Law:

Section:

JUDGMENT A.N. Sen, J.- In this reference under section 66(1) of the Indian Income-tax Act, 1922, the following question of law has been referred to this court: "Whether, on the facts and in the circumstances of case, the Tribunal was right in holding that the sum of Rs. 2,03,255 paid by the assessee for the purchase of loom hours was revenue expenditure and hence deductible under section 10(2)(xv) of the Indian Income-tax Act, 1922?" The facts of the case have been fully set out in the statement of the case and they may be briefly indicated. The respondent, assessee-company, carries on business of jute manufacture and is a member of the Indian Jute Mills Association. The Indian Jute Mills Association is registered under the Indian Trade Unions Act (Act XVI of 1926) with its registered office at Calcutta. The objects of the association, inter alia, are: 1.(a)to protect, forward and defend the trade of members of the association; (b)to impose restrictive conditions on the conduct of the trade; (c)to adjust the production of the mills in the membership of the association to the demand in world market; (d)to arbitrate on matters in dispute. 2.(a)to protect the members of the association against competition; (b)to secure the enactment of legislation beneficial to the trade; (c)to secure the repeal of any legislation or prevent the passing of legislation which is damaging or may in any way damage the trade. It will, therefore, appear that the Indian Jute Mills Association (hereinafter referred to as "the association") was formed in the interest of the various companies who carried on the trade of manufacturing jute and who become the members of the association and one of the main objects of the association was to adjust the production of the mills to the demand of jute and other products in the world market and to impose restrictive conditions on the conduct of the trade for this purpose. In common interest of the members of the association and in furtherance of the main objects of the association the members of the association entered into agreements, amongst themselves, known as "working time agreements" from time to time. The first "working time agreement" was…

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