TaxTMI 
TaxTMI 
1971 (10) TMI 20
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt of the case, the training was actually imparted by Telco which charged the assessee on that account. It is said that under the training scheme, Telco proposed to build a hostel for the apprentices and to recover the entire cost of the hostel from its several dealers. The assessee paid Telco a sum of Rs. 7,242 during the accounting year ending December 31, 1960, and claimed that amount as a deduction from its assessable, profits for the assessment year 1961-62. The Income-tax Officer was of the view that the payment was made as the assessee's contribution towards the construction of the hostel, that the hostel would be the property of Telco and that, therefore, it was not a business expenditure. Accordingly, he rejected the assessee's claim. The assessee appealed to the Appellate Assistant Commissioner. He allowed the claim on the ground that although the sum of Rs. 7,242 was a contribution towards the construction of the hostel it was not an expense of a capital nature but was a revenue expense incurred in connection with the business of the assessee. The Income-tax Officer appealed to the Income-tax Appellate Tribunal. The Tribunal set aside the order of the Appellate Assista....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g imparted to the apprentices sent by the assessee. It paid the amount as training charge, and so far as the assessee is concerned, it remained a training charge, even though Telco applied it to the construction of the hostel and the assessee knew that it would be so applied. This aspect of the case was presented before the Tribunal and reference was made to a debit note dated January 6, 1961, prepared by Telco mentioning that the expenses were " in respect of training dealer's apprentices calculated at Rs. 34 per chassis ". A copy of the document is annexure " E " to the original statement of the case. The Appellate Assistant Commissioner had held that the amount represented payment made by the assessee to Telco in respect of the training scheme. That finding was not upset by the Tribunal. But, the Tribunal proceeded on the basis that under the training scheme the assessee was obliged to contribute towards the construction of the hostel. What the Tribunal omitted to consider was that the entire object of the scheme was the training` of the assessee's apprentices and it was for that reason that payment was made by the assessee. There is no dispute that if Telco had not undertaken t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eration of all the facts and circumstances, and by the application of principles of commercial trading. The question must, be viewed in the larger context of business necessity or expediency. If the outgoing or expenditure is so related to the carrying on, or conduct of the business, that it may be regarded as an integral part of the profit-earning process and not for acquisition of an asset or a right of a permanent character, the possession of which is a condition of the carrying on of the business, the expenditure may be regarded as revenue expenditure .... The assessee-company had undoubtedly acquired the assets by pledging its credits. The assessee-company was formed for the purpose of taking over the business which the Scindias had acquired and for carrying on that business the assets with which the business was to be carried on were required. For obtaining those assets the assessee-company rendered itself liable for a sum of Rs. 51,56,000 and agreed to pay that sum with interest at the rate stipulated. The transaction of acquisition of the assets was closely related to the commencement and carrying on of the business. Interest paid on the amount remaining due must in the no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....enue expenditure. In the case before us, the assessee made payment to Telco on account of the training imparted by Telco to the assessee's apprentices. Trained personnel were necessary for the purpose of the assessee's business. It was necessary because a condition of the agency agreement with Telco required the assessee to have trained personnel. It was necessary also because the staff of trained personnel obviously induces better sales. There is no question here of the assessee acquiring any asset or advantage of an enduring nature. There is nothing to show that the personnel so trained were under bond to serve the assessee for a long term of years. In Commissioner of Income-tax v. Royal Calcutta Turf Club, the assessee, whose business was to hold race meetings on a commercial basis, did not own any horse or employ any jockeys but being of opinion that there was a risk of jockeys becoming unavailable and that such unavailability would seriously affect its business it established a school for the training of Indian boys, as jockeys. The Supreme Court held that the expenditure incurred by it on the running of the school was a permissible deduction under section 10(2)(xv) of the Act....