2017 (4) TMI 1558

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....Cs managers salary security fund are not deductible as business expenditure u/s 37 of the Act, Such Conclusion is legally sustainable. 3. Counsel for the respondent contended that in view of the subsequent decision of the Supreme court in the case of Associated Power Company Ltd. vs. Commissioner of Income Tax reported in (1996) 218 ITR 195, wherein it has been held as under:- The application of the doctrine of diversion of income by reason of an over-riding title is quite inapposite. The doctrine applies when, by reason of an over-riding title or obligation, income is diverted and never reaches the person in whose hands it is sought to be assessed [See CIT v. Sitaldas Tirathdas [1961]41ITR367(SC) (S.C.).] In the present case, the statut....

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....t. This, for the reasons set out above, is quite unacceptable. We hold that the amount credited to the Contingencies Reserve is not diverted by reason of an overriding obligation or title and, in determining the business profits of the assessee, it must be taken into account. Mr. Sachar contended that if the amount credited to the Contingencies Reserved was includible in the computation of the business income of the assessee, the amount so appropriated should be allowed as a business deduction, being expenditure necessary to carry on the assessee's business. As the Calcutta High Court has pointed out, there is no expenditure. The amount appropriated to the Contingencies Reserve is set apart to meet possible exigencies. It is not a provi....