1962 (4) TMI 125

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.... of the -Income-tax Act. The question which has been referred to this court for opinion is: "Whether on the facts of the case the payment of compensation amounting to Rs. 35,000 has been rightly disallowed as capital expenditure within the meaning of section 10(2)(xv) of the Income-tax Act, 1922?" The facts giving rise to the reference are: The assessee is a public limited company carr....

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....upon M/s. Barady & Co. demanded a sum of Rs. 15,000, as compensation and M/s. A.N. Sanyal & Sons demanded a sum of Rs. 20,000 for cancellation of the contracts. The assessee paid both these sums of monies and claimed the total amount of Rs. 35,000 as an admissible deduction under section 10(2)(xv). The claim was disallowed by the income-tax authorities and the disallowance was confirmed by the Inc....

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....f their view the Tribunal relied upon the decision in "Countess Warwick" Steamship Co. Ltd. v. Ogg [1924] 8 Tax Cas. 652. In this case the assessee company owned one ship and it contracted for the construction and purchase of another ship for the sum of GBP226,000 payable as to GBP30,000 on the signing of the contract and as to the balance by instalments as the building of the ship progressed. Bef....

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....n of the business of the assessee company. The point may be strikingly illustrated by reference to another English case, Short Bros. Ltd. v. Commissioners of Inland Revenue [1927] 12 Tax Cas 953. In this case the assessee whose business it was to build steamers contracted to build two steamers. Subsequently it agreed to the cancellation of the contract in consideration of the payment of a sum of G....