1967 (7) TMI 19

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....these : Messrs. Meattles Limited, Delhi, is a private limited company. Shri B. D. Meattle, the governing director of the company, owns practically all the shares. In reality, it is a one-man concern, as held by the Income-tax Appellate Tribunal. The board of directors of the company, by means of a resolution dated October 29, 1954, resolved as under : " The Board think it expedient and in the best interest of the company that Shri B. D. Meattle, the governing director of the company, be insured as provided in article 44 of the memorandum of association of the company, both for life and accident to the extent of Rs. 10 lakhs each, and the premium be paid out of the funds of the company. The policies so effected will be assigned to the com....

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....nected with the trade ; it must be really incidental to the trade itself. In order to ascertain whether the expenditure has been incurred wholly or exclusively for the purpose of the business, one must look to the direct concern and direct purpose for which the money is laid out and not to the remoter or indirect results, which may possibly motivate or flow from the expenditure. Before the deduction claimed can be allowed, there must be satisfaction that the expenditure in question is wholly and exclusively laid out or expended for the purpose of the business in question. As mentioned earlier, we are unable to find any direct nexus between the business and the expenditure incurred. As observed by the Supreme Court in Commissioner of I....

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....tention to certain decisions of the English courts. We shall now refer to them. The first decision read to us is that of the Court of Appeal in Inland Revenue Commissioners v. D. H. Williams' Executors. There a limited company took out a policy of insurance in the sum of pound 15,000 for the benefit of the company, to cover the loss ensuing on the death or injury by accident of a director, whose special qualifications and experience were of value to the company. The director was killed by accident, and the sum assured was paid to the company, which distributed it among the shareholders. The question for decision was whether the receipt in question was a capital receipt or a revenue receipt. Lord Greene M. R. held that that receipt was a rev....