Law:

Section:

I. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1967-68 - Whether where expenditure was incurred in suit filed by worker claiming higher rate of wages of higher quantum of work done during period when business was owned by HUF of which partners of assessee-firm were coparceners, it could not be allowed in hands of assessee-firm - Held, yes FACTS i The assessee, a registered firm, was carrying on business in the manufacture and sale of bricks and purchase and sale of timber. A sum was incurred as expenditure in a suit filed by one of the workers claiming higher rate of wages on higher quantum of work done during the period when the business was owned by a HUF of which the partners were the coparceners. It was disallowed by the ITO on the ground that the expenditure did not relate to the business of the assessee, viz., the firm. The finding was confirmed by the AAC. On further appeal, the Tribunal held that the expenditure was incurred by the HUF and that the deduction was claimed by a partnership which was a different and distinct assessable unit and that since the expenditure had not been incurred as part of the assessee's legitimate commercial requirements in order to facilitate the carrying on of its business the disallowance made was proper and justified. On reference : HELD I The clear finding of the income-tax authorities as well as the Tribunal was that the expenditure was incurred. With rerference to the business of the HUF and that it did not relate to the business carried on by the firm. In view of this finding, which was a finding on facts the Tribunal was justified in holding that the said expenditure was not incurred for the purpose of the business. II. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment years 1967-68 and 1968-69 - Assessee claimed deduction of notional value for mud taken out from his own lands for use in business of manufacturing bricks - Whether since there was no outgoing in cash, assessee was not entitled to deduction claimed - Held, yes FACTS II The assessee was carrying on business in manufacture and sale of bricks. It claimed…

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