT Act. 1961 (for short 'the Act'), in the affirmative, that is, in favour of the Revenue and against the assessee : "Whether, on the facts and in the circumstances of the case and the business of the assessee being one and indivisible, the Tribunal was right in law in holding that the expenses have to be allocated in the same percentage as the different sources of income and are not to be allowed in entirety as allowed by the CIT(A) after following decisions noted in para 11 of the order dt 31st Jan., 1985 for the asst. yrs. 1974-75, 1975-76 and 1980-81 ?" 2. In the asst. yr. 197....
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....n that the order of the High Court is unsustainable. 4. The contention of Mr. K.N. Shukla, learned senior counsel appearing for the Revenue, is that the expenditure which is attributable to the exempted income is not a permissible deduction and it has been rightly disallowed by the High Court. 5. To appreciate the contentions of the learned counsel it may be useful to refer to s. 37(1) of the Act : "37. General.--- (1) Any expenditure (not being expenditure of the nature, described in ss. 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under....
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....n allowing a deduction which was permissible one need not look beyond the expenditure to see whether it had the quality of directly or indirectly producing taxable income and, therefore, there was no warrant for disallowing a proportionate part of the interest referable to money borrowed for the purchase of securities yielding tax-free interest. That judgment was followed in the case of Maharashtra Sugar Mills Ltd. There the assessee-company was manufacturing sugar in its factory and was also growing sugarcane for purposes of its factory. On the question of deduction of expenditure, so much of the managing agency commission which was referable to the growing of sugarcane, was disallowed on the ground that the income from sugarcane cultiv....
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....a case under s. 37(1) of the Act. The assessee in that case was carrying on different ventures, profits from some of them were taxable and from the other were exempt under the Act. In respect of the earlier assessment years expenditure with reference to each activity was worked out separately without claiming any expenditure referable to the head office. In the asst yr. 1965-66 the assessee claimed deduction of the entire expenditure including that relating to the head office. The finding recorded by the Tribunal was that there was no proof that different ventures constituted the same business. On that finding the Tribunal took the view that the apportionment of the expenditure was valid. The High Court of Madras confirmed the order of the ....
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....s in various ventures and some among them yield taxable income and the other do not, the question of allowability of the expenditure under s. 37 of the Act will depend on : (a) fulfilment of requirements of that provision noted above, and (b) on the fact whether all the ventures carried on by him constituted one indivisible business or not, if they do the entire expenditure will be a permissible deduction but if they do not the principle of apportionment of the expenditure will apply because there will be no nexus between the expenditure attributable to the venture not forming integral part of the business and the expenditure sought to be deducted as the business expenditure of the assessee. 10. Mr. Shukla has fairly conceded that if the....