1966 (9) TMI 32

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....ng on the business of manufacturing and selling cloth and other textile goods. During the previous year ending on 31st December, 1948, corresponding to the assessment year 1949-50, the appellant entered into two contracts with two other parties for purchase of textile machinery in order to expand its factory. Subsequently, the appellant-company, having regard to altered circumstances, decided to c....

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....was upheld by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. Thereupon, on an application under section 66(1) of the Income-tax Act, the Tribunal referred the following question for the opinion of the High Court at Allahabad : " Whether, on the facts of the case, the payment of compensation amounting to Rs. 35,000 has been rightly disallowed as capital expenditure wi....

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.... wholly or exclusively for the purpose of the business. The payment was neither made for the purpose of earning profits, nor for the purpose of furthering, protecting or continuing its business which was to be carried on from day to day. The payment was made with the object of avoiding an unnecessary investment in capital assets, and was an amount which was altogether outside the account of profit....