AI Drafter 
TaxTMI 
TaxTMI 
1972 (8) TMI 5
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.... and on a true and proper interpretation of the agreement dated July 31, 1956, between the British India Corporation and the appellant company, the letters of Sri Kailash Nath Agarwal, the letters of managing directors, the sum of Rs. 43,333 retained by the British India Corporation and adjusted by it to the credit of Sharma & Co. was the assessable income of the appellant company? (2) Whether, on the facts and circumstances of the case, the sum of Rs. 43,333 represented an expenditure under section 10?" The matter relates to the assessment year 1956-57. The appellant is a private limited company and Kailash Nath Agarwal is one of its directors. As per agreement dated July 31, 1956, the appellant was appointed with effect from April 1....
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....orporation." On the same day, i.e., March 23, 1955, Kailash Nath Agarwal addressed a letter to the managing director of BIC informing him of the agreement with Sharma & Co. and requesting for the grant of sole selling agency to the appellant. The letter concluded as follows: "I hereby authorise you in case you are pleased to grant your sole selling agency to my said firm to retain one-seventh of our commission for adjustment in the account of M/s. Sharma & Co. with minimum of Rs. 50,000 per annum till your dues against them are cleared with interest." The managing director of BIC later on that day, ie., March 23, 1955, addressed a letter to Sharma & Co., accepting its resignation from the sole selling agency of the Kanpur Cotton Mi....
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.... & Co., before the complete repayment of their liability, the sole selling agents agree that the corporation may continue to retain an amount equal to one-seventh of the trade discount of 1 3/4% or Rs. 50,000 whichever is greater and adjust it towards such dues of M/s. Sharma & Co. as way then be outstanding. Clause 13. That the authority given above to the corporation to retain and adjust a part of the trade discount towards the outstanding against M/s. Sharma & Co. will not be revocable and will be binding on the sole selling agents, their successors, or assigns only so long as they act as the corporation's sole selling agents and will be deemed to be a condition on which the sole selling agency has been granted to the agents. The agen....
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....sel for the respondent, that the judgment of the High Court should be upheld. It would appear from the resume of facts given above that in March, 1955, an amount of Rs. 8,39,350-15-6 was due to BIC from the firm, Sharma & Co., who was the previous sole selling agent of the Kanpur Cotton Mills. As a result of agreement between the appellant, BIC and Sharma & Co., the appellant undertook to discharge the liability of Sharma & Co., in lieu of being appointed the sole selling agent of the Kanpur Cotton Mills in place of Sharma & Co. It can, therefore, be said that the appellant got the sole selling agency of the Kanpur Cotton Mills in consideration of its agreeing to pay Rs. 8,39,350-15-6 which was the amount due from Sharma & Co. to BIC. It is....
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....n the case of Assam Bengal Cement Co. Ltd. v. Commissioner of Income-tax, if the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business it is properly attributable to capital and is of the nature of capital expenditure. If on the other hand it is made not for the purpose of bringing into existence any such asset or advantage but for running the business or working it with a view to produce the profits it is a revenue expenditure. If any such asset or advantage for the enduring benefit of the business is thus acquired or brought into existence it would be immaterial whether the source of the payment was the capital or the income of the concern or whether the payment was mad....